JSE IT shares plunge in Nasdaq`s wake

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 16 Mar 2004

JSE IT shares fell heavily this morning as they tracked their counterparts on the US and other international markets.

By mid-morning, trade losses on the JSE`s IT index had outpaced the rest of the market, shedding 120 points (or 1.63%) to 7 244.65, as the all share index dipped 0.4 points to 10 656.645.

Analysts say the losses on the IT index are related to the fall experienced on the Nasdaq on Monday, which plunged 45.53 points (or 2.29%) to 1 939.2. This was its biggest slide in six weeks, and it is now 10% lower than its closing high. The blue chip Dow Jones industrial average dropped 137.19 points, or 1.34%, to 10 102.89.

World political events have also played a part in destabilising the stock markets following the surprise win of the Socialist Party in the Spanish general elections on Monday.

"There is a lot of doubt about the world economic recovery and how well technology shares will do out of it," says one JSE analyst.

He says while there are signs that IT spending is rising, the growth remains in single-digits and that many US technology shares have benefited from a weaker dollar exchange rate, rather than organic growth.

"The concerns about economic growth are broader than just the US and this indicates we may be in for a significant pull-back," the dealer says.

Dimension Data, which has its primary listing in London, tracked the lower international trend by falling 14c, or 3.15%, to 430c.

Datatec, which is hoping to list its US Westcon subsidiary in the next six to eight weeks, was little changed at R14.

"It seems Datatec may be a bit disappointing if people place all their hopes on the Westcon listing," the analyst says.

Smaller IT shares may be offering better value than their big counterparts, analysts say, after the toil and tribulations they have recently gone through.

AST was steady at 100c and troubled CS Holdings was unchanged at 51c.

"If CS Holdings is able to weather the storm of its CEO resigning and the revelations of 'indiscretions`, it may offer some good value," an analyst says.