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Market capitalisation is the way companies are valued on the stock exchange – and a fancy name for a straightforward concept which is the market value of a company’s outstanding shares.

In the past 10 years we have seen big changes in the Australian economic climate. The glorious mining boom saw the ASX flooded by IPO’s and listings from small to large mining companies. Some did well, others bombed, but this sector single handedly propped up the ASX until recent years.

graph_3Over the last 5 years the ASX200 IT Index has grown by 60% while ASX200 Materials index is down 30%. Going on these figures it appears investing in tech, even in Australia, would have outperformed metals and mining by a whopping 90%!

A recent ASX Sector Listing graph found within recent IPO report released by Deloitte shows clearly that recent times have seen a big drop and continued stagnancy in Energy & Resource (Mining Sector) listings and a massive increase in Tech or TMT (Technology, Media and Telecommunications) listings. The TMT Sector sits firmly at the top of the ranks – showing an impressive increase of over 100% on previous years.

In the past two years there have been a staggering 105 tech company floats on the ASX, and an explosion in ‘backdoor’ listings – in which dormant public mining companies are being quietly ‘acquired’ by technology start-ups through private capital raising. This approach not only allows them to suddenly ‘appear’ on the ASX without going through the intense IPO process, but also means they can escape the public or media scrutiny that an IPO release attracts.

tech-tableDespite the increase in Tech listings, tech stocks in Australia currently account for a measly 1 per cent of the ASX 200. Compare this to the US where nearly 20 per cent of the S&P 500 are tech companies – including five of the ten biggest names (Apple, Google, Microsoft, Facebook and Amazon).

The value of the top 5 Australian tech companies compared to the top 5 in the US –  coincidentally also the most valuable public companies in the US today – is shown in the table above.

You’ll surely agree that the difference in value is nothing short of jaw dropping! This lack of substantial tech sector is arguably a key reason the Australian share market has under performed many of its peers in recent years, and we can only hope the tides will turn before Australia is left too far behind!


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