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Tech sector not looking too bad

The news isn't all bad for the tech sector, according to one manager who took a bath when things turned bad last year.

Thursday, August 16th 2001, 9:39PM

by Philip Macalister

The news isn't all bad for the tech sector, according to one manager who took a bath when things turned bad last year.

Michael Watt, who manages two UK listed investment trusts (Henderson TR Pacific and Henderson Far East Income trust) says that there are signs the tech sector is starting to recover.

For instance the first parts of the sector to be hit by the tech wreck, computers, is showing signs of recovery.

The parts which were hit later, such as Internet and networking companies, are only just hitting the bottom, he says.

Watt also points out that while there was doom and gloom in the tech sector last year, there were also some bits which were unscathed including digital cameras, flat screen televisions and mobile computers.

Watt was big on technology 18 months ago when the TR Pacific Trust had about 55% of its assets invested in the sector.

While it produced some great returns in the 1999 year, things didn't look so good in the 2000 year and it underperformed the sector and its benchmark quite significantly. Consequently the 136 million trust, which is dual listed on the London and New Zealand Stock Exchanges, is trading at an historically high discount of 16.8%.

Currently the fund has about 31% of its assets in tech, which is broadly in line with index weightings.

Watt says he is comfortable with this.

He predicts there may be a relief bounce in the sector at the end of the year if consumers continue to spend.

"A (bounce) wouldn't surprise me at any moment," he told a group of advisers in Auckland yesterday.

While Watt is confident the tech sector will get better he doesn't think it will lead the recovery.

In fact he is picking that the old economy stocks will be the flag bearers in the economic recovery.

The tech sector shines in the latter part of the economic cycle, he says.

"We shouldn't expect great things from (tech) in the early part of the recovery.

"The sector will make sedate progress through next year," he says.

For more details on what is happening in the tech sector check out our Special Report - Tech: One Year After the Bubble burst.

You can read Philip's blog here: http://www.goodreturns.co.nz/blog/

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