Techno Europe (TNO) : Back in strenght

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 54M€. 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 posted a 21% increase, twice the performance of stoxx600 (10.6%), and +3% in 2018 compared to -10.7% for Stoxx600NR but including a 26% drop in the fourth quarter in the wake of Nasdaq and GAFAS under heavy pressure. This strong consolidation was triggered by a more anxious environment related to the global economy, US monetary policy and valuation levels that had become demanding in some compartments. The rebound began in January with a rise of 8.4%, while business results are finally quite reassuring in the semiconductor and software industry with the good results of IBM and Texas Instruments and those of ASML and STMicroelectronics in Europe, less bad than feared.

The technology sector is sensitive to the evolution of the trade war while important end markets(smartphone and automobile for example) are closely linked to Chinese growth.

 

 

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 56% of the total and have fairly high market capitalizations (€ 113n for SAP, € 60bn for ASML, € 29bn for Amadeus and € 30bn 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.