Technology and telecommunications stocks in Hong Kong notched up strong increases yesterday, as investors caught another bout of Internet fever. The gains were part of a broad market surge sparked by a rally on Wall Street on Thursday. The Hang Seng Index rose 528.07 points to close at 12,490.3, marking its first finish above the 12,000-point level in 18 months. Hongkong Telecom, whose Netvigator service dominates the SAR's Internet market, rose 8.47 per cent to $18.55. Continuing rumours that the company would spin off its Interactive Media Services (IMS) unit for a listing on the Nasdaq market in the United States added firepower to the rise. The market's Internet craze also helped Wharf, which jumped 9.82 per cent to $18.45. Small technology stocks also had large gains, as the market attached a higher valuation to stocks related to technology. 'Any stocks linked with the word technology have performed well over the past couple of weeks,' Core Pacific-Yamaichi research director Alex Tang Yee-yuk said. Hanny soared 48.24 per cent to $1.69 after conceding it also was studying the possibility of a Nasdaq listing. The stock hit a year high of $1.77. The firm, which is 30.8 per cent-held by Hutchison Whampoa, denied that it was in discussion with a third party on the possible introduction of a new shareholder. LCD manufacturer Varitronix gained 8.47 per cent to $12.80. Champion Technology was the most actively traded share by volume, with more than 152.35 million shares changing hands. It closed flat at 17.6 cents. Founder fell two cents to $1.14 after the company reported a worse than expected loss of $165.69 million for last year, compared with a profit of $143.29 million in 1997. Small technology companies were also bolstered by market rumours that the Pacific Century Group was looking for a listed takeover candidate, brokers said. Star Telecom, rumoured to be a potential target, added 9.8 per cent to 56 cents. 'The hi-tech wave was triggered by the Government's emphasis on hi-tech industry in the future,' Kim Eng Securities analyst Alfred Li said. Hongkong Telecom's market valuation, for example, has risen about US$7.5 billion since the run-up to its announcement of an agreement with Microsoft Corp under which the companies will develop and introduce software for interactive television services in Hong Kong. Salomon Smith Barney analyst Lloyd Fischer said Hongkong Telecom was riding on the market's present fascination with Internet stocks. 'It's certainly not rising on the basis of fundamentals,' he said. 'People are looking at it in some of the same ways that they've been looking at [technology] stocks in the US. 'US valuations are quite high, and they see Asian valuations for some assets - that are arguably similar - are fairly low.' Mr Fischer said that when Hongkong Telecom announced its fiscal year-end earnings results - possibly next month - it would provide more information about the earnings contributed by IMS and offer more transparency into the unit's business. Hongkong Telecom has ambitions to make IMS a leader in electronic commerce, but 'nobody has a clear idea right now on how the money is going to be made', he said. Some analysts are sceptical that the market's technology stocks can hold on to the enormous gains made in the past few sessions. 'The prices are way over fundamental value - even for Hongkong Telecom,' Mr Li said. 'Bear in mind it is a concept, and the concept won't last long. 'Eventually, people will look back at the fundamentals.'
