Swiss asset manager Pictet has been buying up shares in Chinese online video game developer NetEase, while taking a profit on Tencent Holdings, as the technology sector is now trading at a higher premium than overall global markets, according to Nolan Hoffmeyer, senior investment manager with Pictet’s thematic equities team.
NetEase, the developer of popular video game Knives Out, was weak in the first quarter because it did not release any major titles, meaning that unlike some technology companies it was not trading at very high valuations, said Hoffmeyer. Moreover, its video game pipeline is expected to improve this year, while its revenue was still growing by close to 30 per cent.
“NetEase is not one of those companies trading at very high valuations, so this is typically the kind of company we are looking for,” Hoffmeyer said at a media briefing.
The valuation of the technology sector remains well below the bubble in 2000, when its price to earnings ratio peaked at 44.2 times, compared with current levels of 17.2 times, said Hoffmeyer. However, the MSCI IT premium was slightly above the historical averages of MSCI World, in terms of absolute price to earnings difference.
