South African listed IT shares are building on the news that their counterparts in the US are trading at levels not seen since 2001, sparking worries about another technology bubble.
In mid-morning trade, the JSE`s IT index bucked the overall market trend by rising 15 points to 8 692 as the all share index fell 68 points to 10 146, caused by the rand strengthening by 6c against the dollar to R7.15/$.
US markets shot higher yesterday with the release of some good earnings by corporations, including printer manufacturer Lexmark. Online retailer Amazon.com is expected to release its fourth quarter results this evening.
The Dow Jones industrial average rose 134 points to 10 702, its highest close since June 2001; the blue chip Standard & Poors 500 index added 14 points to 1155.37, a new 22-month high; and the technology-laden Nasdaq composite index climbed 30 points to 2153.83, passing its recent 30-month high.
PC manufacturer Hewlett-Packard and telecommunications operator AT&T are among the US-listed technology shares leading the way.
South African IT and telecommunications shares on the rise include Datatec, with a gain of 15c at R17.25, MTN jumped 100c to R32.25, Telkom bounced 260c to R74.50, and Datacentrix advanced 5c to 225c.
Dimension Data, which has its primary listing in London, slipped 1c to 600c.
Local dealers and asset managers say the gains made by local shares are also closely related to the country`s overall economic situation, which means equities are now the favoured investment route over cash and bonds.
"The share prices are massively overpriced and there is a huge amount of risk," says Piet Viljoen, MD of asset management at Regarding: Capital Management.
He says Dimension Data is trading at forward price earnings of 60, implying that if would take 60 years of that company`s dividends to cover the current share price, compared to a JSE average of 12.
"That is a massive premium to pay and considering that DiData is not expected to make any profits for the next five years, it is really expensive," he says.
"It has been quite amazing to see people pushing the prices of these shares without any real sign of a major recovery," says David Shapiro, a director of stockbroker Barnard Jacobs Mellet. "DiData has been pumped way ahead of a reasonable valuation."
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