Hi-tech sell-off continues as nerves strike new economy

THE COLLAPSE in the shares of high-technology stocks continued forthe fourth consecutive day yesterday as professional investorsshifted funds further into traditional "old economy" shares.

In the United States, the old economy-dominated Dow JonesIndustrial Average soared by more than 400 points to 10,551 by thetime London markets closed. In London the FTSE 100 index closed 110.2points higher at 6,557.2, with traditional manufacturing stocks inthe ascendancy.

Conversely, the techMARK100 index of technology shares fell 6 percent to 4,783.3. It has now lost 16 per cent of its value this week.

Equity strategists said the correction was long overdue, andwarned of worse to come if the slump in internet-related sharessparked a wave of panic selling among small investors.

NatWest Stockbrokers said it is now seeing sellers outnumberbuyers by a ratio of two to one among small investors. "Most havebeen selling technology stocks and returning to stable blue-chipcompanies," the firm said.

Richard Jeffrey, equity strategist at CCF Charterhouse, said: "Itwould be a disappointment if small investors get their fingers burnedon their first experience on the stock market. But I fear this may bethe case. The greatest danger is that when they come to sell theirstock there will be no buyer."

Jeremy Batstone of NatWest Stockbrokers said: "I would think thesmall investor in technology stocks would be starting to feel a bitjittery." He warned of a "dead cat bounce" in technology stocks, withsmall investors sensing a bargain and being tempted to buy more hi-tech shares. He added: "Then we will see the professional investorsselling and there will be a significant fall."

Among the FTSE 100 companies yesterday, the list of the biggestgainers read like a rollcall of traditional industry, with Billiton,Hanson, BAA and Invensys all recording healthy gains.

The biggest falls came among the technology and media companies,with Reuters, Telewest, CMG and BSkyB among the biggest casualties.

Lastminute.com continued to disappoint with a further fall of 25pto 387.5p. The shares in the high profile new issue now stand barelyabove their issue price of 380p.

Commenting on the sudden reversal of the market trend of the pastsix months, Steve Russell, equity strategist at HSBC, said: "We thinkTMT [telecom, media and technology stocks] had got too stretched. Thevaluations were suggesting they were all going to be winners. Wethink there will now be a switch to individual stock selection. Sosome of the new-economy companies will do very well, but some will dovery badly." He added that new-economy stocks would continue tosuffer over the next few days.

Mr Jeffrey of CCF Charterhouse said: "Many of the technologygroups are hopelessly overvalued, and it is no surprise to see acorrection. Whether it is a lasting one remains to be seen. But thereis fantastic value in the old-economy stocks, with terrific dividendyields."

Private-client stockbrokers have denied they have been hit by awave of panic selling. However, some investors have been strugglingto get through to telephone dealing services.

Barclays Stockbrokers' lines have been overwhelmed in some cases,with calls being greeted by a continuous dialling tone.

The average "wait time" to get through has been up to 10 minutes."We have been very busy," a spokeswoman for the stockbroker said.