The bell has rung on Australia’s first dedicated index of locally listed tech stocks, the S&P/ASX All Technology Index, with the dedicated basket primed to start officially operating from market open next Monday morning.
A landmark for both the local market operator and tech sector, the index, which will carry the code XTX, will carry a combined market capitalisation of more than $100 billion with Australia’s best know tech heavyweights and unicorns making up the top ten.
Making the initial cut, in order of market cap as of Friday (and a lot can change in a day), the list was as expected topped by Xero (XRO) followed by registry stalwart Computershare (CPU), buy-now, pay later darling Afterpay (APT) , REA Group (REA) and then Altium (ALU).
They were followed by Carsales (CAR), Wisetech Global (WTC), Link Administration Holdings (LNK) NEXTDC (NXT) and then Appen (APX) to round out the top ten.
(We’ll get an updated fuller list shortly.)
Federal Minister for Science and Technology Karen Andrews presided over the bellringing with trademark humour and enthusiasm, saying the new tech index would “play a big role in increasing the tech sector’s visibility and will make it easier for everyday Australians to invest in tech companies, and share in their success.”
“How exciting is this?! I keep joking that I feel like Carrie Bradshaw in Sex and the City,” Andrews quipped at the launch, prompting the odd blush from besuited fundies in attendance.
“I’ve also had Ring My Bell by Collette stuck in my head for months!”
(Andrews rang the bell with such enthusiasm one cheeky fundy suggested she could get a job on new Sydney light rail after politics.)
Aside from being a crucial market tracker, the index also substantially bolsters the supply of capital to existing and emerging tech companies because it provides a gateway to institutional funding and an important alternative to often expensive private venture capital.
Banks, including the CBA, Westpac and NAB have thrown hundreds of millions at the venture sector, usually as a hedge to gain a foothold in emerging disruptors and competitors.
“We know that Australia has a strong pipeline of smaller tech companies considering how and where to raise capital,” Andrews said.
“The Index creates an opportunity for them to access later stage capital, raise their profile and fuel their growth.”
Executive general manager of listings, issuer services and investment for the ASX, Max Cunningham, also revealed that the XTX had already attracted its own exchange traded fund (ETF) that will launch with weeks through Betashares, which Cunningham described as “Australia’s largest home grown ETF provider”.
“BetaShares will launch an ETF over the S&P/ASX All Technology Index and if all goes to plan we expect that the BetaShares S&P/ASX Australian Technology ETF will commence trading just over a week after the index - on Wednesday the 5th of March - with the ticker ATEC,” Cunningham said.
Apart from Australian companies, on launch the All Technology Index will include three New Zealand companies two US companies and one Irish company, Cunningham said.
“Given recent listings in December and a very healthy pipeline for 2020, that cohort is likely to grow.”
It’s also not hard to see why an tech-based ETF might prove attractive when interest rates are in the gutter and mining stocks bouncing around because of the Coronavirus.
For the main, the leading Australian tech stocks have handsomely rewarded investors who know a thing or two about IT.
Cunningham put it this way.
“To put it into perspective, over the last three years the S&P ASX 200 annualised total return has been around 10 percent – while over the same period the technology companies who would have been in this index if it had existed, would have returned over 20 percent.”
Compare that to the market leading depositor rate of 2.25 percent from neobank Xinja and it’s not hard to see why the ASX is getting into tech with bells on.