Technology is no longer the coolest game in town. At least not in Asia, and not for investors.
For the first time in three years, technology has dropped from being the region's most-preferred sector in Credit Suisse's annual investor sentiment survey. That honor now falls to Asia's healthcare stocks. And it's about time.
While technology has outperformed the MSCI Asia Pacific Index over the past three years, healthcare has outshone by far more. MSCI's Asia Pacific Health Care Index has returned almost 30 percent, versus a rise of about 13 percent in the information technology subindex.
Despite the sector's relegation to third, behind consumer discretionary, in Credit Suisse's survey, investors may still be too bullish.
For one, tech is heavily reliant on new gadgets and new wow factors, and it doesn't look like there's much out there to excite consumers this year. At the same time, emerging markets aren't providing quite the same drive. China is struggling while India's still sorting out radio spectrum needed to help spur growth in smartphones. And while the enterprise side of technology may end up being more robust, driven by a shift to cloud computing, Asia's exposure to that part of the business is relatively low compared with Europe and the U.S.
Tech stocks also look expensive. On a price-earnings basis, the region's IT subindex is trading at levels not seen since 2013 -- when it increased 14.7 percent -- while return on equity is low. Neither of those figures seemed severely out of whack in 2015, which is why investors could be forgiven for being overweight 12 months ago, before copping a 4.6 percent decline.
Right now, though, such excuses aren't available. This makes it a good time for investors to understand that their love for tech may be unrequited.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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Tim Culpan in Taipei at firstname.lastname@example.org
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