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| Thursday, 07 February 2008 | |
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The value of our global technology share index grew impressively in 2007 despite the market turbulence all around it. But are ICT stocks riding out the storm, or riding straight into it?
For a slice of the world’s corporate community, however arbitrary its selection, to post gains of 20.1% in a year is quite impressive. To achieve that in 2007, when global financial markets flirted with freefall and illiquidity, is little short of amazing. Tech shares have tended to be the ‘whipping boys’ of any financial downturn but in 2007 they were looking attractive and safe. Attractive, certainly, when compared to the financial sector which had a rotten underbelly of accounting exposed as forensically and achingly since... well... the technology sector itself was likewise exposed back in 2001. Numbers gain The Redux Global ICT 100 (R-100) Index closed off 2007 more than 20% ahead of the year’s starting point. It thus built on gains of 13.7% in 2006 and 4.9% in 2005. The R-100 is now 47.2% ahead of its July 2004 launch and nearly 60% up on its August 2004 nadir. October 2007 saw the R-100 reach an all-time high of 1529.87, one of seven record levels set during the course of the year. During 2007, only three months saw losses posted for the index. The most significant of these came in July (-1.7%) and again in November (-3.1%). Between these, the R-100 surged through August (+3.01%), September (+4.4%) and October (+5.3%). If the statistics and percentages fail to impress, the dollars they represent might just do so. The market capitalisation of the R-100 grew by US$832bn in 2007 with the index now worth just under US$5trn. Mobile march An interesting subset of the R-100 can be found in the form of the WBR-25, a wireless-only index produced for our good friends at the Wireless Business Review. This listing of mobile network operators grew by 34.5% in 2007, comfortably outperforming the more broadly based R-100. Along the way, the WBR-25 posted four months of net losses, including both November and December, but also reached an all-time high in October 2007. The 25 wireless operators from around the world ended the year with a combined market cap of US$1.3bn plus some loose change Regional variations? Figures for the R-100 are divided into three geographical regions: Europe, Middle East and Africa (EMEA), the Americas (North, Central and South) and the Asia-Pacific. These regions comprise forty companies in the first two instances and twenty in the latter. Experience with the R-100 tells us that the rates of growth and decline across these three regions are rarely in synch. Towards the close of 2007, this rule seemed to have been broken: all three regions were in advance in September and October; all three fell in November. Earlier in the year, January saw all three head forwards, July saw them all in retreat and August saw them all bounce back into positive territory. There are too many local circumstances affecting individual or regional markets to infer too much from this, but a case could be made to suggest that the world’s ICT equity markets are congealing into a globally amorphous whole. This could be important as the sector attempts to distance itself from the malaise that seems to linger and worsen in the financial sector and in stock markets as a whole. The alternative case can be made, of course, that this global fellowship risks that if one high-profile over-exposed ICT enterprise goes down, the rest will follow suit. The beginning to 2008 has been precarious and the technology giants appear to be getting sucked into trouble: don’t rule out the possibility that things will go from 'good' to 'worse than you can imagine'... Jim Chalmers |
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