KUALA LUMPUR:  CIMB Equities Research says the looming headwinds for global economies, especially in the eurozone, in 2H10 are tempering its optimism on the semicon sector.

The research house said on Monday, July 26 it was now more cautious than its was in early 2010.

“That said, there are key positives as the YoY growth trajectory for global chip sales has to date been fairly strong, aided by the low base in 1H09. While the consumer market has been the main impetus for growth, expectations are mounting for a start to the long-awaited corporate replacement cycle, which will add another layer of growth for the industry in 2H10,” it said.

CIMB Research said the semiconductor sector remains an OVERWEIGHT as i) the corporate replacement cycle is kicking in, ii) demand in key end-user markets is still firm, helped by new product launches and iii) emerging markets are becoming increasingly important, thanks to stronger growth than in the advanced economies.

Its top pick is Unisem which it prefers for its liquidity and higher beta.