Tech stocks showing true colors
It scares even seasoned investors and analysts each time global stock exchanges are shaken about on bad news from one major company, but it happened again last week.
A month or so ago it was Yahoo!, the world's leading web portal that sent indices from Tokyo to New York to Warsaw plunging. Last week, it was the maker of Pentium computer chips, announcing weak third-quarter earnings and declining demand throughout Europe.
"It looks like Intel really affected worldwide markets," said Benita Mikolajewicz, an equity analyst with ING Barings Securities.
Thursday's Intel results took a toll on Friday trade on the Warsaw Stock Exchange (WSE), which had been mostly flat during the rest of the week.
The broad-market WIG index lost 6.35% on the week, ending at 17,076.5 points, and increased selling resulted in increased volumes, which were up 9.41% to zl. 504.58 million ($112 million).
The IT-laden TechWIG index was hit even harder, down 11.53% to 1456.7 points.
But whether the market is headed for a recovery or further downfall in the near future depends on who one talks to.
Mikolajewicz thinks now is the perfect time to add a few Polish blue chips to the investment portfolio at bargain prices. "If (investor) sentiment would improve just a little, we should definitely see a recovery," Mikolajewicz said.
But Marek Pokrywka, a broker with Dom Maklerski Banku Ochrony Srodowiska (BOS), saw it differently.
"Intel is the first signal but a very strong signal that the new economy is very overvalued," Pokrywka said. "I have not one doubt that the (downward) trend will continue."
Take, for instance, the WIG-20 index of top performers a number of which are new economy, or hi-tech, stocks Pokrywka said, which ended the week down 8.22% at 1,735.4 points.
When comparing book value to market value on many of these companies, he said, the ratio is sometimes one to 10. Taking some of those ratios down to a more reasonable one to two or one to three, that brings the WIG 20 to around 1,400 or 1,500 points.
Pokrywka predicts the WIG 20 will dip 20% "very soon."
"I wouldn't want to have any stocks in my portfolio next week," he said. "My advice would be to sell everything. Today's prices are not on the bottom yet."
The outlook for the TechWIG looks even worse, Pokrywka said. If last week was any indicator, computer systems integrator ComArch lost a whopping 55% of share value, going from zl. 150 per share to zl. 67.50. In the face of that, software producer Softbank's 14.34% losses to zl. 67.50 per share didn't seem so disastrous.
Media and IT conglomerate Agora also lost big on the week, finishing down zl. 18.42% to zl. 93.
Metals producer Zaklady Metali Lekkich Kety, a traditionally strong performing Polish "old economy" stock, has been on the decline ever since revising 2000 earnings forecasts down by more than 50% in August to zl. 31 million ($6.8 million). Last week, first-half 2000 results turned out expectedly weak and added momentum to Kety's 7.93% weekly loss to zl. 38.3 per share, Mikolajewicz said.
Other factors hurting Kety, she said, are increases in aluminum prices and heavier competition in the aluminum packaging business from such competitors as Amcor, KNU and Europrint. Also, the weak zloty to the dollar has been unfavorable for Kety.
Kety is also present in the aluminum extrusion industry and faces stiff competition from international firms such as Sweden's Sapa and Norway's Hydro Aluminum, Mikolajewicz said.
