Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 177

The future has arrived in Australia

There's a mind-numbing multitude of changes taking place around the world today. Focusing solely on new technologies is more than sufficient to back up that opening statement. I am not even including climate change, refugees, social inequality, demographics or the many side-effects from ultra-low interest rates and bond yields.

Viewed through an economic lens, most changes are still in early days of development. Their true impact will only be felt in 5-10 years' time. But societies have started to pay attention. It's why buzzwords like ‘sharing economy’, ‘fintech’ and ‘disruptors’ are common in the vocabulary of investors and economists, and even of politicians.

My eBook published last year, 'Change. Investing in a Low Growth World', draws a comparison with the roaring and fabulous 1920s, the last time such a whirlwind of innovations and technological breakthroughs re-shaped global society. If my comparison proves accurate, we haven't even seen the full tip of the iceberg of future transformations yet.

ASX transformation

Collectively, new technologies and ‘disruptors’ are already making their presence felt. By opening up monopolies, breaking down market barriers, lifting transparency for consumers and commoditising popular goods and services, there's already a good argument that all this partially explains today's lack of economic growth. It may also be causing a lack of inflation, low growth in wages and poor genuine, sustainable corporate profit growth across developed economies.

In Australia, where a relatively small population in a vast geographic space has facilitated duopolies dominating markets, the arrival of new business models and challengers has been an important co-contributor to why the ASX20 has significantly underperformed the broader share market since late 2012.

So far not so good for Australian share market investors. It's easy to feel excluded with companies including Facebook, Alphabet, Tesla, Apple and Alibaba contributing to the feel-good factor in US equity markets. Unbeknownst to many, the Australian share market is going through major transformation, and modern day explosions in innovation and capital-light business models sit at the coal face of it.

Raging bull market downstairs

The ASX20 price index is close to the same level it was in February 2013. This means no net returns from holding a basket of shares with Wesfarmers, Telstra, BHP Billiton and the banks in it, other than dividend payouts and franking, over a period extending more than 3.5 years.

Over that same period, the All Ordinaries index, comprising of 500 mostly mid and small cap stocks in addition to the Top 20, appreciated by nearly 12%. Still not a fabulous result, given the S&P500 in the US added 43%, but nevertheless a world away from the moribund and sorry state at the top of the Australian stock market.

No double guessing as to why many a focus has descended outside the Top 20 in Australia, including from funds managers previously specialised in large cap blue chips. This looks like the ideal environment to introduce new ASX-listings.

According to data from OnMarket Bookbuilds, not only are fresh IPO numbers on the rise, so is their average size and their popularity among investors. The average first day-of-trading performance for all 24 IPOs on the ASX in Q3 this year was +28.2% (average gain at 4pm on the first day of trading on the ASX). There's a trend to IPO more foreign companies on the ASX, as well as more new listings originating from private equiteers. Note to us all: private equity IPOs do not all turn into mud by default, as long as the owners remain on board with a substantial stake in the equity.

Technology rules among IPOs

The transformation of the ASX, as shown in the 20-year overview below, has expanded the exchange with many new technology, healthcare and finance & professional services companies. In 2016 to date, half of all IPOs consisted of technology and finance companies with many of the latter carrying the label ‘fintech’. Gone are the days when the majority of new listings comprised of mining, energy and mining services providers. That is so 2005-2010!

Australian investors do not only see the ugly side from today's technological transformation disrupting or challenging the corporate heavyweights. They do not by default have to venture overseas to seek exposure to new challengers and innovators; they can stay here at home, at the ASX.

It goes without saying, irrespective of current popularity and average past performances, new ASX listings are not a risk-free, guaranteed money printing option. Some IPOs cause shareholders severe headaches, if not significant capital losses. Once the initial euphoria post public listing ebbs away, there is no guarantee investors stay on board or join in. Most of these freshly minted ASX-additions are young, unknown and they still have a lot to prove.

Don't ignore the future

As a daily observer of financial markets and of global macro-economic developments, I believe new IPOs over the past two years have enriched the local stock exchange, and investors should pay attention because in between the many newbies of today might be the next REA, ResMed or Carsales.

Below are ten newbies from the 2014-2016 harvest which, on my assessment, have shown enough substance to suggest a future success story might be in the making. Investors should always conduct their own research and consider their risk appetite.

