Lyxor ETF Stoxx 600 Technology (TNO) - 29/08/2018
Short Term strategy: Positive (90%) / Trend +
Long Term strategy: Positive (95%) / Trend =
Characteristics of the ETF
The ETF Lyxor TNO (Technology Europe UCITS) created in 08/2006, is listed in Euro on Euronext and seeks to replicate the index Stoxx Europe 600 Technology (SX8R) which is composed of the 28 main European technology stocks. The costs of this ETF are 0.3% and the AUM approximately 77M€. Replication is indirect (via Swap) and there is a dividend capitalization policy.
Alternative ETFs: EXV3 (iShares in Euro), SYQ (BNP Theam, in Euro)
Latest developments
In 2017, the TNO ETF posted a 21% performance, twice the performance of stoxx600 (10.6%), and in 2018, the increase is already 11.3% versus +1,4% for the Stoxx600NR.
The index benefits from the strong momentum of technology stocks around the world, which is also justified by excellent H118 results, particularly for stocks like ASML (+ 22%), Dassault Systèmes (+ 56%) while Nokia is more a recovery (+ 27%) as for Ericsson (+46%) that should benefit from the 5G ramp up in the next 3 years.
The sharp rise in the US dollar is also a very positive factor for technology stocks. Valuations are high at around 27x current results, but short- and long-term prospects are excellent because of long-term themes such as digitization, artificial intelligence or increased computing power.
Index & components
This index is quite concentrated since it has only 28 holdings. The first four stocks in the index (SAP, ASML Holding, Infineon and Nokia) alone account for 56% of the total and have fairly high market capitalizations (€ 130n for SAP, € 76 bn for ASML, € 25bn for Infineon and € 27bn for Nokia).
This sector is characterized by high growth rates and high multiples, but most of the companies that make up the index do not disappoint, and on the contrary regularly revise their prospects upward due to very strong positions, most often world leader with duopoly situation (for SAP) or leading actor (ASML) for laser lithography.
The technological sector is key in the context of major industrial changes and is part of major modernization / productivity factors and new services (digitization, new generation network equipment etc...).
This sector should be one of the big winners of global growth, which makes it eligible for our long-term strategy (Megatrend Euro), especially since very qualitative companies - apart from three companies already mentioned - and in a position of No. 1 worldwide in their segment are heavily weighted like Dassault Systèmes (3D digital model), or Sage (software for SMEs).
All companies in this index account for a large share of their sales in the US and therefore have significant exposure to the dollar and the US economy, some are also present in Asia, particularly in China and Japan. However, we consider that the direct currency risk is low because most companies are listed in euros. The volatility of this tracker is not particularly high and is very influenced by the evolution of the Nasdaq, market leader of technology stocks and of course GAFAs, Apple's developments have a lot of impact on the technology compartment in general and on its supply chain in particular (electronic components such as Dialog or AMS).
The high valuations of this index imply double-digit growth rates over time. However, the long-term themes tend to multiply (Blockchain, AI, Robotics ...) which always feeds more hope of growth.
Weekly data
The weekly chart shows a bullish recovery of the medium-term trend, with a rebound on the EMA20 that propels prices to the peaks of June. The oscillators are just starting to turn upwards and remain in the high zone, which reflects the lack of a major correction since the end of 2016. New highs are expected in the coming weeks as the bullish trend continues and strengthens.
Daily data
On the daily chart, we can see the upward momentum that has taken place from the EMA100, which is not unusual. The index should now exceed the 55/56 € zone for the short-term trend to accelerate and reach new highs. The oscillators are bullish and support the bullish short term momentum.
ETF Objective
TNO is a UCITS ETF, listed in EUR, which seeks to replicate the STOXX Europe 600 Technology Net Return index (28 european companies)
Characteristics
| Inception date | 18/08/2006 |
| Expense ratio | 0,30% |
| Benchmark | SX8R - Stoxx 600 Technology |
| Ticker | TNO |
| ISIN | FR0010344796 |
| UCITS | Yes |
| EU-SD Status | Out of scope |
| Currency | € |
| Exchange | Euronext Paris |
| Assets Under Management | 77 M€ |
| Replication method | Indirect (swap) |
| Dividend | Capitalization |
| PEA (France) | Yes |
| SRD (France) | Yes |
| Currency risk | Yes |
| Number of Holdings | 28 |
| Risk | 3/5 |
Country Breakdown
| Germany | 39% |
| Netherlands | 20% |
| France | 16% |
| Sweden | 9% |
| Finland | 7% |
| United Kingdom | 4% |
| Switzerland | 3% |
| Others | 3% |
Sector Breakdown
| Information technology | 99% |
| Telecom services | 1% |
Top Ten Holdings
| SAP | 29% |
| ASML Holding | 15% |
| Infineon | 7% |
| Nokia | 7% |
| Ericsson | 5% |
| Cap Gemini | 5% |
| Dassault Systèmes | 5% |
| Hexagon | 3% |
| STmicroelectronics | 3% |
| Atos | 2% |