Tech stocks may fall further, says Chris Wood

Tech stocks may fall further, says Chris Wood

The decline in the FANNGM (Facebook, Apple, Netflix, Nvidia, Google, Microsoft) stocks as a percentage of S&P500 market capitalisation probably has much further to run, partly because of Apple, which now has the greatest downside risk on the last man standing theme, said Christopher Wood, global head of equity strategy at Jefferies in his recent note to investors, GREED & Fear.

Nvidia and Netflix have fallen 55% each in the year to date. Facebook’s parent Meta Platforms is down 74%, while Google parent Alphabet has shed 43%. Microsoft and Apple have slid 36% and 23.7%, respectively.The capitulation in Big Tech stocks last week came at the same time as Exxon Mobil hit an all-time high on the release of its third quarter earnings. Wood characterised this as “the revenge of the physical” theme after the orgy in digitalia triggered by the pandemic.

The MSCI Pakistan Index is on 3.7x forecast 2023 earnings and a 2023 forecast dividend yield of 10.2%. The country was not in danger of imminent default as was feared a few months ago. The private-sector external debt totalled only $11.6 billion or 3.1% of GDP at the end of June 2022.

A pressing short-term issue in Pakistan, with foreign exchange reserves down to only $7.44 billion, is avoiding a balance of payments crisis.

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“The crowding out of the private sector by government borrowings means a lack of risk-taking on the part of a banking system which continues to make easy money funding the government with 10-year government paper paying 12.9% yield. The government remains the big borrower with total government debt equivalent to 73% of GDP. Still a compensating factor is that most of the dollar debt is multilateral in nature,” said Wood.