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ASX All Technology Index ends first week on a low note

It’s been a difficult first week for the new S&P/ASX All Technology Index (XTX), which made its debut on Monday. A perfect storm of lacklustre results and coronavirus fears has resulted in the index finishing its first week down more than 10% at 1807.5 points. 

Launched to much fanfare, the new All Technology Index is designed to be a broader, more inclusive index than the existing S&P/ASX 200 Information Technology Index, 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 S&P/ASX 200 Index (INDEXASX: XJO)

How did individual shares perform?

Major ASX technology shares included in the index fared poorly this week. Index leader Xero Limited (ASX: XRO) ended the week down 15% at $73.65.

The remaining top 5 ASX shares on the index also performed poorly: Computershare Limited (ASX: CPU) was down 11% to $15.32, Afterpay Ltd (ASX: APT) fell 15% to $33.17, REA Group Limited (ASX: REA) declined 14% to $98.32, and Altium Limited (ASX: ALU) dropped 10% to $30.80. 

Nonetheless, the All Technology Index is expected to be highly investable, with returns from investing in technology exceeding returns on the benchmark ASX 200 in recent years.

As ASX General Manager of listing services Matt Cunningham recently told ITnews, “over the last three years the S&P ASX 200 annualised total return has been around 10% – while over the same period the technology companies who would have been in this index of it had existed, would have returned over 20%.” 

How does the All Tech Index work?

The All Technology Index includes 46 ASX technology shares currently, 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 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 roughly 20 tech companies on the ASX with market capitalisations over $1 billion. 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 currently included in the index, being 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 yet 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. 

Foolish takeaway

Currently, information technology is the eighth largest sector on the ASX in terms of value, and the fourth largest in terms of volume.

While the All Technology Index may have had a rough start, ultimately it will make it easier to track the performance of the Australian technology sector and bring more attention to smaller listed tech companies. 

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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, 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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Kate O'Brien