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New home for ASX tech shares with launch of Nasdaq-style tech index

A new tech index is set to launch next February in Australia, known as the S&P/ASX All Technology Index or the S&P/ASX AllTech.

Unlike the S&P/ASX 200 Information Technology index, the new the AllTech index will also list ASX tech shares outside the top 200 stock and will include categories such as communication services like interactive media, as well as healthcare technology stock.

The index will give local investors who may be unfamiliar with local ASX tech shares a better opportunity to tap into the growth of the local sector. It could even help promote the growth of the ASX to become a local hub for technology stocks.

The new AllTech index will offer locally based tech companies such as Appen Ltd (ASX: APX) and WiseTech Global Ltd (ASX: WTC) better opportunities to raise their profile to a much broader spread of investors.

Currently, the tech sector is generally not well understood by local investors, especially as none of Australia’s ASX tech shares are listed in the top 20 ASX stocks. In comparison, on the Dow Jones Industrial Average (DJI) the top 5 stocks – Apple, Microsoft, Alphabet (Google), Amazon and Facebook – are all technology companies.

Here are 3 ASX tech shares that are set to be listed on the new AllTech Index that I think are worth investing in.

Appen Ltd (ASX: APX)

Appen is the global leader in the development of human annotated datasets for machine learning and artificial intelligence. Appen continues to experience very strong demand from large global technology firms. This has translated into high revenue growth, assisted by recent acquisitions. I believe Appen is very well placed to see continued strong growth throughout the next decade due to the continued rising demand for Artificial Intelligence (AI).

Nextdc Ltd (ASX: NXT)

NextDC is currently the the largest locally based data centre provider in Australia, and has been recently rapidly expanding its local data centre footprint. The Australian data centre market has come leaps and bounds over the past 5 to 10 years, driven by the rapid rise in cloud computing. The data centre game is highly capital intensive, however once the infrastructure is in place, operators are well placed to reap the benefits further down the track.

Altium Limited (ASX: ALU)

Altium is engaged in the development and sale of computer software for the design of electronic products. The demand for Internet of Things (IoT) is set to explode over the next decade, and all IoT devices require the type of electronic printed circuit board that Altium produces. With excess cash on hand and no debt, Altium is well placed to invest in future growth opportunities, especially in the fast-growing US and China markets.

Foolish takeaway

The launch of the S&P/ASX AllTech will definitely be very positive for the local Australian tech sector.

By raising the profile of our ASX tech shares, I think this in turn will raise their liquidity, which could then attract even more local stock to list and further promote investment and innovation in the local market, thus creating a virtuous cycle.

This could lead towards a real potential opportunity for Australia to become a regional tech hub in the South East Asian region.

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Motley Fool contributor Phil Harpur owns shares of NextDC, Altium and Appen Ltd. The Motley Fool Australia owns shares of Altium and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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