Gaurav Dogra and Patturaja Muraboopathy

(Reuters] – Investors have shifted to a sector they perceive as resilient and cheap as a return of global tech funds. This is due to rising inflationary pressures as well as a decrease in bond prices.

Refinitiv data indicates that since March 16, tech funds received $2.55 trillion in inflows, after $6.86 billion of outflows in the first 2 months.

For a related graphic on Global tech sector funds’ flows this year, click https://fingfx.thomsonreuters.com/gfx/mkt/byprjblqxpe/Global%20tech%20sector%20funds’%20flows%20this%20year.jpg

Amanda Agati chief investment officer of PNC Asset management Group stated, “Tech stocks have not experienced a decline in fundamentals. So we see this rally to be a rebound from overcautious investor expecting the Fed will tighten policy too soon.”

She stated that “Going ahead, we have the first-quarter earnings seasons just weeks away… Tech is likely to be the standout, as it has been an earnings powerhouse during the pandemic.”

The KraneShares CSI China Internet ETF received $640.6 million in net buying in the week ended March 23, while iShares’ Expanded Tech-Software Sector ETF and Semiconductor ETF obtained $372.3 million and $260.5 million, respectively, in inflows.

For a related graphic on Global tech ETFs with biggest inflows, click https://fingfx.thomsonreuters.com/gfx/mkt/gkplgqweovb/Global%20tech%20ETFs%20with%20biggest%20inflows.jpg

Chinese shares of tech, which have been trailing their international peers for the last year, were also part this week’s rally. This was due to reports that Chinese regulators asked U.S. listed firms to make more disclosures.

This was seen as Beijing showing that it is willing to compromise to end a Sino-U.S. long-running audit dispute in which U.S. investments in Chinese companies amount to hundreds of billions of dollars.

The SCHK China technology indicator has risen 23% from March 15, compared to 7.1% for the MSCI World technology.

Joseph Seeger of Nasdaq Intelligence is senior technology analyst. He said investors are shifting their money away from bond funds and into equity funds which led to higher inflows to the funds.

He stated that “investors are generally shifting into equities as bonds have fallen to 2.38%” in his report.

“Another catalyst” is the generally oversold tech market, where multiples are compressing at an average 40% below their peak.

Analysts stated that the tech sector has solid fundamentals and high cash flows, which will help reward shareholders this year with dividends as well as share buybacks.

Refinitiv data shows that the cash flow per share of the tech sector was $1.26 by 2021. This is the most among the main sectors.

For a related graphic on Breakdown by sector for global corporate cash flow per share, click https://fingfx.thomsonreuters.com/gfx/mkt/byprjblgqpe/Breakdown%20by%20sector%20for%20global%20corporate%20cash%20flow%20per%20share.jpg

Chinese E-Commerce giant Alibaba Group Holding Ltd. announced that its share-buyback programme has been increased to $25 Billion from $15 Billion.

Agati, PNC Asset Management said that small-cap technology stocks are performing well due to the fact that a large portion of this sector is part of the alternative/cleaner energy ecosystem.

They are a key factor in the energy outlook and a strong tailwind when oil prices exceed $100/barrel, she stated.

The global tech rally has been long overdue as leaders of China’s tech industry have been under increasing pressure for more than a year. Much of this hinges upon China’s policymakers following through.