Liquidity in the Hong Kong technology sector has shrunk following a recent spate of fund-raisings and sharp falls in speculative small-cap stocks. Meanwhile, directors in the sector have been actively selling shares since December. 'Money is held up in shares that have fallen from high prices. [Investors] don't want to sell at these prices so they're locking in liquidity,' Celestial Asia Securities analyst William Li Kin-tung said. Technology plays have fallen hard from peaks reached from December to last month, as the sector reacted to falls on the United States Nasdaq Stock Market and Japan Internet shares. Many of the smallest plays also lost favour as investors cashed out to take advantage of new offerings, such as recent listings of Internet portal operators Tom. com, Hongkong.com and Sunevision Holdings. 'People have been quite active in raising funds and that's drawn out liquidity as well,' Mr Li said. As many stocks in the sector only recently transformed themselves into technology vehicles, they are quickly dropped as supply widens. 'People are coming back to take a second look at their fundamentals,' South China Brokerage associate director Alan Pau said. 'Many investors got caught after losing 40, 50, 60 per cent. Of course they're going to sit [on the shares] after losing so much.' However, directors of technology stocks have been happy to cash in on stupendous gains seen during the Internet-related market boom. Technology directors have dumped $1.16 billion of shares since December 1 to March 10, accounting for 37 per cent of all sales by company directors in that period, according to Robert Halili, who heads Asian ownership research at Primark Asia. 'The last time I saw huge selling in one sector like this was in the red chips in the lead-up to the market crash in October 1997,' Mr Halili said. 'I guess they were taking profits. They've seen share prices so low for some time when it surged they just took advantage of that.' Some of the directors got out just in time. Directors at electronic display and telecommuncation parts trading company Welback Holdings sold shares last month at an average of 79 cents, accounting for 30 per cent of volume in the stock from February 15 to 23. The share is now trading at 36 cents. Directors at paging, mobile and Internet services group ABC Communications (Holdings) sold shares at as high as $3.65 from March 6 to 8 ahead of a tumble that saw the shares close yesterday at $2.225. Others gave up large gains by selling out. Directors in computer maker Legend Holdings, for instance, sold 33.7 million shares at an average of $18 a share in December. The stock surged to more than $60 ahead of this month's four-to-one stock split. It closed yesterday at $13.65.