Asian tech stocks shrug off Nasdaq sell-off

Monitors show the value of the Facebook, Inc. stock during morning trading at the NASDAQ Marketsite in New York, on June 4, 2012.
Monitors show the value of the Facebook, Inc. stock during morning trading at the NASDAQ Marketsite in New York, on June 4, 2012. PHOTO: REUTERS

Technology stocks in Asia and Singapore rebounded yesterday, shrugging off a second day of profit-taking in New York of the so-called Fang stocks - Facebook, Amazon.com, Netflix and Google parent Alphabet.

The tech-heavy Nasdaq Composite fell 0.5 per cent on Monday after plunging 2.74 per cent on Friday.

Analysts said the sell-off on Monday in local manufacturing and tech stocks was a knee-jerk reaction to Friday's Nasdaq sell-off.

"It was triggered by fear, but there is no change in the fundamentals of these local stocks. Demand for semiconductors is continuing into the second quarter and we haven't seen signs of a slowdown in China, Malaysia or Singapore yet," Mr Jarick Seet, RHB Research's head of small-mid caps, told The Straits Times.

Get The Straits Times
newsletters in your inbox

Asian markets have moved on from the technology rout, CMC Markets senior trader Lim Dong Yul said.

Technology manufacturing companies in Asia are typically hardware-focused as opposed to their software-heavy American counterparts, and also have other businesses to fall back on, he told Bloomberg.

Venture Corp led yesterday's rebound with a 1.2 per cent, or 15-cent, gain to $12.31. Bargain hunters also drove UMS Holdings 4.7 per cent, or five cents, higher to $1.125 and AEM Holdings up 1.6 per cent, or four cents, to $2.51.

Jadason Enterprises jumped 8 per cent, or 0.6 cent, to 8.1 cents; Hi-P International gained 3.8 per cent, or 3.5 cents, to 94.5 cents.

"Nasdaq is at an all-time high, while the Straits Times Index hasn't even recovered back to its 2015 high, so the reaction to the correction is less," Mr Seet said.

Some analysts believe the Nasdaq, which has gained 15 per cent so far this year, is undergoing a short-term correction.

Facebook, Amazon, Alphabet, Apple plus Microsoft accounted for nearly 75 per cent of the two-day drop in the Nasdaq Composite Index, according to Bloomberg data.

These stocks began tumbling after Goldman Sachs warned that they may have been overbought after hitting new record highs recently.

Despite the latest drop in technology shares, these are "much less overvalued than before the dot.com bubble burst in 2000-02 ... when the valuations of technology firms often appeared to have little to do with their ability to generate income", Capital Economics economist John Higgins said.

"The US stock market is unlikely to collapse as a result of a plunge in technology shares. Instead, we suspect that the next big correction in the stock market will occur in response to the growing risk of a recession," he added.

"We forecast this correction to be in 2019, when tighter Fed policy should be taking a toll and any fiscal stimulus should have ended."

Mr Oliver Jones, another Capital Economics economist, believes stock markets in emerging economies are not as vulnerable to a further decline in US tech shares as previously.

"Emerging markets equities' direct exposure to the technology sector is almost entirely due to Taiwan, Korea and China.

"As a result, the stock markets of most of the 24 countries in that index might escape relatively unscathed from a prolonged sell-off in technology shares," he said.

A version of this article appeared in the print edition of The Straits Times on June 14, 2017, with the headline 'Asian tech stocks shrug off Nasdaq sell-off'. Print Edition | Subscribe