Tech Stocks Plunge Presents Buying Opportunity? ... "It's Not Time to Buy Yet"

Expert: "Structural Growth Trust Recovery and Sharp Interest Rate Reversal Needed"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Technology stocks, which led the stock market boom over the past two years, have recently shown sluggish price movements, shaking the 'technology stock invincibility myth.' The Nasdaq index, centered on technology stocks, plummeted 4.29% on the 9th (local time), falling nearly 30% from last year's peak, leading some investors to view this as a buying opportunity at a low price. However, experts suggest that it will take time for technology stocks to rebound.

According to the securities industry on the 11th, the Nasdaq index has retreated 24.3% from its peak and has fallen 14.6% since April, when interest rates surged. From a macro perspective, inflationary pressures and concerns over rapid interest rate hikes are cited as the main reasons for the sell-off in technology stocks, but there are concerns that the Nasdaq will not rebound simply because the macro environment improves.

Shinhan Financial Investment presented three conditions for technology stocks to rebound: ▲ whether the growth of technology stocks has passed its peak ▲ oversupply by companies ▲ concerns about economic slowdown. First, technology stocks had a sharp growth due to increased non-face-to-face demand caused by COVID-19, but this growth clearly slowed in the first half of this year. The Nasdaq's earnings growth rate in the first half was 8.7%, down from 64.2% the previous year, which confirms this.

The explosive increase in tech companies is also a factor slowing the growth of technology stocks. The proportion of tech companies in initial public offerings rose from 35% in 2010 to 58% after 2020.

Lastly, concerns about economic slowdown are another hurdle technology stocks must overcome. Technology stocks had continued to grow regardless of economic trends, but as the proportion of technology stocks' earnings in economic indicators has increased, it has become difficult to expect the same upward trend as before. Even if interest rates fall, it is evaluated that only companies with a solid competitive edge are likely to resume the upward rally.

In other words, not only the macro environment but also passing the growth peak, active new listings and supply increases, and changes in earnings structure are intertwined, causing technology stocks to face headwinds.

Kim Seong-hwan, a researcher at Shinhan Financial Investment, said, "For technology stocks to achieve a V-shaped rebound, trust in structural growth recovery and a sharp reversal in interest rates are necessary, but currently, these are difficult to expect," adding, "It is not the right time for a low-price buying strategy relying on stock price declines."

Kim Hak-gyun, head of the research center at Shin Young Securities, also analyzed, "Although interest rate hikes act as a trigger for the Nasdaq, the fact that the Nasdaq was already overvalued itself caused the interest rate hikes, which further fuels the downward trend," and "Technology stocks still have room for further price adjustments."

This content was produced with the assistance of AI translation services.