US IT shares, galvanised by hopes that equities have been through the worst, bounced strongly last night and spurred a similar rise on the JSE today, but market traders were sceptical of just how long the rally would last.
The Nasdaq composite index of mainly tech stocks climbed 5.8% or 73 points to 1 335, helping to bring it off the October 1998 lows it had been mired in for a while. However, the JSE/FTSE software and computer index was more cautious in its rise and by 10.45am had risen 1.8 points, or 1.34% to 141.1.
The Dow Jones index of US blue-chip stocks ratcheted up a 5,4% gain to close at 8 712 points.
Morgan Sizer, a dealer at SCMB Equities, says while local IT shares were taking their cue from the US, they were behaving as if they were not convinced the rally was sustainable.
"US futures are lower and this has taken the breath out of our rally. Furthermore, this week is a big week for the release of US economic data that may cloud market sentiment and take things out of the hands of the IT shares," he says.
In mid-morning trade, Dimension Data gained five cents to 490 cents. Comparex also rose five cents to 715 cents and Datatec bounced 60 cents to R10.80.
Monday`s Wall Street IT rally was galvanised by hopes that the US equities market had seen its worst for the time being and was cited as a continuation of a rally begun last Wednesday.
Investors also brushed aside worries over troubled technology group Qwest Communications, which said at the weekend that it would restate financial results for 1999, 2000 and 2001 after discovering bookkeeping errors of $1.16 billion. The share price fell one cent to $1.49 at the end of the day.
WorldCom, ironically, jumped 5.5 cents or 29% to 24.5 cents on news that it had appointed two members of a corporate turnaround firm to oversee its restructuring and finances. Ironically, after the US markets closed, the Nasdaq announced that it would delist the troubled telecommunications group today as it had not met the exchange`s listing requirements that a company must remain current in its periodic filings with the US Securities and Exchange Commission.
But other US technology shares had a field day. Microsoft added $2.90 or 6% to $48.25; Cisco Systems was up 11.8% or $1.08 to $13.31; Motorola added 11.4% or $1.4 to $12.15; and Hewlett Packard advanced 12.3% or $1.45 to $13.10.
Palm, maker of personal digital assistants, lost 16.7% or 16 cents to $1.13 after announcing a reverse stock split to revive its share price.
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