Bloomberg is piling on too:
Japan Internet Stock Rout Spreads Across Asia, May Go Further
By Brett Cole
Japan Internet Stock Rout Spreads Across Asia, May Go Further
Tokyo, March 13 (Bloomberg) -- Investors in Asian Internet
shares assumed it would take a slump in the U.S. stock market to
spoil their party. They forgot about Japan.
The Sankei-Bloomberg Net Index of Japanese online pioneers
such as Softbank Corp. is down 34 percent in the past three weeks
-- tumbling 9 percent today -- even as the Bloomberg U.S. Internet
index rose 23 percent.
Japan's Web stock rout started as investors questioned
whether potential earnings justified the Sankei index's seven-fold
jump last year. The slump spread to Hong Kong last week, with
Pacific Century Cyberworks Ltd. down 15 percent in four days.
Today, some investors are warning of a copycat decline in European
and U.S. counterparts.
``The trigger is Japan and the impact is pushing across the
rest of the region,' said Norman Ho, deputy fund manager at Value
Partners Ltd., which manages $130 million in Asian stocks. If the
U.S. Nasdaq Composite Index follows Asia lower, ``then we are in
for a very bad tomorrow.'
Japan's broad Topix index plunged 4.6 percent, its biggest
one-day decline since Nov. 25, 1997. Hong Kong's Hang Seng Index
tumbled 4.1 percent, its steepest drop in nine weeks. Nasdaq
futures fell 1.6 percent to 4585.00.
Japan
The slump in Japanese Internet stocks gathered pace today as
individual investors, who bought stocks close to record highs with
borrowed money, faced calls from creditors to provide more cash to
cover loss-making positions.
``There must be a few individuals who are having a tough
time of it at the moment,' said Nobuaki Kurisu, a senior fund
manager at Sumisei Global Investment Trust Management Co., which
manages about 350 billion yen ($3.31 billion) in assets. ``They
need capital to cover margin calls.'
Softbank, which rose more than 14-fold last year on
expectations for earnings growth from its portfolio of Internet
investments, dropped 5 percent. The company, which has forecast a
loss of almost 82 yen per share for the fiscal year ending this
month, has lost a third of its value in just a week.
Sony Corp., which is recasting itself as an online play by
linking its video games and household appliances to the Internet,
tumbled 7.6 percent, completing a 25 percent slide in eight days.
The company more than tripled last year on hopes for earnings
from PlayStation 2. Yet the machine has experienced teething
problems in the week since it went on sale in Japan and the
company reported its sixth straight profit decline on Jan. 27.
``Some of these stocks have run up a long way and when you
get investors booking huge profits you get huge stumbles,' said
Barry Dargan, a managing director at MFS Investment Management,
which handles about $5 billion in Japanese equities.
Among the biggest losers, Hikari Tsushin Inc., which sells
cellular phone handsets and e-mail services, fell 5.9 percent and
dived 63 percent in four weeks.
Adding to its problems, unfounded speculation spread on
Friday that Yasumitsu Shigeta, president of the cell-phone
retailer, had been arrested for insider trading. The company's
denial did little to reverse the slide.
CyberWorks
It was Hikari's link to Hong Kong's Internet companies that
helped spread the rout. Pacific Century CyberWorks, Asia's third-
largest Internet investment firm and in which Shigeta owns 3.5
percent, dropped 6.6 percent, giving impetus to the 4.1 percent
fall in Hong Kong's benchmark Hang Seng Index.
CyberWorks is a 10-month old Internet investment company that
earlier last month agreed to pay as much as $38 billion for Hong
Kong's dominant phone company, Cable & Wireless HKT Ltd.
Investors are growing skeptical about these companies'
ability to turn a profit from untested businesses.
On Friday, HSBC Asset Management Ltd., which invests $17
billion in Asia, said it shifted some funds out of the region and
into the U.S. because it considers Asian stocks 10 to 13 percent
overvalued. It's favoring providers of Internet infrastructure,
many of which are U.S. based, over other Internet companies.
HSBC sees ``a modest shift from technology to value stocks,'
said Bryce McDonnell, global chief investment officer. HSBC said
the widening disparity between the `new' and `old economy' stocks
will prompt investors to switch back to the more traditional
industries sometime this year.
At current market valuations where Internet companies need to
deliver 25 percent compound earnings in the first five years, it
is difficult to justify investing in such companies, he said.
``At this point I still think, overall, there are a lot of
misvaluations in the technology sector,' said John Lai, chief
investment officer at Nikko Global Asset Management (H.K.) Ltd.,
which manages about $200 million in the region. ``There's nothing
to be alarmed about, but I would stay back at this point. I don't
think the market has found the bottom.'
Investors are also selling Internet-related stocks in
Australia, where News Corp., the world's fourth largest media
company, fell 3.1 percent. In the last month, four analysts have
cut their forecasts of News Corp.'s earnings per share. The stock
trades at 91.5 times earnings in the year to June 30, compared to
the All Ordinaries Index which trades at 28.9 times.
``What we've seen to date is people throwing money at any old
thing,' said Andrew Brown, who helps manage $3 billion in
investments at Rothschild Australia Asset Management Ltd. in
Sydney. ``A lot of companies are not making money and are losing
more money than their prospectuses said.' |
