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United States : Just 7% from the bubble peak, Nasdaq investors are losing nerve.

After waiting 15 years to pull back toward even, technology investors suddenly can't handle success.

They yanked US$6.8 billion from the biggest exchange-traded fund tracking the Nasdaq 100 Index in December and January, the most for any two months on record. Big speculators like hedge funds have cut their holdings of futures tracking the gauge to the lowest since 2012.

Fear of heights is setting in after a 320 per cent rally brought the bellwether index for dot-com excess within 7 per cent of its all-time high, reached March 27, 2000. Investors are bailing out as a 16 per cent increase in the dollar crimps results for companies that tally more overseas sales than any other industry.

"Once you get past Apple, sentiment remains skeptical toward a lot of companies," said Dan Veru, who helps oversee US$5 billion as chief investment officer at Fort Lee, New Jersey- based Palisade Capital Management. "Investors just remember how many of the business models from the dot-com boom failed." Anxiety is building after Microsoft Corp. cited dollar strength for a sales shortfall and International Business Machines Corp. warned the currency volatility may shave revenue growth by 5 to 6 percentage points. Among Nasdaq 100 companies that have reported fourth-quarter results, 45 per cent trailed analysts' sales forecasts, data compiled by Bloomberg show.

Computer and software makers in the Standard & Poor's 500 Index get 57 per cent of revenue outside the US, according to estimates from Strategas Research Partners. All major currencies have declined against the dollar in the past 12 months, with the Bloomberg Dollar Spot Index hitting a decade high.

"Currency concerns are a thing of the present," John Manley, who helps oversee about US$233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said in a phone interview. "The fundamentals look good but you're losing some stuff with the dollar and that makes people nervous." Technology companies have posted some of the biggest gains in the six-year-old US bull market and that's pushing out valuations. After rising 270 per cent since March 2009, the Philadelphia Semiconductor Index trades at 3.6 times sales, near the highest level since 2007.

A 456 per cent surge in the Nasdaq Biotechnology Index has driven its price-sales ratio to an 11-year high of 9.6. Among the index's 151 companies, about two-thirds are forecast to be unprofitable this year, analysts' estimates compiled by Bloomberg show.

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Publication:Mena Report
Date:Feb 17, 2015
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