Next week marks one year since the S&P/ASX All Technology Index (ASX: XTX) debuted. Launched at the end of February 2020, the All Technology Index debuted just in time for the March market meltdown.
The index saw its value tumble 42% between launch and the March 2020 low point. But all was not lost — since its March low, the index has regained 159% and is now up 50.5% from its debut, having performed on par with the NASDAQ 100 over the same period.
The All Technology Index was designed to be representative of Australia's burgeoning tech sector. Consisting of 46 companies with a combined market capitalisation of over $100 billion on debut, the index now includes 69 companies with a combined market capitalisation of over $170 billion. The top 10 companies in the index, by market capitalisation, are:
| Company | Market capitalisation | |
|---|---|---|
|
1 |
Afterpay Ltd (ASX: APT) |
$42.26 billion |
|
2 |
REA Group Limited (ASX: REA) |
$20.34 billion |
|
3 |
Xero Limited (ASX: XRO) |
$18.69 billion |
|
4 |
Seek Limited (ASX: SEK) |
$10.94 billion |
|
5 |
WiseTech Global Ltd (ASX: WTC) |
$10.36 billion |
|
6 |
Computershare Ltd (ASX: CPU) |
$7.61 billion |
|
7 |
Nextdc Ltd (ASX: NXT) |
$5.51 billion |
|
8 |
Carsales.Com Ltd (ASX: CAR) |
$5.36 billion |
|
9 |
Pro Medicus Limited (ASX: PME) |
$4.67 billion |
|
10 |
Altium Limited (ASX: ALU) |
$3.82 billion |
How have All Technology Index shares performed?
A number of these names have seen dramatic share price increases over the past year, contributing to the stellar performance on the All Technology Index.
At the time of writing, Afterpay is up 274% over the past year, while REA Group is up 36% and Xero is up 44%. These share price rises have followed impressive performances by these leading ASX technology shares — Afterpay has seen customer numbers nearly double since the All Technology Index debuted. REA Group grew net profit by 13% in the first half of FY21 with the continued recovery in Australian property markets likely to support second half performance. Xero reported a 19% increase in subscriber numbers in its most recent half-year results.
But it hasn't all been good news for All Technology Index shares. The index also includes shares such as Webjet Limited (ASX: WEB) and Iress Ltd (ASX: IRE). The Webjet share price is down 46% over the past year as travel bans continue to weigh on the business. The Iress share price is down 28% over the same period with COVID-19 impacting on the timing of projects and revenues relatively flat in the most recent financial reports.
EML Payments Ltd (ASX: EML) has also seen its share price fall over the past year, down 10.7%. The payment solutions provider, which reported largely positive half-year results this week, is one of the most shorted shares on the ASX.
How is the All Technology Index designed?
To fully capture the scope of ASX technology businesses, the All Technology Index goes beyond the GICS information technology sector to include other innovative technology related industries. These include healthcare technologies (such as that provided by Pro Medicus) and companies operating online marketplaces that are classified in other GICS sectors.
There is no cap on the number of ASX shares that can be included in the All Technology Index — entrants just need to meet the entry criteria. These criteria cover the percentage of free float shares, market capitalisation, relative liquidity, and minimum daily volume traded. The Index is rebalanced quarterly, with the most recent rebalance occuring in December.
New additions to the All Technology Index
In the December rebalance a host of new ASX technology shares were added to the Index. These included Pointerra Limited (ASX: 3DP), 4Dmedical Limited (ASX: 4DX), Bidenergy Limited (ASX: BID), Damstra Holdings Limited (ASX: DTC), Frontier Digital Ventures Limited (ASX: FDV), Family Zone Cyber Safety Limited (ASX: FZO), Harvest Technology Group Ltd (ASX: HTG), Laybuy Group Holdings Limited (ASX: LBY), Marley Spoon Ag (ASX: MMM), Over the Wire Holdings Limited (ASX: OTW), Tesserent Limited (ASX: TNT), Weebit Nano Ltd (ASX: WBT), and Yojeee Limited (ASX: YOJ)
In the preceding September rebalance, Brainchip Holdings Ltd (ASX: BRN), Dicker Data Limited (ASX: DDR), Envirosuite Limited (ASX: EVS), Mach7 Technologies Limited (ASX: M7T), Novonix Limited (ASX: NVX), Splitit Payments Ltd (ASX: SPT), Sezzle Inc (ASX: SZL), and Whispir Limited (ASX: WSP) were added to the index.
Why do investors choose the All Technology Index?
The All Technology Index offers a number of benefits for investors. Firstly, it is broader than the previously existing S&P/ASX 200 Information Technology Index, which only includes technology companies in the ASX 200. This means the All Technology Index can provide exposure to smaller businesses that may have greater room for growth.
The index also reaches beyond the GICS information technology sector to include innovative technology based companies included in other sectors. This allows for the inclusion of healthcare technology companies such as Pro Medicus and PainCheck Ltd (ASX: PCK), as well as online marketplaces such as Kogan.com Ltd (ASX: KGN).
What's next for the All Technology Index?
The All Technology Index had a shaky start, launching just as the COVID-19 pandemic took hold. But it has proved its resilience over the past year, significantly outperforming the S&P/ASX 200 Index (ASX: XJO). Since its launch, the All Technology Index has gained more than 50%, led by companies such as Afterpay and Kogan. Over the same period, the S&P/ASX 200 is down 1.2%.
The All Technology Index is next due to be rebalanced in March, at which point we may see the number of ASX technology shares included in it increase further. This will provide additional diversification for investors in the index while also providing additional exposure for the companies included in the index.
Whether the All Technology Index can repeat its first year's performance in its second year remains to be seen, but investors will be keeping their fingers crossed.
