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 30main European technology stocks.
The costs of this ETF are 0.3% and the AUM approximately 61M€. Replication is indirect (via Swap) and there is a dividend capitalization policy.
Alternative ETFs: EXV3 (iShares in Euro), SYQ (BNP Paribas Easy, in Euro)
Latest developments
In 2017, the TNO ETF achieved a performance of 21%, which is twice that of stoxx600 (10.6%), but in 2018 the index is now down -8.7% against -7.4% for the Stoxx600NR.
The index is impacted by the downturn in US technology stocks driven by the GAFAs, which are consolidating heavily after impressive stock market trajectories over the past two years. After Facebook, Apple is now raising concerns while several subcontractors have reported production cut. In addition, the semiconductors sector is suffering heavily as a result of fears about China, the automotive sector and the smartphone industry.
However valuations return at reasonable levels (about 20x 2019 earnings) while earnings growth is expected to remain strong in 2019, in the absence of a global recession.
Index & components
This index is quite concentrated since it has only 30 holdings. The first four stocks in the index (SAP, ASML Holding, Amadeus and Nokia) alone account for 57% of the total and have fairly high market capitalizations (€ 110n for SAP, € 62bn for ASML, € 29bn for Amadeus and € 28bn 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.
