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Asian investors more wary of hi-tech

HONG KONG: The recent correction in high-tech stocks in unlikely to lead to the Internet stock bubble bursting anytime soon but investors will become more selective, analysts said.

The Nasdaq market in the US has led the way lower for high tech stocks in Asia, losing 10 percent from its record close last week before rebounding.

Regional regulators and politicians, who have been warning investors to tread warily, will be relieved to see some of the heat coming out of the sector. The last thing they want is market turmoil in economies still recovering from crisis.

In Hong Kong Andrew Sheng, Chairman of the Securities and Futures Commission said this week that technology was changing so fast that "it is hard for anyone to judge whether a tech company will be the next Microsoft or the next bankruptcy".

He likened the recent craze for hi-tech shares amongst local investors to the red-chip fever in 1997. Hong Kong's share market then lost 30 percent of its value when the shares of China-owed firms listed in Hong Kong plummeted after a huge speculative rally.

Analysts suggested investors in the region will be more wary now they know that buying any technology share is not necessarily a safe bet for fast profits.

The frenzy in Hong Kong reached a peak late last month when tycoon Li Ka-Shing launched a public offer for his internet company tom.com. Hundreds of police were called out to control crowds estimated at 300,000 who turned out to pick up share applications.

With an issue price of 1.78 Hong Kong dollars, tom.com reached a high of 15.35 dollars in later trading although it has since eased back to 11.50 at the end of this week.

Given the success of the tom.com listing, thousands also lined upto buy shares in IPOs for Hong Kong mobile phone company Sunday and e-business company Sunevision.

In a sign the frenzy has cooled Sunday ended its first day on Thursday 5.0 percent below its initial public offer price.

Sunevision Ñ seen as a comparatively cheap stock Ñ did better, ending its first day with a premium of nearly 50 percent on its IPO price, although analysts said it would have fared much better a week earlier.

Analysts in the region think the correction in technology stocks is likely to continue but they do not seen any signs of the Internet bubble bursting.

John O'Connell, technology analyst at Macquarie Equitities in Sydney, said investors are becoming more selective in their buying of technology stocks.

They are favouring stocks that either already show real earnings or a real prospect of near-term earnings.

"What's coming off are the 'story' stocks," he said. "People have had enough of listening to stories. They're picking the eyes out of the market," he said.

O'Connell likened the current situation with Internet stocks to the biotechnology sector in the late 1980s and early 1990s. Early optimism about profitability often proved to be unfounded, resulting in a consolidation of the sector.

Internet stocks are seen as being more vulnerable to sharp falls than other high tech sectors such as telecommunications and biotechnology.

Nevertheless, Song Seng Wun, regional economist at G K Goh Stockbrokers Pte Ltd., does not expect more than a correction in Internet stocks.

The market "is looking to see if the whole herd is running with it," he said, adding that there were no signs the bubble was about to burst.

"The whole thing is certainly hype, and sure it will die down sometime, but it will be around for a while before that happens," he said.

In Japan the correction of technology stocks is expected to continue through this month but Tokyo investors are being more selective.

"Correction of IT share prices may take some time following excessively heavy trading in selected issues," said Tsuyoshi Segawa, general manager of equity trading as New Japan Securities.

"Amongst IT stocks, there will be a good contrast in terms of prices between those still favoured by investors and those not". AFP