Technology stocks, which have fallen sharply in recent weeks on heightened regulatory scrutiny and ongoing trade tensions, are poised for a recovery, according to Gerrit Smit, head of equity at international family office Stonehage Fleming.
Despite rallying 2.7% on Tuesday after US Federal Reserve chair Jerome Powell said the central bank could cut rates, the tech-heavy Nasdaq Composite remained 7.8% down from its close on May 3.
Tech stocks — including JSE-heavyweight Naspers and its Chinese associate, Tencent — have been on the back foot for weeks amid trade disputes between the US and other major economies.
Tencent has slipped 14.6% since May 3, while Naspers has declined about 9%, propped up by the weaker rand and plans to list its international internet assets in Europe. Naspers’s decline has dented the JSE, given its hefty weighting in local indices.
The tech sell-off intensified on Monday after US authorities signaled their intention to curb the size and power of sector giants.
“The anti-trust probes will affect only some businesses to some extent, and it may take very long before that happens,” said Smit. “In those cases, valuations already reflect some of those risks.”