SINGAPORE (04/17/2000) - IT and telecommunications companies in Asia bore the brunt of a market sell-off that saw bourses in almost every country in the region fall, many by around 10 percent from their Friday close.
Worst hit in Australia was the country's telecommunications sector. Davnet Pty.
Ltd lost 20.7 percent on the day to close at A$2.64 (US$1.59), Cable & Wireless Optus Ltd. fell 11.5 percent to A$5.29, and OneTel Ltd., slipped 15.9 percent to A$1.21. National telecom carrier Telstra Corp. fell 4.8 percent to A$7.49.
South Korea's high-tech Kosdaq exchange finished the day 11.8 percent down and the main board Korea Stock Exchange also finished well down. Japan's Nikkei index lost almost 7 percent on the day.
In Hong Kong, the Hang Seng index lost more than 8.5 percent of its value in a day of heavy trading. Closely watched Internet investment company Pacific Century CyberWorks Ltd. ended the day down almost 14 percent at HK$13.85 (US$1.78), and incumbent carrier Cable & Wireless HKT Ltd. lost more than 11 percent. Carrier China Telecom Ltd. lost nearly 15 percent.
The bloodletting was even heavier on the Growth Enterprise Market (GEM), designed for small start-ups, which lost 12.7 percent on the day. E-commerce application service provider Digitalhongkong.com made its debut today on GEM and ended at HK$1.10, lower than its HK$1.20 initial public offering (IPO) price. Tom.com, the portal company that just weeks ago drew crowds of small investors seeking to buy into its IPO, ended down nearly 15 percent to HK$6.65, but still above its IPO price of HK$1.78.
However, a sustained slump in high-tech share prices won't halt the introduction of new technologies to the region, analysts said.
"I don't think there's going to be any negative impact on the introduction of technology," said David Webb, editor of webbsite.com and a retired financial analyst. "The cost of capital has been artificially low during the bubble, which has let people go off on a tangent. By raising the cost of capital back to normal levels, there will be a shakedown," he said. "Money won't be wasted on bad projects."
Another analyst agreed. "The money's still around, but it's going to be more discerning," said Howard Gorges, vice chairman of South China Online Ltd., a brokerage in Hong Kong. "It won't be distracted."
Southeast Asia was also hit, with markets in most countries down between 5 percent and 10 percent.
In Singapore, multimedia specialist Creative Technology Ltd. lost 17.2 percent to S$36.10 (US$21.13), networking specialist Datacraft Ltd. was down 20.5 percent at US$6.00 and Internet telephony company MediaRing Pte. Ltd. lost 16.2 percent. Singapore Telecommunications Ltd. (SingTel) was 6.5 percent lower at S$2.30. Overall, Singapore's Straits Times Index fell 9 percent to finish at 1999.3.
The timing of the equity fall may pose problems in the capital-intensive telecommunications business, one telecom analyst said.
Because of the cost of infrastructure, a cooler investment climate tends to favor established, cash-rich providers, who can cast a long shadow over smaller players in the industry, said Bertrand Bidaud, an analyst at Gartner Group Inc., in Singapore. For example, he expects the crowded mobile-phone market in Hong Kong to gradually consolidate, with the larger competitors growing more dominant.
This type of trend could stifle innovation in customer service, where small size can be an advantage, he said.
"It's usually smaller companies closer to the market that understand what's needed," Bidaud said.