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Emerging Tech Stocks Rise to 2000 High; Samsung at Record

By Michael Patterson, Gan Yen Kuan and Saeromi Shin
December 07, 2012 5:48 PM EST 5 Comments
A woman walks past a Samsung Electronics Co. advertisement displayed at the company's Seocho office building in Seoul, South Korea.
Photographer: SeongJoon Cho/Bloomberg
A woman walks past a Samsung Electronics Co. advertisement displayed at the company's Seocho office building in Seoul, South Korea.

Emerging-market technology stocks surged to the highest level since the peak of the dot-com bubble in 2000 and Samsung Electronics Co. (005930)’s market value surpassed $200 billion for the first time amid growing confidence earnings will increase.

The MSCI Emerging Markets Information Technology Index (MXEF0IT) advanced 1 percent to 270.86 at the close of trading in New York, the highest since April 2000. Samsung, the biggest maker of televisions and mobile phones, gained 1.8 percent and its market value reached a record $218 billion. SK Hynix Inc. (000660) and Chimei Innolux Corp. (3481) rose 4.2 percent and 6.8 percent respectively after analysts said profits will improve. Brazilian homebuilder Gafisa SA (GFSA3) rallied to a nine-month high.

The emerging-market technology index is 10 percent below its March 2000 peak, compared with 59 percent for MSCI Inc.’s gauge of developed-country peers. Technology companies led a third week of gains, with the MSCI Emerging Markets Index (MXEF) adding 0.3 percent today, after U.S. data showed payrolls rose more than economists expected in November and the jobless rate slid to an almost four-year low, bolstering the outlook for exports to the world’s largest economy.

The technology rally has been fueled by “bets for global economic recovery, especially in the U.S.,” Chung Yun Sik, chief investment officer for equities at ING Investment Management Korea Ltd., which oversees about $20 billion, said by phone from Seoul today. Investors are “selectively focused on those continuing to boost their market share based on technology leadership such as Samsung.”

Shanghai Advances

The MSCI emerging technology index has climbed 26 percent this year, the second-biggest increase among 10 industry groups after health care stocks. The MSCI Emerging Markets Index has risen 1.7 percent this week.

The Shanghai Composite Index (SHCOMP) of domestic shares was top gainer among emerging market indices, advancing 1.6 percent to a three-week high. Anhui Conch Cement Co. led gains in producers of the building material after China’s new leader Xi Jinping reiterated that the government will promote urban development.

Brazil’s Bovespa (IBOV) index added 1.4 percent extending this week’s rally to 1.8 percent on speculation policy makers will take further steps to shore up growth even after a report showed inflation unexpectedly accelerated in November. Gafisa led gains by companies that sell in the local market, adding 6.6 percent.

Russia’s Micex Index (INDEXCF) climbed 0.2 percent. U.S. employment climbed by 146,000 last month, compared with the 85,000 median of 91 economists surveyed by Bloomberg. The jobless rate fell to 7.7 percent, the lowest since December 2008.

Extra Yield

The 21 countries in the MSCI emerging-market index send about 17 percent of their exports to the U.S., according to data compiled by the World Trade Organization.

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, rose 0.3 percent to $42.79. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 3.4 percent to 21.06.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 280 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

The Indian rupee led declines in developing nations currencies, losing 0.6 percent versus the dollar, while the Mexican peso advanced 0.2 percent.

‘More Focused’

The 21-country developing-nation stocks measure has increased 12 percent this year and closed at 1,024.06, the highest level since May 3.

The tech index more than doubled in 1999 amid speculation the Internet would spark a surge in earnings growth. The gauge tumbled as much as 75 percent from its March 2000 peak as investors concluded share prices weren’t supported by profits. The measure is valued at 15.7 times reported earnings today, down from about 34 times in March 2000, according to data compiled by Bloomberg.

“The marketplace today for technology is a lot more focused than it was during the dot-com boom,” Geoffrey Ng, who helps oversee $1.8 billion as the chief executive officer of Hong Leong Asset Management Bhd., said by phone today from Kuala Lumpur. “Now you have only a few technology companies which have proven themselves to be able to weather many different seasons.”

Record Profit

Samsung, the world’s 15th-biggest company by market value as of yesterday and the first in South Korea to surpass the $200 billion mark, has jumped 40 percent this year. Its market capitalization exceeds the $166 billion combined value of all shares listed in Poland and is almost twice as big as Ireland’s $107 billion stock market, according to data compiled by Bloomberg.

The company reported record profit that beat analysts’ estimates on Oct. 26, boosted by sales of its Galaxy mobile devices. Apple Inc. (AAPL), one of Samsung’s biggest competitors in the market for smartphones and tablets, has climbed 35 percent this year and has a market value of $515 billion, the highest worldwide.

Samsung, based in Suwon, South Korea, urged a U.S. judge yesterday to reject Apple’s request for a permanent sales ban on more than 25 Samsung products in America. A jury found in August that Samsung infringed six of its patents and awarded $1.05 billion in damages.

SK Hynix

Investors anticipate the penalty against Samsung will be reduced, helping spur gains in the stock today, according to Kim Young Chan, a Seoul-based analyst at Shinhan Investment Corp. Samsung’s smartphone shipments will probably climb to about 300 million next year from 220 million this year, Kim said by phone.

SK Hynix, the second-largest maker of computer memory chips, has increased 18 percent in Seoul this year. Fourth- quarter operating profit may be 202 billion won ($186 million), compared with a consensus estimate of 147 billion won, Taurus Investment & Securities Co. said in a report today. The company posted an operating loss of 15 billion won in the third quarter.

Chimei Innolux, Taiwan’s largest panel maker, is up 23 percent in 2012 and is the second-biggest gainer on the MSCI stocks gauge today. Display panel makers’ losses will continue to narrow as product prices climb, and Chimei Innolux will likely return to profit in the second quarter of next year, Jih Sun Securities Ltd. said in report yesterday.

To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Gan Yen Kuan in Kuala Lumpur at ykgan@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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