Asian technology companies such as semiconductor maker Samsung Electronics will be the region's "premier" growth stocks over the next 12 months, with Taiwan and Korea representing the strongest markets outside Japan, according to brokerage house Jardine Fleming.
An expected shortage of semiconductor capacity between now and 2002 and the increasing amount of chip production being outsourced to manufacturers such as Taiwan Semiconductor Manufacturing, the world's largest subcontract computer chipmaker, will boost growth at TSMC as well as at memory chipmakers such as Winbond Electronics and Macronix International of Taiwan, and Samsung Electronics of Korea, the analysts say.
Technology companies will be helped, too, by an increase in cross-border mergers and joint ventures within Asia as family-based corporate cultures yield to more transparent cultures based on providing value to shareholders.
"We're now seeing inter-Asia alliances which will make Asian competitiveness relative to the rest of the world that much stronger," says Mark Baughan, head of technology research at Jardine Fleming in Taiwan.
Strong on telcos
The company also recommends telecommunications operators that deliver information and interactive services such as stock trading over mobile phones. Itsáfavorites include Hong Kong-based SmarTone and SK Telecom, Korea's largest mobile phone service provider.
"We are very overweight in this sector," says Jake Lynch, Jardine Fleming's Hong Kong-based regional telecommunications analyst, whose enthusiasm has partly been fuelled by the "runaway" success of NTT DoCoMo's i-mode service, which lets users browse the web, buy tickets and send messages over their mobile phones. i-mode has turned DoCoMo into Japan's leading internet service provider.
Jardine Fleming, which will release a hefty technology report at a conference it is sponsoring in New York next week, says it is seeing increasing interest from US investors in Asian technology stocks. However, Baughan says the interest is in companies positioned for long-term growth, rather than the dotcoms that have been good for a quick "flip" of the shares and no more.
"Capital will go to companies with earnings," he says. "There's a flight to quality, and valuations based on revenue multiples, as opposed to earnings multiples, will contract."
