HK technology stocks basking in Internet glow
By Donny Kwok
HONG KONG, April 18 (Reuters) - Telecommunications and
technology shares in Hong Kong and China are basking in a
brightening Internet glow, and analysts say buying interest
will grow as local Internet applications and usage expand.
Analysts said local investor interest in the Internet began
growing after the Hong Kong government in March announced plans
for the HK$13 billion Cyberport, a business park aimed at
developing the territory's information technology industry.
When Microsoft Corp <MSFT.O> chairman Bill Gates showed up
a week later to announce a deal with Hong Kong
Telecommunications Ltd <0008.HK>, local shares caught Internet
fever.
Yahoo! Inc <YHOO.O> co-founder Jerry Yang brought more
interest when he announced a partnership with SmarTone Mobile
Communications Ltd <0315.HK> last week.
"The rally started with the arrival of Bill Gates," said
Robert Lewis, director Asian technology research of SG
Securities. "This interest in things Internet-related is not
limited to traditional technology players. It also involves
some telecom related companies."
Analysts said technology stocks in both Hong Kong and China
would benefit.
Local stock market sentiment has gained momentum following
a recent interest-rate cut, increased fund flows from overseas
investors and optimism over the resumption of land auctions on
Tuesday.
Investors also were taking the advantage of the U.S.
technology stocks rally to push values of some local
technology-related industrial shares, analysts said.
The blue-chip Hang Seng Index has risen 14.15 percent so
far in April to close at 12,490.30 on Friday. Many
technology-related stocks have been out-performing the index.
"Interest in the Internet is going to be a key growth
driver for a very long time," Lewis said. "Valuation is
starting to reflect the long-term potential of this new medium,
as well as scarcity of well positioned Internet stocks."
SmarTone, which will use Yahoo! content on its new Internet
service, is up 12.4 percent so far in April, closing at
HK$25.30 on Friday.
Shares of Hong Kong Telecom and Wharf (Holdings) Ltd
<0004.HK> have been driven sharply higher by anticipation of
strong growth potential from their broadband networks.
Hongkong Telecom, which also has been said to be
considering a listing of its Internet business on the Nasdaq
exchange, has surged more than 20 percent so far in April to
HK$18.55. Wharf is up more than 55 percent at HK$18.45.
"Obviously, diversified and large multimedia plays will
have advantage," said Adrian Ngan, head of research of BNP
Prime Peregrine Securities. "Firms like Wharf and Hongkong
Telecom will benefit more in the multimedia boom. With the
broadband networks they can capture the multi-media sector in
all directions."
But not all firms will successfully capitalise on such
growth, making the high prices of some shares risky, analysts
said.
"We worry that the U.S. technology boom may have a
bubble-burst," Ngan said. "If people look more into the
reality, they may find the (U.S.) stocks too high. A correction
in the U.S. may affect the local market."
Analysts said investors should pick up technology stocks
with sound fundamentals such as Vanda Systems & Communications
Holdings Ltd <0757.HK>, Legend Holdings Ltd <0992.HK> and
Automated Systems Holdings Ltd <0771.HK>.
Lewis said he favoured Automated Systems. "In additional to
the benefit from government's IT expenditure, they are also
instrumental in helping Hong Kong businesses go on to net."
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