According to a report from Nikkei Asia, traders are betting that Asian technology companies will fall further in the near term as investors anticipate the Fed’s rate hikes.
Investors are reassessing their portfolios after a lacklustre last quarter of 2021 and especially after the Federal Reserve announced sooner than expected rate hikes. The pressure on tech stock prices may also have a negative influence on this year’s anticipated blockbuster IPOs.
According to Fed officials, a strengthening economy and higher inflation might lead to earlier and more rapid interest rate hikes than previously anticipated.
Prior to Q42021, investors had been buying up tech stocks in the hope of seeing their value grow. However, according to Nikkei Asia, bonds are now offering superior returns and, as a result, investors have become less tolerant of the massive losses that ASEAN technology firms have been incurring.
Sea’s stock has lost 10.3% of its value on the New York Stock Exchange since the start of the year. The company’s market capitalization has halved from an October peak to about $111 billion today.
After a 21% dive on the Nasdaq in their debut as a SPAC merger, Grab has also seen its shares declining. When the IPO plan was announced in April, the well-known firm was valued at around $40 billion. Its market capitalization presently exceeds $23 billion.
Investor confidence began to wane in mid-November, when the firm reported stagnant growth in players for its core game business, which had fueled earnings, for the July-September quarter. It’s also unknown when the e-commerce division will start to generate income.
On Bloomberg Television, BMO Family Office’s deputy chief investment officer Carol Schleif said they’re preparing people for volatility.
“You had another record double-digit year and yet investors’ mood is pretty dour. We definitely think the readjustment of the volatility will increase this year because there is a lot to be dealt with. You do have a leveling off of some things, improvement in some things and people are going to be watching both the Fed and company earnings,” she said.
While investors are optimistic about the medium- to long-term growth prospects of e-commerce and financial services in Asia, they will closely examine a company’s earnings and market control capabilities.
The main challenges for Sea as it expands its operations outside Asia will be leadership and organization, such as how the group manages itself as a multi-continent, multi-sector operation, according to Jianggan Li, CEO of Momentum Works in Singapore.
As for Grab, Li said that investor attention would be focused on its “next few quarterly reports” to determine whether it can reverse its steep losses.