In recent years, ASX-listed technology companies have recorded substantial growth. This is reflected in the number of companies operating in this ever-diversifying field, as well as their respective market capitalisations..
When back-tested, the number of S&P/ASX All Technology Index constituents has leapt from 24 in 2014 to 46 in 2019. As of the most-recent quarterly rebalancing date in June, 2020, that number has since expanded to 50, still only a small portion of the many companies in the IT sector.
Meanwhile the total market capitalisation of these leading companies has surged more than five-fold from $17.1 billion in 2014, to $91.7 billion in 2019. Recently, this value topped $120.5 billion.
While technology stocks were among those hardest-hit when the market plummeted throughout March this year, they have also turned out to be among the most resilient stocks on the way up. In many ways, ASX technology shares, leveraged to the digital stay-at-home economy, have led the market rally, influenced by their US peers that have helped the NASDAQ charter new all-time highs.
Whereas stocks in the financials sector have long played a central role in driving markets on account of their heavy representation of the ASX, demand for technology shares has rapidly escalated in recent times. That has also driven the need for an index that tracks the technology sector in a broad yet specific manner.
Breaking Down the All Tech Index
Not only does the S&P/ASX All Technology Index act as a comprehensive measure for the ASX technology sector, but it also covers additional relevant sub-industries from other ASX sectors that ultimately tie in with the technology theme.
These sub-industries include consumer electronics, internet and direct marketing retail, interactive media and services, plus health care technology. As such, the All Tech index extends beyond the limits of the ASX 300, providing early and extensive access to smaller businesses that may have potential for increased growth.
With the index only launching in February this year, certain parameters have been set to frame the constituents that make up the All Tech Index. In order to feature in the index, as well as the sector classifications mentioned above, a constituent must have:
- A three-month average total market cap of at least $120 million (or $80 million for existing constituents.
- Minimum free float of 30% (or 15% for existing constituents).
- A three-month median daily value traded of $120,000 (or $80,000 for existing constituents).
- Stock liquidity relative market liquidity of 30% averaged over a three-month qualifying period (or 15% for existing constituents).
- No greater than a 25% weighting towards the index, which is flat market-cap weighted.
As of June 30, 2020, the All Technology Index was defined by the following characteristics:
A snapshot of the index’s historical performance, back-dated to 2014, is shown below. While the All Tech Index largely tracked the ASX 300 for the first three years, a notable deviation has been in effect since mid-2017. This result mirrors the same level of outperformance between the NASDAQ and Dow Jones, where the former has gained around 66% since June 30, 2017, compared with just 21% for the latter. With technology playing an ever-increasing role in all our lives, the big tech companies have effectively led a multi-year bull run.
All Tech Index Top 10 constituents
We've written a quick analysis of all the companies in the index. As there are 50 companies, we've split this out into 5 posts.
- ASX All Tech Stocks 1-10 (APT, REA, XRO, SEK, CPU, WTC, NXT, CAR, APX, ALU)
- ASX All Tech Stocks 11-20 (TNE, PME, LNK, PPH, MP1, IRE, DHG, TYR, KGN, CDA)
- ASX All Tech Stocks 21-30 (EML, BVS, FCL, NEA, WEB, TPW, DTL, IRI, IFM, HSN)
- ASX All Tech Stocks 31-40 (ELO, RBL, 360, AD8, NTO, VHT, RHP, BTH, DUB, CGL)
- ASX All Tech Stocks 41-50 (CAT, RUL, LVT, PPS, CL1, ALC, PCK, NET, RAP, AMS)