Asia tech shares join US tumble but full-blown rout not expected

LG Innotek Co

12/06/2017 06:36

* Asia Pacific IT index posts biggest loss since December 
    * US tech stocks slumped Friday on reports on iPhone, 
valuations 
    * Asia tech stocks remain cheaper than US ones 
 
    By Nichola Saminather 
    SINGAPORE, June 12 (Reuters) - Asian technology stocks were 
clobbered on Monday, following a slide in their U.S. peers, as 
caution and profit taking caught up to a sector that had shot to 
record highs on strong global demand for electronic devices and 
gadgets. 
    In its biggest one-day slide since December, the MSCI Asia 
Pacific Information Technology index  .MIAP0IT00PUS  fell 1.5 
percent, after hitting a 17-year high on Friday. 
    That pulled down the MSCI Asia Pacific index  .MIAP00000PUS  
by 0.4 percent.  
    But with Asian tech valuations cheap relative to U.S. ones, 
investors and analysts in the region largely dismiss the 
possibility that Monday's pullback will turn into a longer-term 
rout. 
    Chinese internet firm JD.com  JD.O , Chinese mobile social 
networking company Momo Inc.  MOMO.OQ , Korean internet service 
firm Naver Corp.  035420.KS  and tech equipment maker LG Innotek 
 011070.KS  slumped between 5.5 and 6.5 percent.  
    For a graphic on Asian tech share trends, click http://reut.rs/2rQV3il 
  
    U.S. tech stocks fell sharply on Friday as concerns about 
Apple's  AAPL.O  new iPhones and a cautious Goldman Sachs report 
on the sector prompted investors to book profits and rotate into 
less expensive counters. 
    The S&P 500 information technology index  .SPLRCT  shed 2.7 
percent, while the tech-heavy Nasdaq  .IXIC  slumped as much as 
2.9 percent before closing down 1.8 percent. .N  
    Apple Inc. AAPL.O , Alphabet  GOOGL.O , and Amazon  AMZN.O  
three of the five biggest companies on the Nasdaq, closed down 
more than 3 percent each, with Apple suffering its biggest 
one-day loss in 14 months. 
    "The mini-tech crash last week appeared to be rotation into 
laggards, e.g. financials, and therefore one should not 
necessarily believe this is the beginning of a long rout," said 
Sat Duhra, an Asian fund manager at Henderson Global Investors.  
    "However that's not to say it's undeserved - too many tech 
stocks have re-rated without producing the goods - they are 
driven by sentiment rather than exceptional earning beats and 
this kind of move... is not sustainable." 
    A Bloomberg News report that iPhones to be launched later 
this year will use modem chips with slower download speeds than 
some rival smartphones knocked Apple's shares, which had surged 
over 50 percent over the past year on high hopes for the 
iPhone8.  urn:newsml:reuters.com:*:nL1N1J61EV 
    In Asia, Apple suppliers Hon Hai Precision Industry 
 2317.TW  and LG Display  034220.KS  dropped as much as 2.9 
percent and 5.5 percent, respectively, on Monday.  
     
    SINKING IN THEIR FANGS 
    "The tech sector cannot lead markets forever and with many 
of these tech stocks at or near 52-week highs, we see this as a 
bit of profit taking for now, but will closely monitor the 
situation this week," said Chris Brankin, chief executive 
officer at TD Ameritrade Asia in Singapore.  
    The five largest technology leaders -- Facebook  FB.O , 
Amazon  AMZN.O , Netflix  NFLX.O , Google-parent Alphabet 
 GOOG.o  -- shed a staggering $100 billion on Friday alone to 
dampen the stellar performance of the sector for all of 2017, 
Brankin noted.   
    But investors and analysts remained largely sanguine about 
the fundamentals of Asian tech companies, despite Monday's 
pullback.  
    Jim McCafferty, head of Asia ex-Japan equity research at 
Nomura in Hong Kong, attributed much of the declines in Asia to 
the contagion effect.  
    "When a big company like Apple drops 4 percent, there's 
going to be a knock-on effect," McCafferty said. 
    "For Asia, the hard data suggests that the sector continues 
to grow. And valuations don't appear that stretched relative to 
the U.S." 
    The MSCI Asia Pacific IT benchmark is trading at 14.9 times 
forward earnings, while the MSCI U.S. IT index is at 18.6, 
according to Thomson Reuters DataStream.  
    While some Asian companies have surged on the back of 
factors other than fundamentals -- such as Tencent  0700.HK , 
which has been lifted by mainland Chinese demand for Hong Kong 
stocks -- strong performers can be found, Henderson's Duhra 
said.  
    "One should stick to tech names backed up by strong 
operational performance and strong earnings support," he said. 
"For example, JD.com, in our view, is more attractive on that 
basis today versus Alibaba." 
    Samsung Electronics  005930.KS , which, despite a 66 percent 
gain in the past year is trading at only 13 times earnings, is 
also a good buy, Duhra said.  
    Samsung fell 1.7 percent on Monday.  
    "Stocks do not go up in a straight line," Nomura's 
McCafferty said. "We feel quite relaxed." 
 
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Asian tech firms performance this year    http://reut.rs/2rQV3il 
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 (Reporting By Nichola Saminather; Editing by Kim Coghill) 
 ((Nichola.Saminather@thomsonreuters.com; +65 6870 3317;)) 
 
Keywords: ASIA MARKETS/TECH TUMBLE