Which FTSE tech stocks to buy now

Highlights

• European shares fell 2% to one-week lows with falling tech stocks.
• Rising yield on 10-year Treasury notes to a three-month high of 1.53% has hit tech stocks.
• Tech shares generally underperform when the yields are rising. 

European stocks have hit their lowest point in a week on Tuesday due to rising government bond yields which impacted the high-growth tech stocks, while the investor sentiment was weighing down with new signs of slowdown in China’s economy along with the inconclusive German election. Moreover, the energy sector has been ignited with the three-year high oil prices.

According to the chief investment strategist at Inverness Counsel in New York, Tim Ghriskey, investing in technology stocks means investing in future growth and thus their higher valuation is negatively impacted by higher interest rates. He added that tech shares generally underperform when the yields are rising.

Many tech stocks got a haircut on Tuesday as Wall Street moved in the direction of more sensible value plays rather than investments which seemed to be riskier. Ironically, the tech companies didn’t lose value for doing anything wrong, but for performing well in the recent months and delivering high returns to shareholders. Even big stocks like Apple and Shopify lost 2.5% and 5.9% respectively. This was driven by the surging yield on 10-year Treasury notes to a three-month high of 1.53%.

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Britain’s FTSE 100 fell 0.5%, Germany’s DAX fell 2.1%, and France’s CAC 40 fell 2.2% on Tuesday. There was a 2% fall observed in the pan-European STOXX 600 index, which is its biggest one-day decline in more than two months, as the surging US treasury yields have tipped off investors to brace themselves for higher inflation risks.

Christine Lagarde, the European Central Bank chief, has stated on Monday that inflation levels can potentially raise above expectations, while Jerome Powell, the Federal Reserve Chair, assured that the central bank would take the necessary steps to check the rising inflation if required.

According to senior Europe economist at Capital Economics, Jack Allen-Reynolds, the euro zone headline inflation will hit 4% in the near future, before averaging to 2% in 2022. But during the next year, both the headline and core inflation are expected to fall and eventually settle at disturbingly low levels for the ECB.

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A 4.8% fall has been witnessed in tech stocks and they have hit their lowest point in two months after their Wall Street peers continued to sell off. Out of all stocks, tech stocks are specifically more exposed the influence of rising interest rates as their value majorly depends on future earnings, which are discounted way more as the interest rates rise.

Additionally, due to the oil price surge, it is being speculated that the global inflation will prove out to be more long lasting than expected, and thus central banks will be forced to act through reflation investments, which will rise along with interest rates.

Even though tech stocks are sensitive to rising interest rates, long-term success of the tech companies should be considered regardless of bond yields and inflation rates.

Let’s take a look at some of the top UK tech stocks impacted by the news.

Argo Blockchain PLC (LON: ARB)

Argo Blockchain PLC is a UK-based blockchain technology company which primarily focuses on large scale cryptocurrency mining. Its current market capitalisation is £547.29 million, and it is listed on the London Stock Exchange since 2018. It has given a significant return of 2,397.93% in 1 year. The previous close price of Argo Blockchain PLC’s shares was GBX 119.80 as on 28 September 2021. 

Dev Clever Holdings PLC (LON: DEV)

Dev Clever Holdings PLC is a UK-based software development company which provides its services to a wide range of blue-chip clients and educator customers. Its current market capitalisation is £209.59 million, and it is listed on the London Stock Exchange since 2019. It has given a return of 379.87% in 1 year. The previous close price of Dev Clever Holdings PLC’s shares was GBX 35.10 as on 28 September 2021.

Kape Technologies PLC (LON: KAPE)

Kape Technologies PLC is a UK-based software company which is engaged in the development and distribution of a wide range of digital products in the online security space. Its current market capitalisation is £943.32 million, and it is listed on the London Stock Exchange since 2014. It has given a return of 158.57% in 1 year. The previous close price of Kape Technologies PLC’s shares was GBX 420.00 as on 28 September 2021.

Zoo Digital Group plc (LON: ZOO)

Zoo Digital Group plc is a UK-based company which provides cloud software-based subtitling, dubbing and media localization services to the TV and movie industry. Its current market capitalisation is £105.08 million, and it is listed on the London Stock Exchange since 2001. It has given a return of 96.97% in 1 year. The previous close price of Zoo Digital Group PLC’s shares was GBX 120.00 as on 28 September 2021.

Essensys PLC (LON: ESYS)

Essensys PLC offers a compact platform with the software and digital infrastructure required to offer next-generation flexible workspace experiences. Its current market capitalisation is £181.57 million, and it is listed on the London Stock Exchange since 2019. It has given a return of 100.17% in 1 year. The previous close price of essensys PLC’s shares was GBX 282.00 as on 28 September 2021. 

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