US Shake out eventually hits Australia

Author:KATRINA
NICHOLASandJANEAKIN
Date:05/04/2000
Australian tech stocks suffered one of their worst days ever yesterday, with the Biz.com Investor
Web technology index plummeting more than 12 per cent, or 844.8 points, to 5864.3.
One market watcher described the performance as the ``shake-out we had to have", after the
Nasdaq, the US technology barometer, dived 349.15 to 4223.68.
Nasdaq registered its dramatic fall when investors sold Microsoft stock before a US court ruled that
the computer giant had violated the Sherman Anti-Trust Act. Since last week Nasdaq has dropped
more than 17 per cent. Technology indices in other overseas markets were not immune either, with
the British TechMark index losing 247.5 to close at 4083.3.
Locally, 24 tech stocks fell more than 15 per cent. Those worst hit were Open Telecommunications,
down 40c to $11.60, Davnet, down 95c to $4.05, Isis Communications, 50c to $1.55, Solution 6,
$1.45 to $8.95 and Melbourne IT, $1.83 to $11.30.
Ecorp, Solution 6 and Reckon are now almost 50 per cent off their recent highs. But despite the
widespread falls, telecom player Tele2000 and e-commerce outfit Working Systems, which both made
debuts yesterday, closed above their 50c issue prices.
Shares in Working Systems, which is valued at $65 million, opened at $1 and closed at 86c, while
Tele2000 closed at 58c after opening at 49c.
Tele2000 chief executive Mr Daniel Hayman said considering he could not have picked a worse day to
list, the company had done quite well. ``This doesn't make us that nervous because we're in it for the long
run."
Mr Marcus Fanning, AMP head of Australian equities and a widely respected fan of ``growth" stocks,
predicted that the phenomenal bull run in the technology sector was finally over.
``Many times over the last three years we've seen the sector cool down and then recover," Mr Fanning
said. ``But I don't think this is the same. The easy money days are over."
Mr Fanning, who heads the second-best-performing fund in the market, said his investment strategy
would not be affected by the sell-off. ``I don't think buying in growth is dead. In fact, I think some will be
priced ever higher, but the investment will be much more selective," he said. ``The real key to what
happens will be the retail investor. This was the first day retail investors didn't see a major bounce after
a major fall."
William Noall analyst Mr Matthew Rey said both ``good and bad Internet stocks" were pummelled
yesterday.
``I don't think the market is distinguishing [between tech stocks] yet, but it will happen and it's shake-
outs like this which make it more likely," he said. ``This is the beginning of the wash-out people have
been expecting."
Mr Rey said he had already heard of tech companies that were due to float in coming months ``hitting
the cancel button", adding that few firms would want to underwrite a float in such volatile conditions.
Another analyst also said he doubted whether some tech floats would go ahead, especially if further
Nasdaq falls translated to continued slides on the local market. He said Nasdaq could fall below 4000,
causing more retail investors to ``stampede".
However, some analysts said the correction might be temporary.
CPS Capital's Mr Tony Cunningham said strong after-market trading
in the US resulted in many US tech stocks regaining lost ground.
``So we shouldn't be writing tech stocks off just yet."
WINNERS
LOSERS
Working Systems 71.2% 86c
Pharmanet Online 4% 52c
131 Shop.com 3.2% 32c
Securenet 25.7% $9.14
Isls Comm 24.4% $1.55
Open Telecom 24.2% $11.60