By The Nation
Nasdaq, which is mainly made up of technology shares, rose by 35.31 per cent on September 2, the highest since the beginning of the year.
The index then suffered mass sell-offs for three consecutive days, causing it to fall by approximately 10.34 per cent, led mainly by FANGMAN (+T) stocks, namely Facebook, Apple, Netflix, Google, Microsoft, Amazon, Nvidia and Tesla. The index on Thursday (September 17) remained in the negative territory.
Jaturan Sornvai, Krungsri Asset Management's director of global investments, said technology shares will not enter a critical stage like the dotcom bubble crisis in 2001, because technology shares have good fundamentals and sustainable growth.
“Technology stocks were also able to escape the impact of Covid-19 because people needed to rely on technology in the ‘new normal’,” he said.
“Since growth in technology shares was higher than in other industries, and several investors bought these shares via Exchange Traded Funds or other mutual funds, the price of technology shares will rise further in the long term.”
Hence, he said, this is the right time to buy technology shares cheaply for long-term investment.
He added that there may be two reasons why investors decided to sell off their tech shares:
• Investors’ hope for a Covid-19 vaccine to be ready by September;
• Nasdaq Index went into correction mode to cope with volatility ahead of the US presidential election in November. Based on statistics, the US stock index is expected to fall for three months before the US elections.
In the short term, he said, the company believes the Nasdaq Index may opt for “risk-off” mode due to three factors:
• The price of gold and Nasdaq began moving in different directions, unlike before when the price of gold used to fall in line with the index;
• The Volatility Index (VIX) rose significantly from 26.57 on September 2 to 31.46 on September 8;
• The Dollar Index (DXY) fell continuously since March after the US Federal Reserve injected liquidity into the system via quantitative easing. The DYX rose recently from 92.73 on September 3 to 93.44 on September 8, proving that investors have returned to buying the dollar as a safe-haven asset, thereby strengthening the currency.
"Hence, the company believes these factors will cause cash to flow into safe-haven assets, while technology shares will suffer more volatility than before,” he added.