Investors fear telco bubble
European investors are becoming increasingly concerned at the high concentration of investment in telecommunication bonds.
European investors are becoming increasingly concerned at the high concentration of investment in telecommunication bonds.
Concerns are mounting that the rise could mirror the bubble in financial stocks concentrating in property that preceded the Asian economic crisis two years ago.
An investment frenzy in the bonds erupted after the introduction of the single currency in January gave the green light to cross-boarder purchasing.
Since then, corporate bonds launched by European companies have risen five-fold with about 25 per cent of this sold by telco groups.
Many investors now openly doubt the market is willing to digest another dollop of large telecom debt however generously priced the offering.
The Asian financial crisis started from a bubble in the equity prices of the region's financial stocks, which were concentrated entirely on the property sector.
The telco bonds are not funding operations but re-financings of acquisition debt which is being stimulated by high - and possibly inflated - share valuations. Any turn in the European growth stocks could see many investors regret the day they chose to diversify.
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