International Investment Strategies With so much volatility in the market at present, Chris Vellacott says you pays your money and takes your choiceAutumn is definitely in the air and stock markets around the world have entered their habitual annual selling frenzy. History’s most painful equity market crashes, such as those of 1929 and 1987, all took place around this time of year. In 1997, the Asian crisis, which started with a currency devaluation in Thailand the previous summer, was gathering momentum and markets elsewhere started to feel the hurt. The following year, the problem was no longer confined to a single region and Russia had defaulted on its debt repayments. Once again, markets went into freefall. Although October 1999 passed without incident, this year has seen a return to the old pattern. An oil crisis exacerbated by trouble in the Middle East has eerie echoes of the cruel recession endured by many in the 1970s and, as a result, the markets are nervous. International Investment Strategies & Selling Pressure But there is another factor which has contributed to recent selling pressure, which has little to do with oil prices or inflation. The world still cannot seem to make up its mind about the technology sector. Early in the year, people just could not buy technology shares fast enough and venture capitalists were eager to throw millions at every clever-sounding internet start up. When companies such as lastminute.com in the UK floated, shares were massively oversubscribed and its founders became overnight millionaires. The other TMTs, namely media and telecommunications, were also caught up in the boom on the grounds that they were poised to benefit from the much heralded
internet revolution. Internatinal Investment Strategies & TMT In March of this year the bubble burst and there was a massive TMT sell off around the world. The technology-based Nasdaq index, by mid-April, had fallen as much as 27 per cent from the year’s highs the previous month. The slump was followed by a partial recovery, but volatility has characterised the sector ever since. In late summer, there was much talk about the US economy heading for its much heralded soft landing. The US Federal Reserve seemed to have done a good job of choosing monetary policy and people were confident we would not see a repeat of the recession of the early 1990s. Investors again became more inclined towards higher risk within their portfolios and many were persuaded to have a second flutter with TMT stocks. The Nasdaq started a shaky climb in August, but early September again saw the start of a wholesale sell off by investors disillusioned with the sector. In mid-October, Japan’s technology sensitive Nikkei index fell below the psychologically important 15,000 level for the first time in 19 months. International Investment Strategies & IBM This second technology rout was partly due to profit warnings from the likes of IBM and Intel, the microprocessor manufacturer. Both corporations blamed poor performances on a persistently weak euro, which is damaging sales on this side of the Atlantic. Market pundits have begun to speculate whether this really is the long-awaited technology shakeout. The optimists hope that markets will bottom out soon and investors will be free to start playing a high-quality technology sector finally cleared of trash. 
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