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In the global investment landscape, Asia’s technology market stands as a compelling frontier, attracting investors with the promise of innovation, exponential growth, and a burgeoning digital economy. As a result, tech stocks from Asia have become interesting, and some Asia technology funds have also entered the market.
The region’s tech prowess has been on a remarkable trajectory. Between 2006–08 and 2016–18, Asia accounted for 52% of the global technology revenue growth. During the same period, Asia’s portion of worldwide R&D investments rose from 26% to 34%, contributing to 51% of the overall growth worldwide. Delving deeper into the numbers, Asia secured 87% of the global growth in patent filings over the last decade, as per McKinsey.
“Asia remains the region with the highest spending on research and development globally…We believe Asia remains the foundation for the global tech supply chain, the bedrock of innovation,” says Yash Patodia, Sector Co-Lead at Wellington Management.
Additionally, four of the world’s top ten technology firms hailed from Asia in 2020, a stark contrast to a decade earlier when the region had no representation in the top ten.
In 2023, Forrester projects a 5.8% acceleration in Asia Pacific’s technology spending, reaching $732 bn. This growth rate is attributed to various factors, including the expansion of software, the evolution of IT services, the adaptation of communications equipment, and the resilience of computer equipment.
“While we anticipate APAC tech spend growth to increase even further, it’s crucial that countries and businesses invest in the right technologies to continue to benefit from growing digital and cloud infrastructure,” says Leslie Joseph, Principal Analyst at Forrester.
How to invest in Asia’s technology market?
With Asia’s technology market establishing itself as a major player on the global scene, we have prepared a list of three investment options in the sector in 2023.
Wellington Asia Technology Fund
The first fund in our list is the Wellington Asia Technology Fund (USD D ACC). Its objective is to achieve long-term total returns by primarily investing in the stocks of technology companies in Asia. The strategy aims to pinpoint well-managed firms poised to capitalise on the region’s rapidly rising technology sector.
Launched in 2018, the fund has total assets under management of $291.23 mn as of December 6, 2023. The Wellington Asia Technology Fund uses MSCI Asia Pacific Custom Net Splice as a reference benchmark. The fund levies a management fee of 0.90% and has an ongoing charge of 2.14%.
Year-to-date, the fund has achieved total returns of 6.2%, while the benchmark has provided 0.6% returns. Over the past five years, the fund has grown by 56.6%, in contrast to the benchmark’s 58.7%. Since its inception, this Wellington fund has demonstrated cumulative growth of 5.5%, while the benchmark has swelled by 19.6%.*
The fund’s top five major holdings include the semiconductor equipment company Taiwan Semiconductor (9.5%), Tencent Holdings (9.2%), Sony Group (4.7%), the Japanese electronics and semiconductor company Tokyo Electron (4.7%), and Keyence, another Japanese electronics firm (4%).*
In terms of sectors, the fund has the biggest investments in IT (62.4%), consumer discretionary (14.3%), communication services (11.4%), industrials (6.2%) and health care (2.2%).*
Geographically, 37.5% of the fund’s holdings are in Japan. This is followed by Taiwan (25.8%) and China (18.2%). The US (6.5%) and South Korea (5.6%) also form a part of the fund’s top five country holdings.*
Yash Patodia is the portfolio manager of this fund. He has 16 years of industry experience and has been working with Wellington for nine years.
Sanlam Asia Pacific Artificial Intelligence Fund
Established in 2021, the second fund in our list, Sanlam Asia Pacific Artificial Intelligence Fund (IS1 USD Acc), specifically invests in companies actively involved in key AI-related activities.
The adoption of artificial intelligence in Asia is swiftly increasing, with expectations that AI will make up approximately 40% of total information and communication technology investments in the region by the close of 2023. According to IDC, spending on AI in the Asia-Pacific region is projected to experience a CAGR of 24.5% between 2021 and 2026, reaching $49.2 bn.
To capitalize on this trend, the Sanlam fund invests in companies that are involved in research and development, the provision of AI services, and the transformative adoption of such services.
It has total assets under management of £10.64 mn ($13.38 mn). The asset manager imposes an annual management fee of 0.50% and ongoing charges of 0.64%.*
For the year-to-date period, the fund has recorded an overall growth of 4%. Looking at the past year, the fund has shown growth of 20.7%. Since its inception, this Sanlam fund has exhibited a negative growth of 11.3%.*
The fund’s top five major holdings include the Japanese tech company Hitachi (5.8%), the Chinese online retailer PDD Holdings’ ADR stocks (5.2%), Samsung Electronics (4.8%), the Taiwanese fabless semiconductor company Alchip Technologies (4.4%) and the Japanese AI software provider Appier Group (4.3%).*
In terms of country allocation, more than 50% of the fund are allocated to China (39%) and Japan (22%). Other major country holdings include South Korea (11%), Taiwan (7%) and Singapore (7%).*
Sector-wise, similar to the Wellington fund, Sanlam has the lion’s share of investments in IT (39.9%). This is followed by industrials (21.5%), consumer discretionary (13%), communication services (9.7%) and financials (7.9%).*
This fund is managed by Chris Ford and Giles Worthington. Ford has over 20 years of industry experience, while Worthington has been a fund manager since 1995.
Global X Asia Semiconductor ETF
In contrast to actively managed investment funds, investors may consider a passive strategy due to its lower costs. An example of a passive option to invest in the Asia technology market is the Global X Asia Semiconductor ETF. This investment vehicle mirrors the performance of the FactSet Asia Semiconductor Index (net total return). The ETF is listed on the Hong Kong Stock Exchange (HKG: 3119).
As the name of the fund suggests, it is invested in Asia’s semiconductor industry, an integral part of the region’s technology market. Presently valued at $430.24 bn, the Asia-Pacific semiconductor market is anticipated to reach $695.73 bn within the next five years, exhibiting a CAGR of 8.34%.
The Global X Asia Semiconductor ETF has total assets under management of $9.07 mn. Also, the fund has an ongoing charge of 0.68% over a year.***
In the last year, the ETF has given cumulative returns of 19.80%, as compared to the benchmark’s 20.89% returns. Along with that, the fund has risen 29.13% year-to-date, as compared to the 30.09% rise in its benchmark. Additionally, since its inception in 2021, the fund has generated negative turns of 8.07% as compared to a negative 5.80% return from its benchmark index.**
Global X Asia Semiconductor ETF’s top five holdings include SK Hynix (10.49%), TSMC (10.06%), Sony Group (9.95%), Samsung Electronics (9.69%) and the Taiwanese fabless semiconductor company MediaTek (7.62%).**
Across various sectors, Global X, like the Wellington fund, has the highest allocation in IT (83.21%) and consumer discretionary (9.99%). They are followed by industrials (4.14%), healthcare (2.45%) and cash (0.21%).***
*As of October 31, 2023.
**As of December 6, 2023.
***As of September 29, 2023.
