Tech sell-off extends to Europe and Asia
By Sally Davies and Neil Dennis
Arm Holdings was among the fallers in London as the sell-off, which was most heavy among web application stocks in the US and Asia, extended to manufacturers of tech hardware and internet providers.
Arm, which designs processors that are used in many smartphones and tablets including the iPhone and iPad, fell 2.4 per cent to 972.5p. Rival Imagination Technologies lost 5.6 per cent to 202.6p, while Pace, a maker of TV set-top decoders, fell 1.2 per cent to 444.6p.
In Europe providers of internet and telecoms services were the biggest losers as investors ditched stocks they considered had made a good run-up in recent years and that looked vulnerable at current valuations.
Iliad, the French mobile network operator, fell 5.5 per cent to €198.60, while rival Bouygues fell 6 per cent to €29.00.
Alcatel-Lucent, the French network equipment maker, lost 3.5 per cent to €2.86 and Finland’s Nokia shed 3.9 per cent to €5.32.
“There seems to be some rotation out of any names which have effectively been labelled a ‘bubble’ over the past six months or so, and there seems to be some money being repositioned into names which have been returning cash to shareholders,” said Chris Weston at IG Index.
Valuations for technology companies on both sides of the Atlantic have been at multiyear highs, with observers in recent weeks predicting that the market is due a correction.
Faster internet, the boom in smartphones, falling cost of hardware, the rise of cloud computing and growth in online shopping have made technology businesses more appealing to investors. Since the beginning of 2013, Europe’s tech hardware sector has risen nearly 40 per cent.
“Markets tend to overvalue growth stocks in a period of disruption,” said Ian Spence, analyst at UK research group Megabuyte. “There’s an assumption that all the companies involved in disruption will be successful, which clearly can’t be the case.”
But questions remain about whether these companies can measure up to investors’ optimism – and, in particular, whether social networks such as Twitter, which is yet to make a profit, will be able to create sustainable businesses out of their large user numbers.
The Nasdaq Composite, whose 2.6 per cent fall on Friday triggered the sell-off in Europe and Asia, was down a further 0.8 per cent by midday in New York. The index includes high profile tech stocks Google and Facebook and has been trading at a price to earnings ratio of about 32, and an enterprise value to ebitda multiple of 15. Shares in Google were down 0.8 per cent, while Facebook was up 0.6 per cent.
In Asia, shares in Tencent, best known for its WeChat social media app, fell 4.5 per cent to HK$501.50. Tencent, which is profitable, is valued at 35 times forward earnings even after falling 12 per cent since April 2.
South Korea’s Naver, which owns another Asian messaging app, Line, fell 6.5 per cent to Won739,000, while Japanese mobile group SoftBank was down 4.6 per cent to Y7,556. |
