The local tech sector is booming and the launch on Friday of a new All Technology Index on the ASX would only increase global interest in the Australian tech sector, according to Industry Minister Karen Andrews.
In partnership S&P Dow Jones Indices, the Australian Securities Exchange officially launched the S&P/ASX All Technology Index ahead of its go-live date next Monday February 24.
At launch, the All Tech Index will have 46 constituent companies with a combined market capitalisation of more than $100 billion. In total there are now more than 200 listed technology companies on the ASX valued at about $115 billion.
The companies that comprise the index “reach across our economy,” Mrs Andrews said, “from logistics and finance to artificial intelligence.”
“In a little over five years, there have been more than 100 ASX Tech Initial Public Offerings, and in 2019, seven of the 10 highest performing stocks were technology companies,” she said.
The existence of the All Tech Index would improve the visibility and understanding of technology companies in Australia, according to ASX managing director Dominic Stevens. This would in turn drive further growth in the sector.
“We’ve seen tremendous growth in the number of technology companies listing on ASX and the quality of their performance recently,” Mr Stevens said.
“Over the last three years, the annualised total return from the S&P/ASX 200 has been around 10 per cent, while the return from the new All Tech Index over the same period—if it had existed— would have been over 20 per cent,” Mr Stevens said.
“The All Tech Index recognises the critical mass of technology companies listed on ASX. It provides investors with an opportunity to see how the sector is tracking and gives them a benchmark to measure its performance.”
Of the 46 companies on the All Tech Index, 40 originated in Australia, there are three from New Zealand, two from the US and one from Ireland. Many of the companies included in the All Tech Index started as small caps and have grown into billion-dollar companies.
The top ten companies by valuation on the Index at launch were Xero, Computershare, AfterPay, REA Group, and Altium, followed by Carsales, WiseTech Global, Link Group, NextDC and Appen.
Eligibility for the index includes minimum float-adjusted market cap, daily traded value and liquidity thresholds. The index does not have a set number of constituents; its makeup can change at each quarterly rebalance.
“Technology plays an increasingly important role in our lives. ASX will continue to develop the listed technology sector to provide companies with capital to grow and investors with access to exciting opportunities,” Mr Stevens said.
“A vibrant technology sector is also good for Australia. It helps drive economic growth, strengthens the relevance of our capital markets and encourages job creation and innovation onshore.”
Mrs Andrews said in Australia there was a strong pipeline of smaller tech companies that are now considering how and where to raise capital.
“The Index creates an opportunity for them to access later stage capital, raise their profile and fuel their growth,” she said.
“The Index also complements the growing number of venture funds in Australia and strong levels of venture capital – providing an alternate source of finance for new and expanding technology companies.
“As Australia continues to demonstrate that we are a strong and safe market to invest – we attract even greater global interest.”