The fall in the technology-rich Nasdaq Composite index has
flowed through to New Zealand. Photo by Reuters.
The technology-rich Nasdaq Composite index fell more than
3% yesterday but brokers are ruling out a ''tech wreck'', as
seen in past years. Nonetheless, concerns about the sector are
starting to emerge.
The fall by the Nasdaq was its worst since November 2011. The
Nasdaq Biotech index and the iShares Nasdaq Biotechnology EFT
dropped 5.6%The Standard & Poor's 500 closed 2.1% lower,
falling below its 50-day moving average and ''dangerously
close'' to crossing the 100-day moving average, Craigs
Investment Partners broker Chris Timms said.
''Selling was so indiscriminate that only about 2% of 500
members of the index closed higher.''
The fall on the Nasdaq flowed through to the New Zealand
market. Xero traded down as low as $30 a share after reaching
a high last month of $46.
Dunedin-based Pacific Edge, another top 50 company, reached a
daily low of $1.04 before moving up to $1.17, having hit
$1.76 on February 3.
Mr Timms said the technology and biotechnology sectors had
been trading well for some time.
''People have been patting themselves on the back about
getting Xero right. But it has been a bit of a yo-yo session
this week; down on Wednesday, up on Thursday and down on
Friday. A case in point.''
Pacific Edge was also getting knocked around and others
affected included SLI Systems, Wynyard and GeoOP, the online
job management and software provider.
Diligent had been affected also, but it had other fundamental
issues it was dealing with, he said.
''These stocks have had a massive run and investors are
asking themselves: `Is it coming to an end?'.
''I don't think there is anything wrong with Pacific Edge as
a company, it is just caught up in the general sentiment
towards the sector. People have been looking sideways at the
people selling down their shares, and taking something off
the table, but I don't believe there is anything untoward in
One of the problems for Pacific Edge was the lack of
''substantial news'' from the company which had previously
driven the share price rise, he said.
The last news had been about a research grant earlier this
year. However, it had been the United States deals in
November which drove the rise in share price.
There had been ''tech bubbles'' in the past and speculators
looked for purely growth stocks, Mr Timms said. Xero had
grabbed a lot of attention, particularly because of chief
executive Rod Drury, and there had been some over-exuberance
Some of the investors would be selling out, waiting to see
what the company's plans were, before deciding whether to buy
back in, Mr Timms said.
''They are not long-term investors. Some of the people who
have bought into Auckland Airport and Fisher and Paykel are
long-term investors looking for income. The movements are
more muted, without the volatility usually sought by