S&P to launch new All Technology Index

Thursday, 19 December, 2019

S&P to launch new All Technology Index

Benchmarking tech businesses’ performance is about to get easier with the release of a new S&P All Technology Index (S&P AllTech).

Set to launch on 24 February 2020, AllTech is expected to feature a wider range of tech stocks from the information technology (IT), consumer electronics, internet and direct marketing retail, interactive media and services and healthcare technology sectors, according to the ASX website

This will give investors and business owners a fuller view of how listed companies are faring against their tech peers, the Australian Information and Industry Association (AIIA) said.

The index will typically attract initial public offerings (IPOs) in the tens of millions to hundreds of millions valuation range, AIIA said. It “will also promote our vibrant and growing tech start-ups and lead to more local listings”, said AIIA CEO Ron Gauci, with AIIA adding that an ASX listing could help companies access capital for growth, higher public and investor profiles, and improved valuation. 

The current S&P/ASX IT Index only covers companies that are in the ASX top 200 and provide software and services, technology hardware and equipment, and semiconductors and semiconductor equipment manufacturers, AIIA explained. 

“The introduction of an All Technology Index is recognition of the importance and significance of the technology sector to Australia’s economy. The sector is growing rapidly and it’s time to have a standalone Tech Index as part of the ASX that includes relatively small-cap stocks,” Gauci said. 

“The tech sector contributes 6.6% to Australia’s GDP, creates $122 billion in value and is vital to every industry sector. Australia now has a digital economy with a tech spine running down its centre.

“Tech services exports are worth $3.78 billion, with a tech trade surplus growth of over 200% from $170 million in 2017 to $515 million in 2018. Over 700,000 Australians are employed in the tech sector, accounting for 5.7% of the workforce, and there was an average trend growth of 2.5% between 2011 and 2018, outpacing the overall labour market growth rate of 1.7%. By 2024 the tech workforce is expected to grow by another 100,000,” Gauci said.

IT is currently the third-largest sector listed on the ASX with 204 companies, behind materials (686) and financials (212), with IT stocks coming eighth in value and fourth in volume, AIIA said.  

“In particular, artificial intelligence (AI) represents an enormous opportunity for Australian tech companies which are both using and developing powerful AI technology. According to the government’s AI technology roadmap, AI will improve productivity, create thousands of new jobs every year, help us live longer and improve our quality of life. Digital technologies, including AI, could be worth $315 billion to the economy by 2028,” Gauci added.

The IT sector has broken away from the rest of the share market in the past few years and is already boosting growth in the Australian economy, AIIA said. 

“My hope is to see IT become the second largest sector on the ASX by 2024,” Gauci concluded.

Image credit: ©stock.adobe.com/au/denisismagilov

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