* Cybersecurity "ISPY" ETF up 3 pct since launch
* Issue in spotlight after attack on TalkTalk
* Certain stocks have outperformed after TalkTalk hack
By Sudip Kar-Gupta
LONDON, Oct 30 The hacking scandal at broadband
provider TalkTalk has heightened interest in stocks and
companies dealing in cyber security, with some fund managers
betting on more growth in the sector.
British police said on Friday that they had arrested a
second teenager in connection with the breach at TalkTalk, which
may have led to the theft of personal data from among the
company's more than 4 million customers.
TalkTalk was not the first such incident, but traders and
investors said it should re-ignite interest in companies
offering protection against hack attacks.
Market research firm Gartner has estimated that global
spending on IT security is set to increase 8.2 percent in 2015
to $77 billion. Corporations around the world will spend $101
billion on information security in 2018, Gartner says.
That has caught the attention of financial markets. The ISPY
exchange-traded-fund, which lets investors hold a
basket of cyber security stocks - such as Cisco Systems
and Sophos Group - has risen around 3 percent
"As cyber crime continues to grow, governments and companies
are prioritising cyber security as an essential investment. This
is a sector we can expect to dominate headlines and corporate
budgets," said Kris Monaco, the head of ISE ETF Ventures.
Others focussed on some relatively small British stocks
whose shares have risen, in contrast to those of TalkTalk whose
stock has fallen 6 percent in the last week.
Falanx Group has climbed 15 percent over that same
period. NCC Group and Corero Network Security
- an offshoot of the former Corero software business - have
risen 3 percent.
Corero's products include software that protects against
attacks on Internet sites and domain addresses.
NCC has similar services, including one to test how
vulnerable a company is to "phishing" - where internal emails
are hacked by someone posing as an employee or outside contact -
while Falanx has services monitoring clients' computer
infrastructure for signs of suspicious activity.
John Blamire, a former British Army officer who is chief
executive at Falanx, said customer interest had risen since the
attack on TalkTalk.
"Incidents such as the one at TalkTalk actively brings
attention to organisations such as ours," he said.
To be sure, stocks such as these would carry the usual risks
associated with "small cap" stocks with a relatively small
market valuation - less liquidity, which can then make them more
prone to a slump and harder to sell than bigger stocks.
Nevertheless, they have attracted some big-name investment
houses, with Liontrust Asset Management holding a near 10
percent stake in NCC while Blackrock Investment Management has a
near 3 percent holding in Corero. Both Liontrust and Blackrock
declined to comment on those holdings.
Mark Slater, chief investment officer at Slater Investments,
holds around 3 million NCC shares in his company's portfolio,
and he expected NCC and others to continue to grow.
"The nature of the Internet makes it open to attack. These
problems are not going to go away."
(Reporting by Sudip Kar-Gupta; Editing by Lionel Laurent, Larry