By James Thorneley Unit prices of Aberdeen and Henderson Investors technology unit trusts bottomed o...
By James Thorneley
Unit prices of Aberdeen and Henderson Investors technology unit trusts bottomed out last week after declining by 700p and 250p respectively since 22 March.
The fall out in technology stocks led to the buy price of units in Henderson Global Technology falling from 1,533.04p on 22 March to 1293.45p on 5 April. The following day the price bounced by 48.46p to 1341.91p. Over the same period the buy price of Aberdeen Technology fell even further. On 22 March it was 4,022.16p falling to 3,328.99p on 5 April. The next day the price rebounded slightly at 3,435.29p.
Both trusts are heavily invested in the US and were adversely affected last week as market sentiment moved away from telecoms, media and tech stocks. During morning trading on 4 April the Nasdaq fell by 14% finishing the day on 4148.89 some 814.14 points off its March peak of 4963.03.
Hendersons said it had been expecting a correction following the first quarter results season but admitted the timing and also the magnitude of its predictions were out. The group believes several factors contributed to the sell off, including the level of new issuance in the technology sector and a new belief in the old economy stocks. In addition it believes markets were worried about further US rate rises.
Tim Woolley, manager of Henderson Global Technology, said: "We have been warning investors since the beginning of the year of the pressure new issuance and further rate rises could have on the sector. We expect a more normalised level of returns after last year's spectacular performance. That said the fundamentals for many companies in our universe keep accelerating."
Woolley and his team have been using the correction as a buying opportunity, putting cash weightings into equities. In light of the correction he believes there will be a dramatic fall in new issuance. In addition Woolley is doubtful about the sustainability of the old economy stocks.
He said: "We see little in the way of fundamentals to suggest that relative growth rates versus technology are going to improve any time soon."
The US market was not the only one affected by the sell off. The FTSE Techmark fell to 3731.57 on 4 April some 1987.43 points off the index's peak of 5719 on 10 March. While having a negative affect on the performance of the Close Techmark fund, the fall may have increased the appeal of the fund, according to Marc Gordon, managing director of Close Fund Management.
He said: "A number of institutional investors have been waiting for a correction in the market. On Friday we had a £3m investment from an investor. Since launching the fund enquires have increased, even when there has been a dip in the index's performance."
At close of business last Thursday the index was standing at 4156.84. The performance of other indices picked up towards the end of last week. The FTSE 100 finished last Thursday at 6451.10 after standing at 6379.30 the previous day. Over the same two days the S&P 500 advanced from 1487.37 to 1501.34.
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