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Tencent's absence is a drag for lagging Asia tech stocks
[HONG KONG] US technology stocks are on their hottest winning streak of the year, yet those gains aren't necessarily translating to the same boost for their peers in Asia.
The tech benchmark Nasdaq 100 Index, heavily skewed towards the so-called FAANG stocks - Facebook, Apple, Amazon.com, Netflix, Google parent Alphabet - as well as top position Microsoft, has now rallied for six straight days. It has rebounded 33 per cent since a low in March as investors piled into technology and biotech shares seen as winners amid the social-distancing lockdowns of the coronavirus pandemic.
There's no equivalent tech mainboard in Asia, with the MSCI Asia Pacific Information Technology Index the closest comparable. It's up a comparatively weak 24 per cent since mid-March, and the top stocks in the gauge, Taiwan Semiconductor Manufacturing and Samsung Electronics, have lagged that gain. Tencent Holdings, the online gaming and social-media services giant that analysts expect will report on Wednesday an 18 per cent revenue increase amid the virus outbreak, isn't part of that index.
While the top of the Nasdaq 100 enjoys a more diverse mix - Google, Netflix and Facebook leveraging demand for online and social-media services from consumers stuck at home, alongside Amazon's online delivery - the Asia-Pacific index is largely dominated by chipmakers TSMC and Samsung. They account for more than a third of the gauge.
The coronavirus pandemic has been a net negative for chipmaker stocks worldwide. Despite growth in data centers, they've been hit by concerns about lower end-market demand for new personal computers, smartphones and autos, Bloomberg Intelligence analysts Anand Srinivasan and Marina Girgis wrote in a May 1 note.
Tencent not being part of the Asia-Pacific tech index is also hurting it. After falling less than its peers during the initial market downturn, the stock is up 14 per cent for the year, climbing to a two-year high on Monday.
Global mobile game sales hit a record for the week ended May 3, according to Sensor Tower, with holidays in China and Japan also helping gains, BI's Matthew Kanterman and Ling Vey-Sern wrote in a note on Monday. "Growth should continue above the long-term market potential for the duration of the pandemic, likely through Q2," they said.
Tencent was also included as a "select stock pick" as Internet, healthcare and property sectors are among those to benefit from China's upcoming National People's Congress, Citigroup analysts including Pierre Lau wrote in a May 11 note.