HSBC Asset Management is overweighting mobile telephony, data communications and asset management in...
HSBC Asset Management is overweighting mobile telephony, data communications and asset management in its European Growth fund, writes Jane Wallace.
The fund manager, Chris Rice, believes that these sectors will benefit the most from the new business models created by the increased use of the internet and mobile phones.
He said: "Japan led the technology field in the 1980s with minaturisation such as the Walkman and the US did so in the 1990s with PCs. Mobile phones will be a bigger industry than the PC market and Europe already has a leading position in it. I confidently predict that Nokia will have a market cap equal to or larger than Microsoft in five years.
"Consider why people buy PCs for personal use. Is it to play games or work at home? It is to surf the web. The average PC costs about £1,300, and less in the US but you can buy a mobile phone which is a fifth of the cost and will do exactly the same thing."
According to Rice, mobile phone sales will outnumber PC sales by four to one in three years' time, while in 2004 it is estimated that 650 million phones will be accessing the internet on a regular basis. Services which should be available will include online access to transport timetables, ticket purchases, banking and e-mail.
Rice noted that the largest market will be data communications, whereas voice traffic over mobile phones will be less important, and may end up being without charge. For this reason, handsets may actually become bigger to accommodate larger screens, rather than smaller as is the trend now.
Other stocks Rice likes are those which provide services to these sorts of transactions. One such is Sonera, which supplies security for credit cards used in internet transactions, and Swed-ish company Enea Data, the world leader in Bluetooth technology.
Bluetooth is a standard agreed by Motorola, Ericsson and Nokia which provides a radio link between a mobile earpiece and the handset. It means that the handset can sit in a handbag (or be embedded in a car or other object), but is activated by voice instructions given through the earpiece and microphone.
Apart from technological innovation, Rice said that in the shorter term, prospects for the European economies were good. GDP for 2000 is forecast to be 3.5% and earnings growth at 20%.
This latter exceeds estimates for the US, while share price valuations in Europe are below those in the US. Rice said: "Europe has the technology leaders of tomorrow. There is no need to move into the overvalued market of the US. Europe is the place to be for the next 10 years.
At the end of December 1999, the top five largest holdings of the fund were Nokia on 5%, Banco Populaire on 3.2%, Total Fina on 2.9%, BASF on 2.8% and Ericsson on 2.8%.
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