Ten ASX-Newbies worth investors’ attention

Brief introduction to these names:

  • iSentia: media intelligence offered as Software as a Service (SaaS), expanding into Asia
  • Speedcast International: network and satellite communications services worldwide, headquartered in Hong Kong
  • Catapult Group: wearable athlete tracking and analytics solutions
  • oOh!media: out-of-home advertising services, increasingly digital
  • Appen: speech technology and search services for international technology customers
  • Link Administration: back office administration services to companies and financial services providers in Australia
  • MYOB: desktop accountancy software, migrating into the cloud
  • Class: cloud-based services for SMSF trustees, their accountants and their advisors
  • WiseTech Global: cloud-based software solutions for the logistics industry, worldwide

If you do intend to look into some of the potential new stars of the future, the list above could be a good starting point.

 

Rudi Filapek-Vandyck is Editor of FNArena. His book, "Change. Investing in a Low Growth World", is available via Amazon or any online book platform. This article is general information and does not consider the circumstances of any individual.

 

RELATED ARTICLES

Bounce back delivers super second-half for IPOs

IPO a-go-go: the who, why, when and how much of IPO investing

Inside a hot IPO

banner

Most viewed in recent weeks

Lessons when a fund manager of the year is down 25%

Every successful fund manager suffers periods of underperformance, and investors who jump from fund to fund chasing results are likely to do badly. Selecting a manager is a long-term decision but what else?

2022 election survey results: disillusion and disappointment

In almost 1,000 responses, our readers differ in voting intentions versus polling of the general population, but they have little doubt who will win and there is widespread disappointment with our politics.

Welcome to Firstlinks Election Edition 458

At around 10.30pm on Saturday night, Scott Morrison called Anthony Albanese to concede defeat in the 2022 election. As voting continued the next day, it became likely that Labor would reach the magic number of 76 seats to form a majority government.   

  • 19 May 2022

Betting markets as election predictors

Believe it or not, betting agencies are in the business of making money, not predicting outcomes. Is there anything we can learn from the current odds on the election results?

Keep mandatory super pension drawdowns halved

The Transfer Balance Cap limits the tax concessions available in super pension funds, removing the need for large, compulsory drawdowns. Plus there are no requirements to draw money out of an accumulation fund.

Welcome to Firstlinks Edition 455 with weekend update

The resolve of many investors to focus on the long term with their share portfolios is increasingly tested as the list of negatives lengthens. There is a lack of visionary policies during an election campaign and stimulatory spending is contradicting the aims of tighter monetary policy.

  • 28 April 2022

Latest Updates

In praise of our unique democracy and its sausage

For all the shortcomings of our political campaigns, our election process is the best. We are blessed with honest administrators and procedures that we all trust to hand over power peacefully, with a big snag. 

Investment strategies

Is the investing landscape really different this time?

Many market analysts argue that the pandemic has changed everything but we must judge whether the circumstances are as drastic as billed. A quick review of four major events helps decide if this time is different.

Economy

Comparing generations and the nine dimensions of our well-being

Using the nine dimensions of well-being used by the OECD, and dividing Australians into Baby Boomers, Generation Xers or Millennials, it is surprisingly easy to identify the winners and losers for most dimensions.

Retirement

When will I retire? Economic impact of an ageing population

About 39% of the labour force is aged over 45. Intergenerational reports highlight the challenges of an ageing population and the impacts on consumption patterns, dependencies, public finances and economic growth.

The real story behind the crypto crash

The recent sell-off in the crypto market and its trigger - the collapse of the Terra UST coin - has affected many institutions either holding or trading crypto assets, including crypto fund managers.

Investment strategies

Cash is the nightingale, the bird in the hand

The bird in the hand is worth two in the bush, and it's an apt metaphor for investment choices. In 2021, as investors hunted in the bush for decent returns, demand overwhelmed supply. Cash is the bird in the hand.

Strategy

Book review of 'Putin’s People' and his motivation for war

Author Catherine Belton argues Putin’s sole ambition is to hold onto power. Her book seeks to understand why Putin invaded Ukraine after he became isolated and out of touch with reality during the pandemic.

Sponsors

Alliances

© 2022 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.