Will higher valuations for technology companies spark an internet bubble?

China's largest online shopping platform company Alibaba in the United States recently opened a two-week IPO roadshow activities, the scene is unusually hot. Many fear that the rise in valuations of tech companies will trigger an internet bubble in the context of a difficult global recovery. Most experts at the summer Davos forum here believe that the valuation of science and technology firms is still in a reasonable range and that a new round of internet bubbles will not be triggered by higher valuations.

To the memory of many in the market, the Nasdaq Composite Index (1934.23,-0.370,-0.02%), which dominated technology stocks, climbed to 5,048 in March 2000, after which investors, funds and institutions began winding up and the dotcom bust burst. The fear is that, from a market perspective, the rise of the technology industry does have much in common with the "dotcom bubble" of 14 years ago, with corporate overvaluation, start-ups with lots of users and activity, but limited profitability.

For this concern, Zhu, a professor at the Shanghai Jiaotong University's High School of Finance at the 2014 Summer Davos forum, and a researcher at the Yale International Financial Center, said the bubbles of internet companies in China and the US were little, but not too big. While valuations have widened, they are not as bad as they think. In terms of stock prices, it's not a big deal for internet companies to have higher valuations, because the benefits of technological change are hard to measure.

Careful study of the market is not hard to find, this round of market rally is not as crazy as the last round of the dotcom boom. The Nasdaq index, which hit a record high of 5,048 points, was 1 time times higher than a year ago, and the Nasdaq index is far from the same level as it was a year ago, and there was even a sharp adjustment in the second quarter of this year. In addition, the main strength of the rally is mainly institutional investors, and investors are relatively mature compared to the previous round of participants.

"In the last round of the dotcom bubble, investors thought there was a 1% chance of success in investing, which made the bubble accumulate rapidly." "Speed of light An Zhen, co-founder and managing director of China Venture capital fund Cao Darong, said investors are now investing more rationally after the lessons of the last dotcom bust. At present, many technology companies are still in a reasonable valuation range, there may be a little bubble, but not very serious.

Zhu that, from the valuation point of view, the current valuation of science and technology companies are not too high, and behind the important impetus is the return of capital from emerging markets to the United States, while the United States low interest rates, lack of other good investment options. Compared with the real estate bubble, the current internet bubble can not say no, but much smaller.

According to the latest earnings reports from major companies, search giant Google, smartphone giant Apple, IBM and other companies have achieved good results, confirmed the market expectations, still support for the future.

Forum experts believe that, from a corporate point of view, the increase in valuation to attract scientific and technological talent, motivate staff to improve productivity, so as to maintain the smooth operation of the company benefits.

Max Lev, founder and CEO of American HVF, said that people should not limit their gaze to valuations, but should think about the value of science and technology enterprises, mainly in the change of human life. In agriculture, urbanization, food and other fields we have witnessed the role of science and technology. Most bubble cycles are 5-10 years, but if you look at them from 20 or more, it's not a bubble. We should focus on long-term trends rather than short-term fluctuations in valuations.

Zhu that high stock prices are not a mistake, as long as there is no mismatch between capital and resources is not a problem.

Experts also warn that the internet giants are now wary of investment mistakes. Zhu pointed out that the internet giant in the possession of large sums of money, managers and employees are prone to arrogance, if the wrong decision, excessive expansion, not only the company a big blow, but also to the industry a big bubble.

As for the development prospects of Chinese Internet companies, Cao Darong that China's it entrepreneurs, like the United States, have a strong entrepreneurial spirit. In China, in spite of stricter regulation in many areas, we have seen a reversal of technology in the industry. China's science and technology enterprises in the future are facing great opportunities, in the next few years to meet a lot of "interesting" company was born.

Zhu says social investment in the internet has reached a very high level. From the international level, it may indeed be approaching the bubble stage, especially the pre-listed companies. It is recommended that investors be more cautious, and that many companies are mixed, to find companies that do have core competencies or have a very high entry threshold in a certain field.

(Responsible editor: Lvguang)