Asian Internet Stocks May Fall in Week Ahead After U.S. Plunge
Tokyo, April 16 (Bloomberg) -- Asian Internet-related stocks
such as Japan's Softbank Corp. and China Telecom (Hong Kong) Ltd.
may fall in the week ahead as a 9.7 percent rout on Friday in the
U.S. Nasdaq Composite Index, it's second-biggest single-day drop,
heightened concern that these stocks are still overvalued.
The Nasdaq plunged 25 percent in the week just ended, with
Oracle Corp., Nortel Networks Corp. and Cisco Systems Inc. the
biggest losers.
Industrial stocks such as Japanese chemical maker Mitsui
Chemical Inc., may gain, as investors shift money away from
Internet-related stocks that offer less-stable returns.
``If I can't comprehend the valuation of Internet stocks in
Japan -- some of which are higher than U.S. Internet stocks --
I'll hesitate to invest in them,' said Hisanori Gondo, senior
portfolio manager at Mercantile Mutual Investment Management
Ltd., which handles $140 million in Japanese equities. ``I need
to see earnings first.'
In other markets, Korea's Kospi Index may decline in the
week ahead, led by computer- and telecommunications-related
stocks such as SK Telecom Co. as investors bet their growth
potentials were already reflected in their current prices.
Australia's ASX200 stocks index could drop as investors switch
out of telecommunications and media stocks such as Telstra Corp.
and News Corp. and into banks, which are perceived as lower-risk,
though lower-yielding.
Taiwan's TWSE Index may also drop, as chipmakers such as
Taiwan Semiconductor Manufacturing Co. and United
Microelectronics Corp., are seen as too expensive after Nasdaq's
decline.
On Friday, U.S. stocks were spooked by the biggest pickup in
inflation in more than five years, suggesting that Federal
Reserve may raise rates by more than the expected quarter point
when policy-makers meet May 16.
The technology-laden Nasdaq plunged 355.49 to 3321.29 on
Friday, completing the worst week in its 29-year history. That's
the second-largest percentage loss and biggest point drop ever.
The Standard & Poor's 500 Index lost 83.20, or 5.8 percent, to
1357.31, as 87 of its 88 industry groups dropped. The Dow fell
617.78, or 5.7 percent, to 10,305.77.
Japan
In Japan last week, the Topix index of all stocks on the
Tokyo Stock Exchange's first section dropped 1.4 percent at
1653.70, while the Nikkei 225 stock average rose 0.9 percent to
20,434.68.
Softbank, one of the world's largest investors in online
businesses, and other Internet-related companies, may extend
losses this week, on concern the drop in the Nasdaq, half of
which is computer-related stocks, will continue.
Mitsui Chemicals Inc., Japan's biggest producer of material
for making polyester, may extend its two-day gains of 13 percent
after it said group pretax profit this year will rise 30 percent
as the company raises product prices to cover naphtha costs.
The company said Tuesday it expects group pretax profit of
67.6 billion yen ($632 million) for the year started April 1,
from an estimated 52.0 billion yen for the previous year.
Expectations that buying next week by new funds, which are
expected to build their portfolios around Internet and computer-
related stocks, may help offset some losses. Yet, some investors
warn that the recent falls in prices may discourage individual
investors from rushing into such funds.
``Individual investors are not totally blind,' said
Mercantile's Gondo. ``A few months ago, people were more willing
to buy the `New Japan' (Internet or computer-related) funds, as
they haven't experienced the correction yet. But now they will be
cautious.'
Meiji Dresdner Investment Trust Management Co. will on
Wednesday start investing some of its capital of as much as 50
billion yen in its ``Wadaiko' fund and on Thursday, Fidelity
Investments Japan Ltd. will introduce three new funds: ``Japan
Blue Chip Fund,' ``Japan Aggressive Growth Fund' and ``Select
Financial Services Fund,' which may be worth as much as 50
billion yen each. On Friday, Nomura Asset Management Co. will
start buying shares for its ``Japan Best Blend,' which had aimed
to collect as much as 50 billion yen.
Most of these funds have said they will buy ``growth'
stocks, or companies that the funds deem to have promising
earnings potential.
Hong Kong, Korea
Hong Kong's Hang Seng Index may fall this week, extending
its 4.7 percent decline last week. China Telecom (Hong Kong) Ltd.
and Internet-related shares, could decline as the slump in the
Nasdaq, from which they take their lead, raises investor concern
these shares are overvalued.
``Hong Kong remains focused on the Nasdaq and the outlook
there remains volatile,' said Edmund Harriss, investment manager
at Investec Guinness Flight Asia Ltd., which manages between $450
million and $500 million in Asia ex-Japan.
For the past 12 months, moves in the Hang Seng Index closely
tracked the ups and downs of the Nasdaq, with a correlation of
0.944 during the period on a daily basis using Bloomberg
analytics. A value of 1 means the two securities move in
lockstep. Above 0.75 is significant.
Investors use ChinaTel, the city's largest stock taking up
about 25 percent of the benchmark stock index, as a proxy for the
index if they plan to reduce their exposure to Hong Kong stocks.
ChinaTel fell 12 percent last week to HK$60.75. It's down 23
percent from its record on March 6 of HK$80.
