Advertisement

Air hisses out of the tech-stock bubble

Sanity has returned to the technology sector with King Digital's float flop.

Are we seeing an "overdue resumption of sanity" in the technology sector? asks Richard Holway of Techmarket View.

Last week the New York initial public offering of King, the producer of addictive game Candy Crush Saga, fell by almost a fifth in three days. It had been valued at$7bn, which seems a bit much for agame that merely consists of "matchinglittle coloured thingies" on your smartphone or tablet, says Jeff Sommer on Nytimes.com.

Advertisement - Article continues below

The King flop merely highlighted the broader retreat in technology stocks over the past month. The Nasdaq Internet index has slid by 10% from its early-March peak, while the Nasdaq Biotech has slid even further.

In 2000, the wider market was badly dented when air began to hiss out of the tech bubble. But this time it has "barely blinked", notes James Mackintosh in the FT.

That's because investors have rotated out of growth stocks', those that had attracted a premium valuation based on hopes of rapid profit growth in the future, to value' shares, companies on relatively low price-to-earnings or price-to-book levels.

This trend has been evident on a global scale, says Mackintosh; witness the uptick in Chinese bank stocks in recent days. If it holds, it suggests that the rally's foundations are becoming more solid.

Growth stocks have outperformed the value plays since 2007 in the American market. It was high time investors concentrated on more reasonably priced shares and gave the overheated technology sector a long, overdue rest.

Advertisement
Advertisement

Recommended

Visit/517688/the-british-equity-market-is-shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Visit/511212/reasons-for-investors-to-be-bearish-but-stick-with-the-stockmarket-bulls
Stockmarkets

There are lots of reasons to be bearish – but you should stick with the bulls

There are plenty of reasons to be gloomy about the stockmarkets. But the trend remains up, says Dominic Frisby. And you don’t want to bet against the …
17 Jul 2019
Visit/510684/good-news-on-jobs-scares-stockmarkets
Economy

Good news on jobs scares US stockmarkets

June brought the best monthly US jobs growth of the year, but stockmarkets were not best pleased.
11 Jul 2019
Visit/investments/stockmarkets/601611/nasdaq-all-time-high-markets-and-the-real-economy
Stockmarkets

How can markets hit new record highs when the economy is in such a mess?

Despite the world being in the midst of a global pandemic, America's Nasdaq stock index just hit an all-time high. And it's not the only index on a bu…
3 Jul 2020

Most Popular

Visit/economy/inflation/601584/the-end-of-the-bond-bull-market-and-the-return-of-inflation
Inflation

The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020
Visit/investments/property/601606/house-prices-crash-uk-property-prices-falling-where-next
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020
Visit/investments/commodities/gold/601587/bullish-gold-price-cup-and-handle-chart-pattern
Gold

This chart pattern could be extraordinarily bullish for gold

The mother of all patterns is developing in the gold charts, says Dominic Frisby. And if everything plays out well, gold could hit a price that invest…
1 Jul 2020