Stock market: technology stocks remain under pressure

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Times are tough for technology stocks. Since its record of August 29, the Nasdaq index has lost 12% of its value, while the NYSE FAANG + index, which includes 10 US stars and Chinese tech, has fallen 20.14% since June 20 (ie the definition of a "bear market" or "bear market"), the American values ​​having joined the Chinese in the disenchantment of investors. The Gafam, which have long supported Wall Street, have lost, since the end of August, $ 624 billion of capitalization, to 3.598 billion, of which 212 billion for Amazon, 188 billion for Apple and 143 billion for Alphabet. Is the party over or is it just a correction after the runaway 2017?

Stock market: technology stocks remain under pressure

"2017 has been a fantastic year. Technology has benefited from an ideal economic environment, while the US tax reform has put a boost to this sector. In 2018, the headwinds rose with the Chinese slowdown, exacerbated by trade tensions with the United States. There is also the scandal
Cambridge Analytica
, which touches Facebook, and finally, there has been a change in investors who have preferred to focus on more domestic companies, less exposed to the risk of commercial war "says Richard Clode, manager of a technology fund at Janus Henderson.

Increase in bond rates

In September, another phenomenon occurred: the sudden rise in US borrowing rates in September. "Investors have felt less comfortable paying high prices for certain values"continues Janus Henderson's manager. An opinion shared by Catherine Garrigues: "The technology is expensive and especially the FAANG" because the origin of the decline comes in particular "The quality of the results. When there is a disappointment, the market sells, especially since almost everyone had a wallet ". The market has rather poorly received the results of companies like Apple (-6.63% on the day of the announcement), NVidia (-18.78%), Amazon (-7.82%) and even Alphabet (-2 , 20%).

This is reflected in particular by an exit of many investors. Equity funds dedicated to the sector indeed recorded a $ 3.1 billion outflow in one month to November 7. They had received 41.3 billion net inflows between January 2017 and September 2018, says Bank of America Merrill Lynch. The bank's survey also shows that the allocation of 225 panelists ($ 641 billion manager) collapsed to its lowest since February 2009. They are still 18% (net) overweighting the technologies in their portfolio. The sign that there is still room for further correction.

Impact of the trade war

This is the opinion of Jacques-Aurélien Marcireau, manager of the EDR Fund Big Data Fund. In April, he analyzed five risk factors for the sector. According to him, three are already well integrated: the slowdown of the smartphone market, which is reaching maturity, the risk of regulation and finally the fall of cryptocurrencies which has consequences on values ​​like NVidia, which benefited, for a time, from the madness around the mining of cryptocurrencies.

But they remain two. First, the trade war that has already had a very hard impact on the semiconductor industry. "Many people underestimate the length and breadth of the trade war. It began several years ago with technology thefts and discriminatory measures. This risk is there for a long time », assures the manager of Edmond de Rothschild AM. For Richard Clode, the continuation of trade tensions and the evolution of interest rates on the bond market will remain paramount: "We should see a hardening of positions, especially around central issues such as artificial intelligence or 5G. I do not see any resolution in the short term. "

The second is more pernicious, it is the risk of disappointment with the speed of implementation of new technologies. "There is a temporality that is difficult to manage because innovation is not linear, it does not spread in the same way in all sectors", recalls Jacques-Aurélien Marcireau, like 3D printers, about which we speak much less. "There is therefore a risk of lag in time that is not anticipated by investors, especially given the valuations reached by the market. "

Pierrick Fay