Local markets are following big brothers Nasdaq and the Dow, and local tech analysts are scrambling to find a buy in an index that is bathed in red.
Technology-rich Nasdaq has taken a pounding recently, with profit warnings the order of the day.
The latest news to send shockwaves through the bourse is Microsoft`s share price hitting a two-year low and trepidation over chip manufacturer Intel`s release of third quarter figures, which analysts are expecting to be way off target.
Adding to the sombre mood is speculation that Xerox is facing a cash crunch and rumours that the copier manufacturer was seeking bankruptcy protection. Xerox shares have fallen 76% in the past year, 49% of the plunge occurring in the last three months.
Locally, the tech markets have been fairing little better, with the IT index tracking the movements of the international markets.
Bleak outlook
Vantage Investment Solutions IT analyst Marlene Heyman says the mood among analysts at the moment is bleak and she is not expecting the sentiment to change any time soon.
"Our tech markets take a direct lead from the international trends; the entire JSE is affected. The exceptions to the rule have been largely because of corporate action with announcements of mergers and acquisitions."
Heyman says the conundrum facing MGX Holdings at the moment is its falling share price.
"MGX has been falling despite a sound footing. I`m watching the share carefully and I think there may be an institutional investor in the process of removing itself. I`ve got it marked as a sell at the moment, but I think that could change very soon. The share has definitely been oversold."
The shares least impacted by the current downward trend will be the stocks setting themselves up as rand hedges.
"Stocks like Dimension Data might be cushioned by the fall, but certainly not immune. Earning in dollars is attractive to investors but the company will still bear the brunt of sentiment," says Heyman.
Dimension Data began trade this morning 10c down at R63.40, but by 11am the counter had clawed back to R63.60.
Bucking the trend
One counter which has bucked the trend is controversial Usko, which was leading the field by volume, trading up at 24c by 11am on a 22c opening.
Heyman believes this is largely due to parent company Altron`s involvement in the small cap company.
"Usko has an improved outlook, especially with Altron taking a conservative view in management. Speculation that Altron may be looking to hive off some of the Altech and Fintech IT divisions into Usko can`t hurt either."
Overriding macro economic issues facing the economy at the moment can`t be overlooked. The Reserve Bank announcement of the repro rate`s increase of 25 basis points to 12% has done little for market sentiment, sending industrial and financial shares scurrying for cover.
"Once again we see the JSE following the international markets. Consumer debt is very high at the moment in the US, this is forcing investors who bought heavily into tech stocks - largely with borrowed money - looking to get out of the markets all together to try pay off debts."
Heyman says although the consumer debt is not as high in SA, the hike in interest rates will also affect the markets in a similar fashion. She does not expect the Nasdaq or the JSE`s downward turn to end any time soon.
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