2008 A Good Year For Tech

The technology industry will be the best performing sector worldwide this year, according to a Citigroup survey of investors who were more bullish on tech stocks than on any other sector.

Citigroup expects the sector to see earnings increase by 14 per cent, and sector growth of 23 per cent this year. In Q2, tech stocks went up 14 per cent.

The Singapore-based Henderson Global Investors sees three reasons to be positive about the sector: low valuations relative to history, industry consolidation, and product up-cycles.

“We are now seeing a positive asset allocation shift towards technology equities from generalist investors on the back of better relative earnings growth, identifiable product cycles and strong cash redeployment”, said Arthur Henderson, managing director of Henderson.

Whereas general industrial production slid 0.7 per cent in April, tech production rose 1 per cent in April over March and by 25 per cent year on year.

Intel’s results, led by good sales of server chips, gave many analysts a feeling that the tech sector is not going to be hard hit by the general economic malaise.

Global Crown Capital analyst David Wu said Intel’s results showed the recession would not be too bad. “We know it’s not deep, because if it were deep, we would have seen it in Intel’s results, and we didn’t,” said Wu.

The semiconductor sector is seeing a robust 2008. “Finally the chip market is starting to hum”, said Malcolm Penn, CEO of European analysts Future Horizons, who expects the world chip market to grow 12 per cent this year.

And US semiconductor analysts Gartner Dataquest said that semiconductor demand was holding up against the expectations of many.