Benchmarking Asia’s Tech Giants
Published
June 2023
Author
Senior Director, Equity Index Research and Development
Asia’s technology-related companies are making a slight recovery following a period of relative instability. While the sector was once only accessible to domestic investors, recent listings and market changes have allowed for a broader range of participants to gain access. It remains critical that any benchmark in the space is diversified across both geography and industry.
The ICE Asia Tech 30 Index (ICEAT30 / Index) provides exposure to 30 highly-traded Asia-Pacific-listed technology and tech-related companies as ranked by market capitalization in quarterly rebalances.
From its inception1 on March 19, 2010 to February 17, 2021, the Index returned an annualized 15.10%.2 This was a period of strong growth for the broader global technology industry with strides made across megatrends such as big data, cloud computing, artificial intelligence, robotics, 5G connectivity, internet of things, autonomous and electric vehicles, and battery and energy storage technology. This trend was even more pronounced in Asia, with a fast-growing base of middle-class consumers and a healthy pipeline of technology-related IPOs, especially from China.
During the first year following the outbreak of COVID-19, with the internet and electronic devices playing an even larger role in people’s lives, the technology sector reached a peak. In Asia, geopolitical and regulatory concerns saw the Index subsequently decline 55.80% from February 17, 2021 to October 24, 2022. Although many industries and regions experienced this tech-related pullback, a large part of it was concentrated in Chinese social media and online and direct retail companies.
Nevertheless, over the last 7+ months, many of those same companies are leading the Index in a recovery that has resulted in a cumulative gain of 39.92% from October 24, 2022 to June 9, 2023. For example, Tencent Holdings (700 / Hong Kong) has risen by over 73% during that period. It is the major Chinese technology conglomerate involved in a variety of businesses, including video games, electronic payment processing, mobile software, social media, and online advertising and marketing.
Other index constituents have gained as well, with Taiwan Semiconductor Manufacturing (2330 / Taiwan) rising approximately 55% over the same period. It is the leading semiconductor foundry, manufacturing chips for other major semiconductor and technology companies. With the global economy driven heavily by technology and tech-related products, it plays a critical role for companies and their products across multiple industries. This was especially evident when chip shortages led to supply chain problems over the last few years.
Following this initial rise, pullback, and subsequent recent recovery in Asia’s technology-related companies, it is important that any benchmark for the space has a robust methodology for the right type of exposure.
The ICE Asia Tech 30 Index contains securities listed across four Asia-Pacific countries: Hong Kong (31.06%), Japan (27.17%), South Korea (18.30%), and Taiwan (23.48%).3 The Index methodology incorporates weight-capping criteria to prevent overconcentration in any one security, with the top weighted constituents being Taiwan Semiconductor Manufacturing (16.98%), Samsung Electronics (10.55%) and Tencent Holdings (10.10%). Although the Index is weighted toward semiconductors (23.83%), social media, search & online marketing (17.18%) and online & direct retail (14.50%), it contains companies from 13 ICE Uniform Sub-Industries and 3 ICE Uniform Sectors: consumer discretionary (23.50%), technology (58.78%) and media & communications (17.71%).4
1“Inception” relates to the date from which historical data is available. ICEAT30 was launched on March 19, 2021. Historical returns and weights before the launch date of an Index are based upon backtested data. For the period prior to the launch date of an Index, simulated performance data has been provided as an illustration of how the Index would have performed during the relevant period had the Index been calculated by ICE Data Indices, LLC (“IDI”) using the current Index methodology. Such simulated performance data has inherent limitations, as the simulated data is produced by the retroactive application of the methodology. Simulated performance data is based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected its performance and may reflect a bias toward strategies that have performed well in the past.
2All performance figures for the Index and individual securities are represented in U.S. dollar (USD) gross total return terms.
3All index constituent and weight data as of June 9, 2023.
4Based on the ICE Uniform Sector Classification Schema.
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Resources
Takeaways
- Asia’s tech-related companies have made a slight recovery following a period of instability
- For investors expressing a view on the sector, choosing a representative benchmark is critical
- The ICE Asia Tech 30 Index provides exposure to 30 highly-traded Asia-Pacific tech companies ranked by capitalization.