The new S&P/ASX All Technology Index (XTX) is set to launch today at a ceremony at the exchange in Sydney. The index, envisioned as a ‘mini NASDAQ’ will give investors a chance to invest in one of the fastest growing market sectors on the ASX in a single trade.
The new index is designed to be a broader, more inclusive index than the existing S&P/ASX 200 Information Technology Index (INDEXASX: XIJ), reflecting the broad range of ASX-listed companies in the technology sector. The current S&P/ASX 200 Information Technology Index only covers ASX technology companies in the ASX 200.
Representatives from each of the WAAAX shares – WiseTech Global Ltd (ASX: WTC), Afterpay Ltd (ASX: APT), Appen Ltd (ASX: APX), Altium Limited (ASX: ALU), and Xero Limited (ASX: XRO) – are expected to be in attendance at the opening. The index will go live from Monday, providing a smaller, localised version of the NASDAQ composites index.
What will the ASX All Technology Index look like?
The All Technology Index, or ASX All Tech, is expected to be highly investable, with returns from investing in technology exceeding returns on the ASX 200 in recent years. Xero is understood to be heading the index, with the top 5 also including Computershare Limited (ASX: CPU), Afterpay, REA Group Limited (ASX: REA) and Altium.
The number of technology stocks listed on the ASX has more than doubled in the last 5 years, from 100 to over 200. There are now 20 tech companies on the ASX with market capitalisations over $1 billion. The ASX All Tech will include 46 ASX technology shares at commencement, but does not have a set number of stocks.
To qualify for inclusion in the index, ASX technology shares must have a market capitalisation of at least $120 million and have a minimum $120,000 of shares traded each day.
The new index is part of an effort by the ASX to encourage overseas based technology companies to list in Australia. Six overseas-based shares are included in the index: Ireland-based Fineos Corporation Holdings PLC (ASX: FCL); New Zealand-based Xero, Pushpay Holdings Ltd (ASX: PPH), and Volpara Health Technologies Ltd (ASX: VHT); and US-based Life360 Inc (ASX: 360) and Livetiles Ltd (ASX: LVT).
New listings Tyro Payments Ltd (ASX : TYR), Nitro Software Ltd (ASX: NTO) and Limeade Inc (ASX: LME) will also likely join the index, although are not included at inception due to the rule that a company must have liquidity measures tracked over at least 3 months to qualify. Tyro, Nitro, and Limeade all listed in December.
What impact could the index have?
Currently, IT is the 8th largest sector on the ASX in terms of value, and the 4th largest in terms of volume. The ASX All Tech will make it easier to track the performance of the Australian technology sector and bring more attention to smaller listed tech companies. It may also boost the number of tech IPOs this year, with tech stocks representing the highest number of new listings on the ASX last year.
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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX and VOLPARA FPO NZ. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, Appen Ltd, WiseTech Global, and Xero. The Motley Fool Australia has recommended LIVETILES FPO, Nitro Software Limited, and REA Group Limited. 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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