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First of all, what is tech stocks. In general, we can classify tech stocks into 'New Economy' and 'technology research industry'. New Economy is a new term to describe a market. A market that is no longer depending on the traditional channels (i.e. Shops on the high street). Mostly refers to Internet based companies. Companies which sell products or services via Internet. Technology research industry can be regard as the original tech stocks. These are the companies specializing in researching new products and new technologies (i.e. IBM, Intel). In general, their financial foundation is much stronger than those 'New Economy'. In my personal opinion, there are numbers of reasons for the bubble in tech stocks to form. Such as the booming of the U.S. economy and yet low interest rate, high expectation in the 'New Economy'...etc. There is currently a massive debate on this subject. Since many arguments are still controversial, here I am going to mainly concentrate on the issue of so-called 'New Economy'. Over the last few years the Internet has evolved from being a scientific network only, to a platform that is enabling a new generation of businesses. The first wave of electronic business was fundamentally the exchange of information. But, with time, more and more types of businesses have become available electronically. Nowadays we can buy goods online, book holidays or have texts translated over the Internet in an instant. Home banking, for example, is one application that is already provided by most banks around the world. Looking up your balance, transferring money and other transactions are done every day by millions of people. Public administration has discovered the Internet as a means to talk to the general public at election times. And it will not be long a time before we see general elections decided on the Internet. Digital business is causing an upheaval that is shaking the foundations of traditional business. More and more companies recognize the opportunity the Internet offers and start to establish an online presence with a sound business model behind it. Increased revenues and additional customers who return voluntarily to the company are drivers that bring more and more companies to digitize their offerings. Through the Internet it is possible to invent new and innovative ways to add value to existing products and services without necessarily spending a lot of money. Internet technologies are advancing to support commercial transactions and in addition to this, new commercial transactions have been invented by these new Internet technologies. Companies need to move fast in this New Economy. But speed is not the only factor that is important to succeed in electronic business. Careful planning and execution are just as important as moving on quickly. This requires the combination of a variety of skills and disciplines, many of which are new and unfamiliar. Computer companies, advertising agencies, Internet providers and service providers come together and act on an equal level of expertise. In the industrial age, every company had expertise in one field. In the information age, every company has a lot of expertise in its own field and at least come expertise in the fields of the others. Advances in technology will always influence society, but neither only in a positive or only a negative way. After the transition phase the people will hopefully found a new sense in life. The total automation of business may also make large companies collapse as they are too expensive to maintain and will bring the electronic freelancers into a perfect position to produce goods and services, both online and offline. These new concepts, indeed, has injected a new hope in any industry and has formed a really high expectation on these new companies (especially the small one) which reflected from their stock prices. The Initial capital for these companies is very expensive. And this form of market is still under development, future is uncertain. Stock prices which previously built on expectations solely will adjust accordingly. Maybe it is time for us to reconsider these factors before we invest our 'hard earned' money. Good luck! P.S. If you have any opinion on this subject, you are welcome to send me an email. The following web sites may provide you some useful financial information. |
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The bubble in tech stocks appears to have burst and the
broad equity market indexes have suffered some damage. Hong Kong's Hang Seng has
dropped more than 500 points in the same day. Has this created another excellent
buying opportunity or is the worst yet to come? 