Hutchison Whampoa Ltd., the city's biggest conglomerate with
interest in the Internet, fell 8.6 percent last week to
HK$122.50.
Similarly in Korea, the Kospi index could fall further this
week, led by computer- and telecommunications-related stocks such
as SK Telecom Co. and Samsung Electronics Co., as investors bet
their growth potentials were already reflected in their current
prices.
``When the market's on a rally, investors only want to see
their growth expectations,' said Park Key Pyeong, a fund manager
at Hanyang Securities Co., who oversees 2.5 billion won. ``When
the index is falling, investors can only look at what the stocks
are worth at the moment.'
Still, Park said the index will not likely dip below 780
points this week.
Australia
Australian stocks may fall as investors switch out of
telecommunications and media stocks, and buy companies which have
been neglected in the rush for higher, faster returns technology
stocks have offered until last week.
The ASX200 stocks index fell 2.2 percent last week to close
at 3111.90. The All Telecommunications Index fell about 5 percent
last week, while the All Media Index fell about 8 percent.
``There's a lot of uncertainty in terms of fundamentals on
the sort of cash flows and earnings telecommunications companies
will generate in the future,' said Michael Fitzsimmons, who
helps manage A$250 million ($150 million) in Australian equities
at Jardine Fleming Capital Partners in Melbourne. ``We're seeing
huge valuation ranges on all of the phone companies.'
Cable & Wireless Optus Ltd., the country's second-largest
telecommunications company, has risen more than 80 percent in the
past six months, as has AAPT Ltd., Australia's No.4
telecommunications company.
Australia & New Zealand Banking Group Ltd., the No.4 bank,
rose almost 6 percent to A$11.60, while Commonwealth Bank of
Australia, the nation's biggest mortgage lender, rose more than 5
percent last week to A$25.60.
Investors are winding back their expectations of future
interest rate increases from the Reserve Bank of Australia.
Higher interest rates may depress lending and the value of banks'
financial holdings.
The yield on June 90-day bank bill futures, the futures
market's closest match to the RBA's key lending rate of 5.75
percent, fell 18 basis points to 6.22 percent last week,
signaling investors see a reduced chance of a rate rise by then.
Taiwan, Singapore
Taiwan stocks may fall, led by computer chipmakers and
Internet related shares such as Taiwan Semiconductor
Manufacturing Co. and United Microelectronics Corp., as well as
Internet-related shares such as Systex Corp., as declines in the
Nasdaq fuelled concern that these stocks may be too expensive.
``Taiwan electronics shares will have to wait for Nasdaq to
rebound from its slump,' said Liu Ru-ming, manager of Fubon
Securities Investment Trust Co.'s NT$1 billion High Tech Fund.
Taiwan banks and insurers may fall as signs of accelerated
U.S. inflation may prompt the U.S. federal reserves to raise its
interest rates, which could slow the U.S. economy -- Taiwan's
biggest export market.
Singapore stocks may fall, erasing last week's 1.8 percent
gain, led by computer-related and electronics stocks on concern
their prices may have outrun earnings potential.
Interest sensitive banking and property stocks such as DBS
Group Holdings Ltd. and City Developments Ltd., may also fall,
after the U.S. Consumer Price Index climbed a higher-than-
expected 0.7 percent in March, raising concern the Federal
Reserve may increase short-term rates by more than the expected
quarter-point next month. Higher interest rates would make loans
less attractive and harder to repay.
India
The Mumbai Stock Exchange index, the Sensex, which shed 1
percent last week, may extend its decline. Infosys Technologies
Ltd. and Satyam Computer Services Ltd., may decline as investors
fear the Nasdaq's decline last week, could lead to fewer sales
for Indian software developers.
The market ``will definitely be weak,' said Aniket Inamdar,
who helps manage 800 million rupees ($18.4 million) in software
stocks for Cholamandalam Cazenove Asset Management Co., in
Chennai. The Nasdaq Composite Index's worst week in its 29-year
history, will hit sentiment, he said.
Reliance Industries Ltd., could fall on concern the
country's biggest petrochemicals company, may disappoint analysts
expectations of a 25 percent rise in profit in the fourth-quarter
ended March. Investors are also disappointed with the company's
offer to buy back shares at 303 rupees. The stock fell 15 percent
to 307.3 rupees last week.
Malaysia, Philippines
In Malaysia, stocks are likely to trade mixed as investors
are concern the fall in U.S. equity markets could presage a
slowdown in the world's biggest economy, which in turn could hurt
the country's exports.
Multi-Purpose Holdings Bhd. is likely to rise, after it
scraps a plan to sell Magnum Corp. Bhd., Malaysia's oldest
gambling company, to Bolton Bhd. Bolton, which would've gotten
the second-biggest slice of Malaysia's 8-billion ringgit a year
legal betting industry if the sale been successful, could fall
after its purchase was scrapped.
Philippine stocks may fall for a fifth day, after shedding
1.5 percent to 1712.54 last week, as investors sell shares of
large companies such as Philippine Long Distance Telephone Co.,
for better returns elsewhere. Companies with large dollar-
denominated debt such as Filinvest Development Corp. may fall as
the peso's weakness is likely to push up their interest expenses. |
