*[MLBEF] MELBOURNE IT LIMITED FOREIGN - Australia *No US quote available <info included in post>
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au.finance.yahoo.com
Australian tech stocks jump, but investors wary
SYDNEY, Jan 29 (Reuters) - Australia's major technology
stocks have climbed off their lows since the start of the year as
they catch a ride on Nasdaq's coat tails, some rising sharply in
value.
But while retail investors scrape tech stocks off rock
bottom, heavyweight fund managers are sticking close to the
sidelines, wary of dipping back into the market ahead of
February's company results.
"The fact is these stocks were absolutely hammered,
especially in the last two or three months of 2000. You cannot
overstate the low base," says Mara Bun, Internet strategist at
Macquarie Equities.
Domain name register Melbourne IT Ltd , once the
local market darling, has helped lead the surge since the start
of 2001, rallying more than 80 percent.
Software group Reckon Ltd has leapt 43 percent over
the past three weeks and online broker E
The gains are impressive, but it's worth noting Melbourne IT
is still 93 percent off its record A$17 high reached before last
year's tech stock crash, and most key stocks are trading at least
50 percent below their top levels.
While institutional investors may feel some stocks have been
heavily oversold and there are bargains to be had at these
levels, many fear the reporting season will show firms are still
failing to meet over optimistic earnings targets, and reneging on
pledges to dose their cash burn rates.
"The feeling they've bottomed out is gaining momentum, but
where to from here?" says Michael Willoughby, emerging and
technology companies analyst at JP Morgan.
"It largely depends on sentiment in U.S. technology stocks
and a lot will depend on macroeconomic changes, whether they do
cut interest rates," he said.
Further easings by the Federal Reserve might help Nasdaq
extend its 12.6 percent rally so far this year, and
subsequently give Australian tech stocks a lift.
But analysts caution that the mere whiff of a hard economic
landing is likely to see corporates tighten their purse strings,
and quickly cut back spending on new technology.
Software, security and smartcard groups are likely to be the
most watched on institutional investor radar screens for the time
being, while firms taking drastic steps to slash their spending
and secure concrete revenue streams will also be viewed
favourably.
"It's almost every day now you hear of an internet company in
particular laying off staff or cutting costs to become cash flow
positive more quickly," Willoughby said.
And with all major tech firms expecting to post steep losses
for at least another year, it's going to be a long time before
investors can revert to more traditional price/earnings ratios to
value their investments.
Name RIC Business Price % chg % chg
on day in 2001
Adultshop Online sex shop 0.35 -18.89 114.71
Melbourne IT Domain names 1.19 -2.94 83.08
E27 -3.79 53.01
Spike Networks Online media grp 0.25 unch 48.48
Reckon Software 0.23 -6.12 43.75
Open Telecoms Telco software 1.44 -0.69 28.00
Davnet Telecoms 0.60 -1.64 26.32
Solution 6 Software 1.32 -2.94 19.98
Secure Net E-security 5.73 2.14 19.20
MYOB Software 2.27 -0.44 13.50
Sharon Austen Online sex shop 0.20 -6.98 11.11
Catuity Inc Smartcard group 11.00 -7.95 0.92
ERG Smartcard group 2.76 5.75 0.77
eServe IT solutions 1.20 4.35 unch
Sausage Internet group 0.68 -4.23 -1.45
Keycorp Smartcard company 8.00 -1.17 -13.60
Ecorp Internet portal 1.25 -1.57 -19.09
Technology One Software 1.25 -0.79 -43.18
c) Reuters Limited 2001
REUTER NEWS SERVICE
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