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Technology Stocks : Pacific Century CyberWorks (PCW, PCWKF) -- Ignore unavailable to you. Want to Upgrade?

To: ms.smartest.person who wrote (4387)	1/7/2001 10:02:31 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 4541

Is this the time to buy tech stocks? They are cheap based on long-term valuations but there'll be bouts of weakness in the first two quarters of this year By Teh Hooi Ling AT their current prices, tech stocks are a long-term buy. The advice for investors with the patience is that technology stocks are cheap now based on longterm valuations. However, there will still be bouts of weakness as more earnings disappointments and profit warnings are expected in the first two quarters of the year. So those with an investment horizon of six months or less might want to stay on the sidelines first, analysts said. While analysts are bullish that tech stocks will end the year higher, many are hesitant to stick their necks out and say the sector will outperform the others. "It is still uncertain at this moment which sector will outperform," said Ng Soo Nam, fund manager at Schroders Investment Management. It is a toss-up between tech counters and interest rate-sensitive counters such as banks and properties. A major plus point for tech stocks, however, is that it has been bashed so severely that the probability of a substantial upside is strong. Banks and property stocks, on the other hand, have held up pretty well in the last two, three months. In addition, one analyst noted that local banks may not benefit much in a low interest rate environment as they are net lenders in the interbank market. Furthermore, if the global economy slows down, it is foolhardy to think that banks will not be hit as well. To be sure, the outlook for tech counters had brightened markedly since the US Federal Reserve announced an unexpected 50 basis point rate cut last week. "The Fed's rate cut greatly reduces the chances of an implosive recession," said Arthur Chai, an analyst with independent research company NetResearch. While the effect of the rate cut may not be felt in the economy for at least another six months, it does improve the prospect that the US economy will have a soft landing instead of a hard one. "This hard versus soft difference is very important because the overall level of spending on tech products for 2001 will be meaningfully higher in a soft landing scenario than in a hard landing scenario," he said. Thus current valuations which have factored in a sharp slowdown in profits now look relatively inexpensive compared to historical levels, said Mr Chai. ABN Amro's analyst Patrick Yau, however, cautioned against over-optimism at this point. "There are a number of issues that has to be resolved. Inventory has to clear, capacity has to be cut and consumer spending has to pick up. It's not just one event." The wisps of optimism in the air, he added, could be due to the fact that we are just entering the new year. "It is usually easier to be positive in the new year," he said. Negative news: Schroders's Mr Ng concurred, adding that one should not rule out possibilities of further negative news where the macro economy is concerned. But for those with a bullish bent and would like to start nibbling, analysts recommend good quality, big capitalisation stocks. Even if you go wrong on the timing now, you know they will still be around for the next cycle. They are also more transparent in that they give more timely and better earnings guidance, said Pranab Kumar Sarmah from Daiwa Institute of Research. This week, however, may not be the best time to buy one's entire portfolio given the massive rally in the last two days of last week. Profit-taking and the continuing stream of bad news in the coming weeks are likely to weaken the resolve of some investors, said Mr Chai from NetResearch. Investors will have months to build up their positions. So don't rush in, he advised. These are analysts' comments on a few favourite tech companies: Chartered Semiconductor Should the semiconductor cycle pick up by end of this year, Mr Pranab believes Chartered's share price could recover to $10. If not, the counter is still worth $6 to $7. "The semiconductor cycle should recover, led by telecommunications demand. Chartered will benefit because 52 per cent of its sales are to the telecommunications sector." business-times.asia1.com.sg