It is “highly unusual” to see a market sector crash twice in two years as the technology sector falls back to pre-COVID levels, according to Dale Gillham.
While the Australian stockmarket had fewer technology stocks than its US counterpart, that did not mean it had been immune to the downturn. It was almost 11 years since a fall as large as this had occurred in the sector, Gillham said.
The sector was one of the smallest in the Australian Securities Exchange (ASX) as 87% of companies had a market cap of less than $100 million and the top five companies had a combined market cap of $60 billion.
He said: “By mid-May, the Australian tech sector had effectively fallen back to pre-COVID levels and taken with it the hopes of many investors who had jumped into technology stocks following the COVID crash.
“It is highly unusual to see any sector crash twice in the space of two years, yet the Information Technology sector fell 49% from a high in February 2020 into the COVID low of March 2020.
“It then rose nearly 200% over the following year into February 2021, as new investors and traders flooded the market attempting to cash in on the rise.
“It then fell away for a short period of time and after making a new all-time high in August 2021, it fell 44% into May 2022.”