Tech shares globally are teetering.
The rise in yields (especially in the US) has undercut secular growth favorites and otherwise forced a rethink around nosebleed valuations, with tech often cited as one of, if not the, most stretched sectors.
This is familiar territory for regular readers and for US investors more generally. Last week was a reminder that names like Tesla and high-fliers like Cathie Wood’s ETFs, are at risk of suffering steep declines in the event yields move abruptly higher.
A quick glance around the globe reveals widespread malaise. For example, tech shares in Europe sat at a one-month low Thursday after falling more than 2% at one juncture.
Chip makers were under siege, but so were stay-at-home winners, increasingly viewed as potential losers in the reopening trade.
One of the most notable manifestations of this dynamic is visible in the relative performance of Hong Kong tech shares. The figure (below) depicts an egregious stretch of persistent underperformance, with Thursday marking another particularly acute episode.
There’s more to consider in Hong Kong than the knock-on effects from rising US yields, but the point is simply to illustrate that tech woes are becoming “a thing” (so to speak) on a global scale.
In fact, the Hang Seng Tech index looks to have fallen into a bear market (almost) on Thursday.
In a testament to how far tech shares have run (and also to what, on some interpretations, is a mania in Hong Kong), the gauge is still up around 4% for 2021.
The point here isn’t to stoke fear or traffic in hyperbole. Rather, it’s just to point out that as the global vaccine push progresses and economies (hopefully) reopen, there’s a long way down for some of the names which benefited the most during the socioeconomic environment that typified 2020.
I think it’s entirely fair to say that some of the names which have run the furthest could easily fall 30% in a broad-based de-rating episode that comes about just as the reopening push gets underway in earnest in western economies.