ASX Tech Index Launches Today
Australia will finally get its own index of publicly listed technology companies today. The Australian Stock Exchange (ASX) will launch the S&P/ASX All Technology Index that is expected to become the localised version of the NASDAQ composite index, providing investors with the opportunity to invest in the one of the fastest-growing segments in a single trade.
Additionally, the opening ceremony at the exchange in Sydney will witness the attendance of technology minister Karen Andrews and representatives from each of the WAAAX (Wisetech, Afterpay, Altium, Appen and Xero) stocks. More importantly, the launch of the S&P/ASX All Technology Index is a significant day for the tech sector which has for close to twenty years strived to win the hearts of institutional and retail investors whose emphasis were on banks and minerals.
General manager of listings and issuer services at the ASX, Max Cunningham asserted that profits reaped from investing in tech stocks have surpassed the benchmark index for many years now and would, therefore, be a popular option for investors. This is evident as the amount of tech stocks listed on the ASX has doubled from 100 to 200 within the last five years. Specifically, the S&P All Tech will initially consist of forty-six stocks, including the WAAAX players whose market capitalisation easily surpass $1 billion. Additionally, it provides an excellent platform for local tech companies which are large, but market capitalisation has yet to attain the scale equivalent to Atlassian or Alphabet.
However, measures have also been put in place to ensure that the All Tech index would avoid having a breakaway success by imposing a rule that no firm can exceed 25 per cent of the index in terms of weighting. Telco stocks will be excluded as S&P GICS (Global Industry Classification Standard) classifications back in September 2018, witnessed the creation of a new sub-category of communications.
Mr Cunningham reaffirmed that ASX had been working closely with S&P in the past year on company classifications as the index will operate based on its GICS criteria. It currently comprises of more than 210 ASX stocks. As of now, the index does not have a fixed number of stocks. However, this figure is expected to be rebalanced quarterly. For companies to qualify, a firm must have a minimum investable weight factor of 0.3, a minimum market capitalisation of at least $120 million, witness a $120,000 worth of daily trade, and finally a minimum relative liquidity ratio of 30 per cent.
On a lighter note, Accounting technology giant Xero will be leading the $100 billion index. The inclusion of other tech darlings such as Tyro, Limeade and Nitro will likely be well-received by investors. Yet, these firms are excluded from the initial index due to S&P regulations which stipulate that a firm must possess liquidity measure tracking for at least three months in order to qualify.
By Caroline Wong
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