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‘Tech spring’ just around the corner, HSBC banker says
If, as many analysts believe, the Federal Reserve’s key interest rate has peaked, the valuation of tech companies may bounce back in the coming months.
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The apps of six Indonesian tech giants are shown on a smartphone screen in August 2021. (JP/Norman Harsono)
W
hen the United States Federal Reserve embarked on a string of aggressive benchmark rate hikes last year, one sector that was hit particularly hard was tech. Investment that had for years fueled the operations of digital giants and fledgling start-ups, most of which have yet to reach profitability, was suddenly slashed, forcing massive downsizing in the sector in a phenomenon termed the "tech winter".
However, HSBC's head of equity strategy for Asia Pacific, Herald van der Linde, opined that the hard times were close to ending, as many analysts expected the Fed's tightening policy had reached its peak.
"The assumption in the market is, if we're not at the peak, we would be in the next one or two months. Some people say [that interest rates will drop] in September, some people say January [2024]," Van der Linde told The Jakarta Post on Friday.
Herald said that once interest rates in many countries came back down, tech stocks in Asia, including Indonesia, should rise.
"Tech winter is coming to an end, and tech spring is coming," he predicted.
The banker added that tech companies in Asia were "long-duration" firms, meaning most of their value lay in the future, as opposed to companies looking to make a profit on day one or the next year, like oil companies. Currently, the value of tech companies was discounted due to the "winter climate".
Read also: Infrastructure, tech, healthcare deemed ripe for takeovers
