Joice Alves

LONDON, (Reuters) – European technology stocks plunged into bear territory last Friday. They are on course for the largest monthly decline since 2008’s global financial crisis. This was due to fears the U.S. Federal Reserve might tighten its monetary policy.

The tech sector in Europe, once a darling of investors, is now down 20% from its November 21-year peak.

The index also fell more than 15% in January, its lowest month since September 2008. (Graphic: European sectors in 2022, https://fingfx.thomsonreuters.com/gfx/mkt/akpeznqagvr/European%20sectors%20in%202022.png)

European tech showed a similar pace to the United States in January, where it also recorded its worst month for more than 13 year.

As rising yields have made it more difficult for investors to invest in growth stocks, global tech stocks are under increasing pressure. The Fed will raise interest rates to contain inflation and cease bond purchases.

Investors shifted towards more secure assets due to increasing tensions with Russia over Ukraine.

It was stated that rising real yields and economic growth will support growth. Morgan Stanley In a research note, (NYSE:) analysts.

Value stocks are comparatively inexpensive multiples of the fundamentals they trade at, including autos, banks and energy shares. They outperformed growth stocks by 13 percent in January. (Graphic: Europe value vs growth, https://fingfx.thomsonreuters.com/gfx/mkt/zdpxoaddevx/Europe%20value%20vs%20growth.png)

Deustche Bank’s survey revealed that 50% of 500 participants believed the valuations for tech stocks in the United States was in bubble territory.

Some investors consider tech stocks attractive to buy because of the recent weakness in their prices.

Portfolio manager for UBS Asset Management Jeremy Leung said he purchased the dip in January.

“We’ve been really taking advantage also of weaknesses in large tech companies,” he stated, noting that this was an opportunity for investors to grab stocks that have become too pricey during the pandemic.

Expectations are that earnings will be positive.

For a total amount of 10.5 million euros, the estimated earnings growth rate in the fourth quarter 2021 for technology companies is almost 40% more than the previous year.

Logitech International Switzerland (NASDAQ) International has, by example, increased its earnings projection for the current financial year. As offices began to reequip employees returning home from work, they also raised their earnings forecast.

SAP, a German software company for business applications, stated that there is room to surpass the 2025 target of 8 billion euros (or $8.92 billion) in free cash flow.

Conor Moore from KPMG Private Enterprise is the head of tech IPO tracking.

“Will valuations go up as high in the future as they were during 2021? He said that it could be. Moore said there will be a “slight slowdown, but it won’t be a significant slowdown.”

($1 = 0.8971 euros)