Investors bet on a quiet tech revolution in Europe

Fri Mar 31, 2017 5:00am EDT
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By Kit Rees

LONDON (Reuters) - It's not banking or mining shares, but rather technology stocks, that have come up trumps in Europe this year and are poised to end the first quarter as the best-performing sector.

European tech companies often pale in comparison to the glamor of peers across the pond such as Facebook (FB.O: Quote), Snap Inc (SNAP.N: Quote) and Amazon (AMZN.O: Quote), and are dwarfed in terms of market value. The U.S. sector, at $4.3 trillion, is worth more than eight times Europe's.

Investors, however, have been quietly buying into a European industry they see as being at the heart of disruptive digital developments across a slew of sectors.

Tech stocks in Europe have risen nearly 12 percent in the first quarter, outstripping the broader market .STOXX, which is up 4.8 percent, and also their performance in the first three months of last year when they fell 5.4 percent.

Driverless cars, iris-scanning technology and augmented reality are just a handful of the themes at play globally in which European companies such as STMicroelectronics (STM.MI: Quote), Infineon Technologies IFXG.BU and SAP (SAPG.DE: Quote) are involved.

Many European software firms are involved in corporate back-offices, keeping systems efficient and running - a less headline-grabbing side of the tech sector but one that can be important for companies across all industries looking to cut costs.

"Every consumer is exposed to Google, or Facebook, or Twitter ... something like SAP, which actually is in most corporations, is less visible to the end consumer," said Marcus Morris-Eyton, European equities portfolio manager at Allianz Global Investors. Tech now accounts for nearly a quarter of Morris-Eyton's portfolio, and SAP is his biggest position.


FILE PHOTO: An employee is pictured inside a clean room of German semiconductor manufacturer Infineon in Regensburg February 12, 2013.     REUTERS/Michael Dalder/File Photo