ASX tech shares had a very solid day today. The S&P/ASX All Technology Index (ASX: XTX) ended up rising 1.26% to 2,668.1 points. That looks pretty decent against the broader S&P/ASX 200 Index (ASX: XJO), which actually fell 0.32% to 7,092.5 points.
But some ASX tech shares were more equal than others.
WiseTech Global Ltd (ASX: WTC) managed a healthy 3.06% bump to $27.94 per share. Afterpay Ltd (ASX: APT) put on a solid 0.87% to $93.54, leaving the $84.50 level it hit a fortnight ago in the dust. Some of the top performers were NextDC Ltd (ASX: NXT), which managed a 5.17% rise to $11.18, and Domain Holdings Australia Ltd (ASX: DHG), which put on a 5.26% increase to $4.80 per share.
So why were ASX tech shares feeling the love today? Well, as has been the norm over recent months, there might be a couple of factors at play. The first is US tech shares. ASX tech investors seem to be taking their cues more and more from the US markets these days.
We can see this at play with the dance that Afterpay and its US-listed buy now, pay later (BNPL) counterpart Affirm Holdings Inc (NASDAQ: AFRM) have been dancing for the past few months. If Affirm falls hard on any given day, you can probably bet that the Afterpay share price will be following close behind when our market opens.
ASX tech shares on the rise
Arguably, this situation can be extended somewhat for most ASX tech shares. In that vein, it’s interesting to note that US tech shares have had a pretty decent week so far. The tech-heavy NASDAQ-100 (NASDAQ: NDX) was up 0.12% last night and has risen more than 5% in the past week. This could be supporting the ASX tech sector as a whole.
The other factor that could be at play is interest rates on government bonds. Now, this doesn’t seem like an obvious connection. But the kinds of shares that dominate the tech sector – namely high-growth companies that don’t yet make solid profits – are extremely sensitive to interest rates. That’s because the market assumes these businesses will be in the most trouble if borrowing costs were to rise. But the opposite is also true.
According to CNBC, the running yield on 10-year US Government bonds was at roughly 1.7% back on 12 May. Today, it is sitting at just 1.57%. That could be giving at least some investors out there more incentive to look in the tech sector for their next buy.
Since there is no real news out of most of the top-performing ASX tech shares named above, it could well be a combination of these factors that is leading to the outperformance we see today.