Here's the South China Post's version of yesterday's sell off:
scmp.com
Tuesday, April 18, 2000
Equity slump a reality check
DAVID SAUNDERS, SUZANNE HARRISON and CATHY HOLCOMBE
--------------------------------------------------------------------------------
Yesterday's region-wide slump in equity markets is likely to herald a more realistic appraisal of technology stocks among Asian investors, according to investment professionals.
They expected investor attention to switch from previously hot "dotcom" issues to quality technology firms with real earnings potential.
Economists, meanwhile, said the slump did not threaten to derail Asia's economic recovery, although it would slow growth.
Most in the marketplace took yesterday's heavy falls in their stride, saying there was no panic among investors as Asian markets, led by technology stocks, took a battering.
However, fund managers said the fall had caused investors to take a more discerning view of technology companies, particularly Internet-related firms with questionable earnings potential.
"I think in general for Asian investors this has been a lesson: The Internet is not everything," Invesco Asia fund manager Martin Lau said.
Instead, investors would gravitate more towards hardware and semiconductor manufacturers, he said.
Reacting to record points falls on Wall Street on Friday, the Hang Seng Index suffered its biggest decline since October 28, 1997, closing 1,380.39 points, or 8.55 per cent, lower at 14,762.37.
In Tokyo, the Nikkei-225 Index recorded its fifth-largest drop, ending 1,426.04 points, or 6.97 per cent, down at 19,008.64, while in Seoul, the Korea Composite Index closed at 707.72 points, down 93.17, or 11.63 per cent - its biggest single-day decline both in terms of points and percentage.
Investec Guinness Flight chief investment officer Robert Conlon said he felt relatively immune to the slump, despite being a buyer of "new economy" plays.
"We don't think [yesterday's] correction has changed that fact," he said. "But when we say we're buyers in the new economy, we own no dotcom companies. What we've been looking at is the way that traditional businesses are evolving to take advantage of the tech sector . . . companies like Li & Fung."
Director of Barclays International Funds (Asia) Roger Pyrke said the correction prompted investors to look at technology stocks more realistically.
"They are saying: 'If we are going to be in the new economy, let's be in those that actually do something,' " said Mr Pyrke, who also believed it was too early to go back into the market following yesterday's falls.
Others said they anticipated a more conservative investment strategy, especially if US markets continued to fall.
Already some investment houses have increased their cash holdings in recent weeks in anticipation of a market correction. HSBC deputy treasurer Mike Powell saw investors switching into regional bonds in the type of portfolio re-balancing associated with longer-term investment.
"Usually credit spreads blow out when the equity markets fall like this so there was some switching into corporate and sovereign debt. It's a real portfolio adjustment rather than a switch into cash," he said.
Head of Asian investment at Axa Investment Managers (Hong Kong) Barbara Shaw said Friday's sell-off on the US technology-dominated Nasdaq Stock Market had accelerated a move back into non-tech related stocks.
Ms Shaw said telecommunications companies could also be casualties of the anti-technology sentiment.
"This is where I see risk as well as opportunity. If Asia comes down further, these companies will present good value," she said.
Economists said they expected the slump in stock markets would slow growth in Asia, but it would not send economies into reverse.
"My view is that this will not derail the overall trend of recovery in Asia, but it could dampen the strength," said head of North Asia economics at Merrill Lynch, Guonan Ma, adding the wealth effect of recent gains on the stock market may disappear.
Most economists have said they expect a slowdown in growth in the second half of this year, in line with a manufactured slowdown in the United States because of tighter monetary policy.
ING Barings North Asian economist Eddie Wong said Hong Kong's export sector could suffer if the US market correction turned into a crash, depressing economic growth and consumer spending.
By noon yesterday, US stocks had clawed back some of Friday's losses, with the Nasdaq 78.72 points higher at 3,400.01 and the Dow Jones Industrial Average up 71.05 points at 10,376.82.
|
