Tech shares dive amid Presidential uncertainty

As election remains in limbo, tech shares lose ground in US and UK

High-tech shares in the UK lost ground in morning trading Thursday, reacting to an overnight drop in the US' tech-centric Nasdaq Composite index. Investors stayed away from trading, keeping volumes low, as they awaited the delayed outcome of the US presidential election.

Both candidates, Democrat Al Gore and Republican George W Bush, are seen as friendly to high-tech business, according to industry observers. The force driving the market down was simply the suspense, they said.

"It [the election] seems to be a bit of debacle at the moment and markets don't like uncertainty," said Sharon Coombs, European equity strategist with HSBC.

With Florida preparing for day two of a recount to determine who won the state's make-or-break 25 electoral votes, the US presidential election was still too close to call. Whichever candidate takes Florida's popular vote wins the US election.

A 5.4 percent slide overnight on Nasdaq took its toll on the technology and telecoms sectors, but with Nasdaq and S&P 500 futures inching up, markets were preparing for a modest recovery on Wall Street.

By 1.47pm GMT the techMARK 100 high-tech index was down 72.51 to 3364.25. The FTSE 100 blue-chip index had also begun to slide, losing 5.70 to 6471.

BT (quote: BT) did much of the damage, eroding 10 FTSE points in a 4.4 percent slide after it announced a break-up of the company and scaled back its global ambitions in order to offload a third of its huge debt burden.

Among technology stocks, fibre optics firm Bookham led the list of FTSE 100 losers with a tumble of almost ten percent as the market digested its results a day earlier. Software company Misys was down 4.7 percent and South African IT firm Dimension Data was 3.8 percent lower as a 62 percent rise in pre-tax profits failed to inspire investors.

BT's woes contributed to a 1.2 percent drop in the DJ Stoxx telecoms index which is now down 26 percent for the year and has underperformed the Eurotop 300 by 28 percent.

"We are seeing a little bit of sector rotation out of the techs and telecoms," HSBC's Coombs said.

Both US presidential candidates see high-tech as a key part of the American economy and are expected to take measures to keep the sector booming. "Both [candidates] have a focus on Silicon Valley and free trade. I think the net effect to Silicon Valley is going to be very minimal," said V Eric Roach, chief executive and chairman of startup eLance.

While the Democratic Party has traditionally been less friendly to big business than the Republicans, observers say the situation has shifted in the past few years, with both Bill Clinton and Gore emphasising their commitment to the economy in general and the high-tech industry in particular.

"Gore is very focussed on Silicon Valley, and has received tremendous backing from many of its founders," Roach said. "Bush is naturally supportive of free trade, but Gore in particular is very technical by nature anyway."

Reuters contributed to this report.

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