Update 16 October on YTL and YTL Power

US stocks closed lower Tuesday as losses in the oil & gas, technology and healthcare sectors led shares lower. Dow Jones lost 0.75% while Nasdaq declined 0.98%.

Nvidia share dropped 4.5% last night along with other chipmakers like AMD (down 5.2%). The primary driver of the selloff has been the premature release of ASML’s profit guidance, which led to a significant drop in its share price - ASML down around 16%.

Nvidia and AI chipmakers’ shares suffered selling down on news that US officials have discussed capping sales of advanced AI chips from Nvidia and other American firms to some countries. The new approach would set a ceiling on export licenses for certain countries in the interest of national security, according to the people who spoke about the private discussions on condition of anonymity. Officials are focused on Persian Gulf countries that have growing appetite for AI data centres and the deep pockets to fund them.

Deliberations are in the early stages and remain fluid, the people said, noting that the idea has gained traction in recent weeks. The policy would build on a new framework to ease the licensing process for AI chips shipments to data centres in places like the United Arab Emirates (UAE) and Saudi Arabia.

A spokesperson for the White House National Security Council declined to comment but pointed to a joint statement by the US and the UAE on AI. In the joint statement, the two countries acknowledged the “tremendous potential of AI for good,” as well as the “challenges and risks of this emerging technology and the vital importance of safeguard”.

Setting country-based caps would tighten restrictions that originally targeted China’s ambitions in AI, as Washington considers the security risks of AI development around the world. At the same time, some US officials have come to view semiconductor export licenses, particularly for Nvidia’s chips, as a point of leverage to achieve broader diplomatic goals.

I believe this Bloomberg news on US potential country-based restriction on AI chips export has been used by certain parties to spread unnecessary fear on YTL Power’s AI data centre prospects. Some forumers (most with fake IDs) in i3 website said that Nvidia chip delivery to Malaysia and YTL Power would be halted completely, while others said Nvidia would pull out entirely from the Malaysia’s market. You know all these comments are absurd.

The Bloomberg news stated clearly that the potential US restriction would focus on Persian Gulf countries such as the UAE and Saudi Arabia, countries which are in the Middle East entangled with the ongoing conflicts between Israel and Hamas & Lebanon backed by Iran. Malaysia is a small country relative to these Persian Gulf giants, and hence will not be a focus of the US in achieving its broad diplomatic goals.

Furthermore, the Nvidia chips to be supplied to YTL Power AI data centres will be all used by American big companies such as Nvidia itself, Microsoft and potentially Oracle. Hence there is no reason for the US to restrict AI chips export to Malaysia.

Short selling on YTL Power increased by 1.6 million shares yesterday to push the net short position on YTLP to 9.4 million shares as of close Tuesday. NSP on YTL dropped below 0.1% on the contrary. Foreign funds net sold RM38 million worth of YTL Power shares and RM20m of YTL shares yesterday. That was the biggest foreign funds selling on YTLP in recent weeks. It strengthens my believe that the sharp drop in YTLP share price yesterday was due to the Bloomberg news, and not due to any MACC case news. Anyway we need to monitor any further moves by foreign funds.

Foreign funds net sold RM22m of Genting shares and RM10m of 99speedmart shares yesterday, but net bought RM11m of Sunway and RM8m of SP Setia shares yesterday. They could have bought a couple of million shares of IOIPG yesterday as the share price broke up resistance level RM2.28 convincingly to reach a high of RM2.38 on extraordinary high volume of 15.5 million shares. Local retailers were the only notable sellers of IOIPG with net sale of RM6m yesterday. I would suggest that those fellow investors who have bought in IOIPG to hold on for a little longer and not to sell off your holdings in IOIPG prematurely. I expect more good news coming its way for IOIPG ahead of its AGM/EGM in early November.

Yesterday most of the property developer stocks went up including KSL, Mah Sing and SP Setia. That is likely due to the anticipation of good government measures to be included in the 2025 Budget to be tabled this Friday 18 October. Potential measures include the Madani Deposit scheme and the return of Home Ownership Campaign (HOC). The HOC would see schemes such as the 100% stamp duty exemption for properties priced from RM300,001 to RM1 million and 10% discount for first-time home buyers. Not unlike the Madani Deposit scheme, property developers also hope that the government could introduce a one-off, first-time home buyer’s grant of RM30,000 (for properties priced up to RM500,000) plus lower fixed-rate financing. The Madani Deposit scheme, targeting youths aged between 21 and 40, is one of the 33 proposals pushed by the Housing and Local Government Ministry.

On the other hand, the US has sent a letter to Israel warning that the country could lose military aid if it did not increase the flow of humanitarian supplies into Gaza within the next 30 days. Israel has replied to the US that it would not attack the nuclear and oil facilities of Iran in its retaliation actions. Crude oil prices dropped sharply as a result with Brent down $3.21 to $74.25 per barrel.