Despite a largely flat first year, the R-100 looks more impressive in terms of its winners than its losers, as this additional research and analysis shows... 

The Redux Global ICT 100 Index has now been going for a year. Its performance has been a bit unspectacular, but perhaps that’s a good thing: after the events of the last decade, investors are only too well aware that one can have too much excitement in life. For the record, it still represents some US$3,300bn in company equity; that is, perhaps, exciting.

The year in review
The R-100 sagged by more than 6% in the two months following its July 2004 debut. It recovered during the autumn to peak 2.7% above its starting point – and 10.6% ahead of its lowest level – at the turn of the year. To date, 2005 has seen it first slip and then recover, ending its first year just 0.5% down on its opening, still more than 3% down on its 52-week high but more than 6% ahead of its 52-week low.

One of the recurring (and perhaps surprising) features of the R-100’s results over the year has been the way in which the movements of regional clusters have determined its overall performance each month. The Index is composed of 40 companies each from Europe and North America and 20 from the Asia-Pacific region. Here are month-by-month summaries that bear this out:

July 2004: European stocks lead the Index down; North America is mixed, with some significant gains; Asia is steady, but nudging downwards.
August 2004: stocks in each region mix big gains with large losses, resulting in a slight overall decline led by North America.
September 2004: recovery begins as Asia is flat (pinned back by a dismal month in Japan) while North America picks up and Europe gains nearly 5%.
October 2004: Europe is up again (by 3.7%), North America nudges upwards and Asia declines – adding up to a small net gain for the R-100.
November 2004: North America leads another month into more positive territory, but Europe is mixed and Asia slips again.
December 2004: Asian stocks gain 5%, Europe gains nearly 2% and North America 0.2% as the R-100 reaches what is still its all-time high.
January 2005: Europe falls 1%, Asia retreats 4% and North America is down more than 6% as the Index slips back from its peak.
February 2005: Asia leads the way, up 3.5% with Japanese stocks shining, Europe gains 1.6% but a static North America fails to interest those looking for growth.
March 2005: the R-100 drifts back down, despite a steady showing in North America, as Asia and in particular Europe fall back.
April 2005: a 3.15% fall overall with Europe and Asia down again while North America stays steady but cannot lift the Index.
May 2005: a rebound of more than 5% with gains for Europe, North America and Asia in that order.
June 2005: year one of the R-100 comes to a close with a flat performance, gains of 3% and 2% in Asia and Europe respectively offset by a 2.5% decline in North America.

What this demonstrates is that, as befits a ‘global’ index, concerted movement worldwide can drive the Index up or down at an impressive rate by regional variations, with one part of  the world out synch with the others, creates a greater or lesser degree of stability. Europe and Asia combined can offset contrary trends in America; Asia and North America combined will almost always dwarf Europe; Europe and North America moving in tandem drive the Index regardless of what is happening in the Asia-Pacific zone.

Bottom of the class?
As a global industry-specific index, it is worth examining how the R-100 has fared in comparison with other stock indicators. In part, this shows us how ICT has performed as an important component of the economy worldwide, its movements measured against other key market-driving sectors such as defence, construction, banking and pharmaceuticals. A quick glance at stock indicators from around the world appears to show that technology has failed to punch its weight over the course of the last twelve months:

FTSE 100 (UK) +17%
Hang Seng (HK) +16%
S&P Euro 350 +16%
CAC 40 (France) +16%
Dax (Germany) +15%
S&P Global 1200 +8.7%
NASDAQ (US) +2.5%
Dow Jones Industrials (US) +0.01%
Redux Global ICT 100 Index -0.5%
Nikkei (Japan) -0.8%

To infer too much from this ranking would be a mistake. Once again, it’s a regional thing: double-digit 52-week declines posted by 14 stocks in North America and five (all Japanese) in Asia, plus five in Europe, have done most of the damage. In contrast, nearly 50% of European R-100 companies enjoyed double-digit share rises in the year, alongside 40% in Asia and 25% in North America.

Heroes & villains
Looking at individual R-100 companies more closely, more than three in ten outperformed their national stock markets in the year to 01 July, 2005. That’s healthy for them, of course, but the flipside is that nearly two-thirds underperformed their local stock-market peers.

The double-digit growth brigade comprises the following:
Google (US) 307% (listed: 08/04)
OTE (Greece) 53%
Sprint FON (US) 44%
mmO2 (UK) 43%
TPSA (Poland) 40%
AT&T (US) 38% (takeover imminent)
TDC (Denmark) 31%
LG Electronics (S. Korea) 30%
Telekom Austria 29%
COLT (UK) 29%
China Unicom 23%
Elisa (Finland) 23%
Singapore Telecom 23%
Hutchison Whampoa (HK) 21%
Cable & Wireless (UK) 20%
LSI Logic (US) 20%
BT (UK) 19%
Level 3 Comms (US) 18%
Nokia (Finland) 17%
Apple Computer (US) 17%
TeliaSonera (Sweden-Finland) 17%
Vivendi (France 17%)
NTL (US) 17%
France Telecom 16%
Ericsson (Sweden) 16%
Hewlett-Packard (US) 15%
Reuters (UK) 15%
Oracle (US) 14%
Vodafone (UK) 14%
Belgacom (Belgium) 14%
Advantest (Japan) 14%
Samsung (S. Korea) 13%
Dell (US) 12%
Telefónica (Spain) 12%
SK Telecom (S. Korea) 12%
Matsushita (Japan) 11%

At the other end of the scale, one finds the following experiencing double-digit declines in the 52-week period:
EBay (US) -64%
Marconi (UK) -55%
Nortel (Canada) -47%
Avaya (US) -45%
Teradyne (US) -44%
Amazon (US) -36%
Alcatel (France) -25%
ST Micro (France) -24%
Fujitsu (Japan) -22%
NEC (Japan) -21%
Cisco (US) -17%
NTT (Japan) -17%
Lucent (US) -17%
Accenture (US) -17%
Agilent (US) -17%
KDDI (Japan) -16%
Analog Devices (US) -16%
DoCoMo (Japan) -15%
3Com (US) -15%
Microsoft (US) -14%
Telecom Italia (Italy) -14%
IBM (US) -14%
BSkyB (UK) -14%
Sun Microsystems (US) -13%

These list do not include some heavy hitters in the middle ground, including Germany’s Deutsche Telekom (down 8.2% on the year), Italy’s TIM (off 5.3%), Qualcomm in the US (down 7%) and Sony in Japan (also down 7%). A slew of traditional telcos finished the period no more than a few percentage points either side of where they started: they include BellSouth, Qwest, Verizon and SBC in the US; Portugal Telecom and Swisscom in Europe; and China Telecom, Telstra of Australia and Telekom Malaysia in Asia.

Custom options now available
The wealth of information being gathered in compiling the Redux Global ICT 100 Index is now available to you. TelecomRedux has now set up a new department to undertake bespoke tracking of share movements within the R-100 and beyond. For more details of this quite funky new service, click here.

This month will also see a recalibration of the Index in line with currency moves, and a reshuffle with some of the smaller components dropped in order to be replaced by more substantial and influential ICT companies. Do not expect this to result in a sudden upsurge. Life ain’t like that and struggling giants have a more profound effect on the R-100 than struggling tiddlers.

In addition, a new set of regional and industry-specific tracking indexes will be launched later this month.
Jim Chalmers