When we talk about tech companies in Australia, the household names of Google, Apple, Microsoft, Netflix and Amazon come to mind. However, there’s a whole raft of huge Asian tech companies servicing the world and their own markets. We take a look.
When we talk about technology companies in Australia, the household names of Google, Apple, Microsoft, Netflix and Amazon come to mind. In the Western world these companies have grown over the last 20 years to dominate tech and become some of the largest companies in the world.
However, there’s a whole range of huge technology companies whose logos may not be familiar to us, who are delivering important services, from building the chips and processors that power our devices, through to being the Google, Facebook and Amazon in China’s great firewall where to date the large US tech companies have been held out. Betashares have recently launched an ETF to capitalise on this market. The Betashares Asia Technology Tigers (ASIA) ETF invests in 50 of the largest technology companies in Asia. Today we take a brief look at ASIA.
ASIA aims to track the performance of an index that provides access to the 50 largest technology and online retail companies, by market capitalisation, that have their main area of business in Asia (excluding Japan).
Where internet services and consumer hardware dominate the US tech industry, Asia, in particular China, Taiwan and Korea dominate building the components that go into our devices. As a result ASIA has a large exposure to these type of companies, with Semiconductor manufacturers making up 24 % of the portfolio. The other large exposures are the consumer focused Interactive Media and Services at 24% and Internet & Direct Marketing Retail at 15%.
As expected in an Asian focused ETF, China dominates the country makeup at 42%, followed by Taiwan at 25% and South Korea at 21%.
ASIA follows the Solactive Asia Ex-Japan Technology & Internet Tigers Index, which invests in the 50 largest technology focused companies who predominantly do business in the Asian Region.
As at December 2018, the largest position is in Alibaba, a Chinese conglomerate specialising in ecommerce, retail, internet, AI and Technology. Alibaba is considered by many as the Amazon of China. The second largest holding is Tencent Holdings. Whilst Tencent certainly isn’t a household name, its underlying brands, particularly in China certainly are. They run the web portal QQ.com, as well as messaging and social media platform WeChat. Tencent are essentially Google and Facebook in China all in one, and then some!
The next largest companies are involved in hardware and components, with Taiwan Semiconductors (TSMC) currently the 3rd largest company in the Index, and one of the largest Semiconductor companies in the world, providing components to the likes of Apple, Samsung and Nvidia. The 4th largest holding is Samsung, of course a household name in Australia, and one of the largest consumer electronics companies in the world.
The top 10 holdings are rounded out with Chinese Search engine company Baidu, Indian IT Service company InfoSys, consumer device company Xiaomi, Chinese deal of the day company Meituan Dianping, South Korean memory chip provider SK Hynix and Chinese online gaming company NetEase.
What we like about the portfolio mix of ASIA is its broad diversification the whole way up the technology value chain, from components up to consumer device manufacturers, right through to a variety of consumer technology companies.
Whilst there are now a number of technology focused ETFs available, ASIA is the first to focus specifically on technology. There is likely to be some crossover in the underlying holdings, however the other tech ETFs available are very US centric, so investors can expect some unique exposure in ASIA.
For investors who believe in the Asian technology story, ASIA provides low cost exposure at 0.67% pa.