Tech stocks listed in Singapore outperformed the benchmark in average return and valuations over the past five years, reflecting investor interest against the backdrop of a new wave in technology disruption.
With the rapid pace of innovation spurred by disruptive technology such as Big Data, Internet of Things, Artificial Intelligence, Automation/Robotics, Augmented/Virtual Reality and 3D printing, the technology industry is going through what some term the 4th Industrial Revolution.
This wave in technology disruption has augmented investor interest in Singapore technology stocks, specifically those that look set to benefit from it. The year of 2016 was tricky for investments worldwide, arising from the unprecedented Brexit, United States Presidential elections, and volatile oil prices. Notwithstanding this, the Information Technology sector ended the year as the 3rd best performing sector in SGX, with listed technology stocks generating total double digit return of 15%, underpinned by strong investor interest in this sector.
At 2017 year-to-date, it is the best performing sector on SGX.
Viewed with a longer term lens, the 84 listed tech stocks with a combined market capitalisation of about S$80B and has a strong weighted average return of 53% over the last five years, outperforming the Straits Times Index’s 40% return.
Investor interest in Singapore tech stocks should come as no surprise as Singapore has long been Asia’s technology hub. Semiconductors and technology hardware manufacturing has traditionally been Singapore’s stronghold, and the Government has also lay out its vision and plans to develop Singapore into a Smart Nation. In less than two years, numerous startups have been accelerated across Singapore and a network of data scientist and tech talents has been cultivated to collaborate with the Singapore government to deliver projects for public consumption. The inaugural Singapore FinTech Festival held last November featured over 11,000 participants from 50 different countries, propelling Singapore to its status as Asia’s prime FinTech hub.
Investor interest in Singapore tech stocks should come as no surprise as Singapore has long been Asia’s technology hub. Moving forward, Singapore and SGX are poised to play a significant role in nurturing promising technology companies into their next stage of growth.
Tech companies listed on SGX are broadly categorized as technology hardware and internet, gaming, IT services and software companies. Besides technology hardware manufacturing companies that form the foundation for disruptive technologies such as Venture Corp, other tech listings in Singapore include iFast which was ahead of its time, creating the online fund platform fundsupermart.com more than a decade ago; Silverlake Axis which provides digital economy solutions and service to the banking, insurance, payment, retail and logistics industries; and DeClout, a next generation technology service provider offering a full suite of ICT solutions and services to customers in the IT infrastructure service and vertical domain cloud business segments. These three companies went public over the course of the past 14 years and have garnered strong investor interest, exhibited by strong valuations and market cap growth.
Evolvement of tech sector and tech investors
As the tech sector and its business models continue to evolve and change, and knowing that the technology listings of tomorrow can be very different from yesterday’s, SGX has been educating investors about the new business models of technology companies.
In 2015, SGX commissioned a research paper on the emerging trends in the technology sector to provide insights and enhance investors’ understanding of the fast evolving digital sector, including Cloud and Data Centre, IoT, Cyber Security, E-payments, E-commerce, Social Network and Big Data. This was followed by a series of Technology Investor Education Seminars held over 2016 and 2017, where the exchange gathered experts from each of these fields to talk about the trends and valuations of the respective sector companies. These seminars have been well-attended by retail and institutional investors, bankers, and other members of the financial community, and the research paper has been downloaded over 2,200 times since its release in December 2015.
These sessions weren’t limited to physical learning ones either. SGX also launched 7 videos that serve as a quick guide for beginners looking to invest in technology companies – these videos have garnered over 200,000 views to date.
The most recent technology investor education seminar was on investing in Social Networking Company. It featured representatives from Ayondo (a FinTech company that has announced intentions to list on SGX) MoneySmart, Paktor and Gushcloud. An upcoming seminar, geared towards improving investors’ understanding of alternative investor platforms, will be held at the end of March.
Moving forward, SGX is also planning to conduct investor education seminars that discuss how Traditional Tech supports Digital Tech. These initiatives by the exchange fulfil a crucial function – they develop investor knowledge in emerging technology, serving as a useful resource as our tech sector continues its digital evolution.
As we continue observing the growth trajectory of the tech sector, it is also useful to reflect on the strengths of Singapore’s technology ecosystem, as well as the confidence we can draw from our fundamentals. Singapore is an international financial and wealth management centre, this coupled with robust support for the tech ecosystem, strong investor interest and an infrastructure of global repute, Singapore and SGX are poised to play a significant role in nurturing promising technology companies into their next stage of growth.