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Tuesday, June 22, 2021

Unswayed by Nasdaq rout, global investors stick to buying the dip

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By Ishika Mookerjee, Abhishek Vishnoi and Min Jeong Lee

Global investors don’t seem to be taking the Nasdaq 100 Index’s 11 per cent slide over three days as a sign of things to come.

Most money managers are either looking to buy the dip or sticking to their stock bets on expectations that stimulus measures and an economic recovery will support stock prices and offset concerns linked to the U.S. election and the development of a successful coronavirus vaccine. If anything, Nasdaq 100 futures bounced back strongly on Wednesday, trading 1.9 per cent higher at 10:47 a.m. in London.

“With still significant amount of cash on the sidelines, coupled with still very easy monetary and fiscal policies, we reckon there should be buying on dips,” said Michael Foo, chief investment officer of HP Wealth Management (S) Pte. “Bottom line — we do not believe this is the start of a bear market.”

Nasdaq 100 future contractsBloomberg

Here’s what some other investors are saying:

‘Healthy Profit-Taking’

“We have held on because the tech sector is still one of the very few sectors with transparently good fundamentals for future growth,” said Gary Dugan, chief executive officer of the Global CIO Office. “It was a very exaggerated rally so there was room for healthy profit-taking,” he said, adding that a cyclical recovery and inflation are needed to spark value stocks “back to life.”

Temporary Shakeup

In a digital world, “there isn’t a clear answer to the question of where else will you invest after selling Apple, Google and Facebook,” said Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management, adding that stock prices will stabilize over the next couple of weeks after portfolio rebalancing.

Limited Correction

According to Kerry Goh, chief investment officer of Kamet Capital Partners Pte., the correction should in U.S. equities should be “less than 20 per cent” because several tech plays continue to be profitable with valuations that are less stretched than the FAANGs. His firm has started buying value and cyclical stocks including Walt Disney Co., Berkshire Hathaway Inc. and SATS Ltd.

Moving Sideways

Kerry Craig, global market strategist at JPMorgan Asset Management, expects the market to move “sideways” in part due to concerns related to U.S. elections. “However, broad pillars of support for the equity market remain intact,” he said, adding that short-term concerns should not outweigh the longer-term potential offered by growth and technology stocks.

“Market tremors are a normal, if uneasy, part of investing and not all shocks are a warning of an impending collapse in risk sentiment,” Craig said. “A market fueled by central bank largesse, economic surprises and record earnings beats in the last few months was never going to maintain its heady pace forever.”

Shift Focus

Investors should shift their focus from options activities to tech companies trading at reasonable prices for their growth potential, said Jian Shi Cortesi, a fund manager at GAM Investment Management in Zurich. “These are the companies whose share prices would recover after the frenzy is taken out of the stock prices,” she said.

Shorting Tech

Nader Naeimi, head of dynamic markets at AMP Capital Investors Ltd., started shorting tech stocks in July and added short positions in August. “The tech unravel is only just beginning and has a long way to go,” he said. “We are rotating into banks, materials, industrials, etcetera.”

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