The ASX has announced that it is planning to launch a new technology index in February, 2020, giving Australia what some industry players have called a smaller version of the NASDAQ-100 index.
This new index, to be named the S&P/ASX All Technology Index (XTX) (All Tech), is intended to give greater visibility and clarity to investors tracking ASX-listed tech stocks and to raise the profile of ASX as a global tech exchange.
In comments appearing in Australian publications The Australian Financial Review and Stockhead, Mr Cunningham, Executive General Manager of Listings, gave his views as to why the ASX believes that the new All Tech index will push a pipeline of listings in 2020, which already looks like outstripping 2019.
The All Tech will focus on tech companies of mid-cap size and upwards. Unlike the existing ASX tech index the S&P/ASX 200 Information Technology Index, which lists the top 200 IT companies, All Tech will encompass all technology classifications but the number of companies to be included on the list will be open-ended and comes down to what Max Cunningham described as “investability”.
What are “investability” criteria?
Mr Cunningham stated that of the 200 tech-focused companies presently trading on the ASX, only around 45 of those would be on the index if it were live today. He described “investability” as meaning a company with a sizeable market cap, a free float of at least 30-40% of its shares being publicly traded and having a minimum dollar value average trading turnover. The ASX has not disclosed what that number will be.
Mr Cunningham said the ASX has been focused “for the best part of five years” on trying to create a “listed tech ecosystem”. “Now there’s a critical mass of tech companies that you can point to or recognise as tech and it’s time to give them a sector of their own … and give investors something to benchmark against,” he said.
The new All Tech index will enable the investor market to track how the ASX listed tech sector is performing as a whole and as against other local specialist indices such as mining or financials and against peer technology indices internationally. “It also hopefully gives tech companies … greater profile and greater access to investors, and banks and brokers follow [indices] too,” Mr Cunningham added.
The ASX is to provide further details about the All Tech index methodology upon the launch of the index, which is anticipated to occur late in February.
The launch of the All Tech index presents an exciting opportunity for Israeli companies. Inclusion in the new index will constitute formal recognition by the ASX of a company's maturity and its operational and financial success. Market recognition will then follow. The challenge for Israel companies currently listed on the ASX (and as at the opening of 2020 there are 20 such companies) will be to demonstrate that level of maturity and financial and operational success that will qualify them for entry to the index.