(Australian Associated Press)
Australia’s stock exchange is attracting a new wave of tech and overseas listings firms but the biggest firms on the ASX are still miners and banks – a characteristic of the market that is both a strength and a weakness.
In 2016/17, the ASX listed 40 new tech stocks among 133 new listings – comparing favourably with the tech-heavy NASDAQ in New York, which added 42, and Hong Kong’s exchange, which had 18 new entrants.
In Australia, however, the top six firms remain the big four banks, who together represent around one quarter of the ASX by market capitalisation, plus miner BHP Billiton and the blood products maker CSL.
Macquarie Wealth Management division director Martin Lakos says that 20 years ago the Australian market was dominated by resources stocks and the banks that fund them.
The situation today is much the same, although changes are starting to happen.
ASX chief executive Dominic Stevens told shareholders at the company’s AGM in September the Australian exchange was focused on growing its reputation as a destination for offshore companies and technology firms.
“ASX used to list only a handful of technology companies a year,” he said.
“Since FY15, it’s been between 30 and 50.”
Companies falling under the “tech” banner now make up the third-largest sector of the ASX in numerical terms, though not by value, and many in the category only loosely fit into any definition of technology.
Mr Stevens said the ASX has been trying to build a global ‘sweet spot’ in the $50-500 million market cap range.
“We’re attracting a mix of large companies like MYOB and WiseTech, and many smaller high growth companies from home and abroad,” he said.
The ASX boss cited the chief executive of an Israeli company describing the ASX as “just right” for listing.
“His company listed on our single, main board; there was liquidity and a knowledgeable analyst community; and in the words of the CEO, the process was “more straight-forward,” Mr Stevens said.
Mr Lakos said attracting tech and international companies is a good beginning for the ASX but the acid test for true market diversification will be whether Australian investors buy into those firms.
“The underperformance of the ASX200 relative to its global peers can part way go to the lack of “new world” sectors such as technology and information, where our market remains dominated by old world cyclicals and financials,” he said.
“For tech to be a bigger constituent of our Australian market, the sector will have to attract capital from domestic investors and therefore, there needs to be a change in investors’ mindset to risk and reward here.”