Asia Watch: Technology stocks brace for frosty Christmas

greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Asia Watch: Technology stocks brace for frosty Christmas By Joe Leahy in Hong Kong Published: November 22 2000 13:37GMT | Last Updated: November 22 2000 13:52GMT

While the rest of the world prepares to celebrate Christmas and the New Year, Asian technology companies, particularly those in the semiconductor and personal computer industries, are bracing for harder times.

Growth in US demand for PCs and high-technology appliances slowed in the third quarter and the trend is expected to extend to the festive season and possibly beyond, analysts say.

"We’re facing a potentially disappointing Christmas in the US," said Bhavin Shah, head of regional technology research at CSFB in Hong Kong.

Mr Shah said US manufacturers, such as Cisco, the network equipment supplier, and Compaq Computer Corp, have warned of inventories piling up because an anticipated surge in consumer demand in the third quarter did not materialise.

"Inventories did increase at end of the third quarter and consumers are already in the phase of cutting back," Mr Shah said.

"How things pick up next year will depend on the extent of the inventory overhang after Christmas. If it’s very severe, it could take six months to clear it."

There was also an overhang of other appliances, such as mobile phone handsets, Mr Shah said. He said worldwide, there are currently 30m excess units that need to be digested before the production can pick up again.

The slowdown in demand growth damaged sentiment in Asia’s technology-heavy markets, particularly Taiwan and South Korea, and to a lesser extent Singapore. South Korea’s composite index, for instance, is down nearly 50 per cent from the beginning of the year.

The stocks hardest hit include Taiwan Semiconductor Manufacturing, the world’s biggest "foundry" producer of made-to-order computer chips, which on Tuesday ended trade at T$94.00, compared with T$139.00 at the beginning of the year. Taiwan’s biggest PC maker, Acer, was at T$20.20, down from T$78.40 in January.

Other casualties include South Korea’s Samsung Electronics, the world’s largest memory chipmaker, which is at Won158,000 compared with Won305,500 at the beginning of the year, and Singapore’s Chartered Semiconductor, which is trading at S$7.00, down from S$11.50 at the beginning of the year. "Generally speaking, they are near the bottom, if you look at historical lows for the stocks," Mr Shah said.

"But the catalyst is missing for them to move up."

However, Winson Fong, senior portfolio manager at SG Asset Management, said that though demand for chips, semiconductors and PCs may weaken next year, the region’s stronger companies, such as TSMC, should benefit.

"Good companies usually can expand market share during difficult times, " Mr Fong said.

The trend among the world’s major manufacturers outsourcing much of their business to cheaper Asian contractors outside Japan could be one source of new business for the region’s more competitive technology companies. This has been the practice in the US and Europe for some time and Japan may follow.

"Rather than from US producers, who have already reached fairly high out-sourcing percentages, I believe the key out-sourcing business from now on would be coming from Japanese producers like Sony, Toshiba and Fujitsu," Mr Fong said.

http://markets.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3ASEF2VFC&live=true&tagid=ZZZR4COD

-- Carl Jenkins (somewherepress@aol.com), November 23, 2000


Moderation questions? read the FAQ