Business: Is That A Bubble Burst I Hear?

It depends, as it always does, on when you bought

By ASSIF SHAMEEN

March 13, 2000 Web posted at 12:15 p.m. Hong Kong time, 11:15 p.m. EST

Is the tech bubble about to burst? Or are a bunch of mischievous punters just trying to push down some of Asia's highest flying tech stocks?

You've probably heard the investing axiom: Buy on rumors, sell on facts. Well, some Japanese investors are doing just the opposite lately and that's causing incredible volatility in tech stocks across Asia.

Last Friday, 10th March, was black Friday in Tokyo for tech stocks. Softbank, Hikari Tsushin, even Sony (whose latest Play Station 2 has been a stellar seller) suffered huge losses. Only Sony's share plunge may have been due to fundamentals: reportedly there have been problems with some of the recently shipped Play Station 2s. Interestingly, the Tokyo tech stock plunge (on a day when rest of the market was up) came only hours after the tech-heavy NASDAQ surged past the magical 5,000 mark. So while U.S. technology stocks, driven mainly by bio-tech are still surging, their Japanese counterparts, mainly the so-called Internet plays, are seeing precipitous falls.

Take Hikari Tsushin. That Japanese mobile phone retailer saw its stock climb from just 20,000 yen about ten months ago to 240,000 yen last month (which gave it a market capitalization of U.S.$ 74 billion) as the company was re-rated as an aggressive global Internet Investment fund. Hikari Tsushin could do no wrong. It had become a Netbatsu -- a sort of Internet zaibatsu investing in hundreds of little Internet companies. It was supposed to be the best of times for Hikari Tsushin. Its president, Shigeta Yasumitsu, was on the cover of international magazines. Its 51% subsidiary, e-mail service provider Crayfish, had just completed its initial public offering (IPO), which was supposed to have pushed Hikari's own stock on the stairway to the stars. But in the past six trading days the stairway was heading in the opposite direction. The stock closed this afternoon at just 99,000 yen, down from 220,000 last week. And traders say there are still some selling orders waiting to be executed on Monday morning.

What's happening? Well rumors for one. In just the last 24 hours Hikari has put out several written statements denying whispers that President Shigeta Yasumitsu had been arrested. It had previously denied allegations that Shigeta-san is under investigation for insider trading or other securities related fraud. But the rumors -- many emanating in Hong Kong -- kept flooding in. The official denials, which are being carried by wire agencies and radio, are only depressing the stock further -- and fueling more rumors.

Meanwhile, in Hong Kong, Kitao Yoshitaka, the head of Softbank Investment -- the overseas arm of Softbank, the world's biggest Internet investment company -- distanced himself from Hikari Tsushin and its Hong Kong partner, the high-flying Pacific Century CyberWorks of Richard Li. Kitao said although Shigeta-san was on Softbank's board the company didn't like him and actually wants him to resign from the board. Softbank Chairman Masaoshi Son apparently thinks Hikari is copying his company's business model. (Who isn't? And the competition has probably hurt Softbank's share price.) Kitao doesn't like Richard Li either because Li and Shigeta are friends. Hikari recently did a share swap with PCCW, and Li's PCCW and Hikari jointly own Hong Kong-listed company Golden Power, which they acquired through a backdoor listing two months ago. With so many nasty rumors flying around, Softbank doesn't want to be seen as a bigger Hikari.

But clearly it isn't just nasty rumors that are pummeling Hikari shares. At 240,000 yen-a-share the company was trading at a price-earnings ratio of nearly 600 times. Well, tech freaks will say: so what? At least the company actually has some earnings from its old economy ventures like selling mobile phones in jazzy retail outlets throughout Japan. The problem with Hikari is that the stock price was way, way overvalued and then went to unsustainable levels. The selling is partly due to the rumors, and mostly due nervous investors looking for any excuse to get out of the stock.

But Hikari isn't alone in its fall from the grace. Just two weeks ago, Softbank shares had surged to over 198,000 yen; on Friday it plunged to just 99,200 yen. Son, who was worth U.S.$ 73 billion about 12 days ago, is now worth just U.S.$ 35 billion. Last month, brokerage Lehman Brothers Inc. put a target price for Softbank at 400,000 yen a share by Christmas. Well, if you believe that and you believe in Santa Claus you should be buying Softbank shares now -- and with lots of jittery sellers out there the price could even go lower.

So has the tech bubble burst? Or is it about to burst? It depends on your time horizon. If you bought Hikari or Softbank two weeks ago, for you the bubble has truly burst. If you bought them before the November tech rally, you probably are still sitting pretty and can see the past week's plunge as just a minor correction.

http://cnn.com/ASIANOW/asiaweek/business/2000/03/13/

-- Carl Jenkins (Somewherepress@aol.com), March 15, 2000