Tech stocks plunge

AUSTRALIA’S listed technology companies face a choppy start to trading this week following a sell-off in US tech stocks amid fears some titans of the industry are grossly overvalued.

Companies such as Apple, Facebook and Google parent Alphabet have helped propel US stocks to record highs but were heavily sold off overnight Friday in the wake of a cautious note from investment bank Goldman Sachs.

Apple tumbled 3.9 per cent, Alphabet shed 3.4 per cent and

Facebook gave up 3.3 per cent as the tech-heavy Nasdaq 100 index fell 2.4 per cent.

Although the retreat was isolated to the tech sector, it was enough to give investors food for thought given those companies along with Microsoft and e-commerce megalith Amazon have increased their collective market value by $US500 billion ($664 billion) this year.

Despite the slide, the average ratio of share prices to earnings-per-share of companies on the Nasdaq is still 26.1 – the widest gap in valuation over the broader S& P 500 index in more than a year.

“We are probably going to see additional selling pressure on some high-momentum stocks that have spearheaded the rally,” Chad Morganlander, a money manager at US broker Stifel Nicolaus, said.

“Stocks have become overbought.”

Goldman’s global chief investment officer, Robert Bouroujerdi, set the tone, warning the low levels of volatility in Facebook, Apple and Alphabet could be blinding investors to risks such as industry disruption and regulatory moves.

Ensuring the heat would stay on the sector, Mizuho Securities analyst Abhey Lamba wrote in a note dated June 11 that Apple’s shares had outperformed this year.

Mr Lamba downgraded the stock from “buy” to “neutral”.

Australia’s listed tech sector makes up just 1.2 per cent of the benchmark ASX 200 but it includes companies such as international share registry Computershare, a $5.9 billion company, and $2.1 billion online classifieds group Carsales.

AMP Capital chief economist Shane Oliver expects the ASX 200 to lift 21 points when it reopens today after yesterday’s Queen’s Birthday holiday in all states except Queensland and Western Australia.