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Tech Megatrend Monthly Report | August

  • COVID-19 continues to boost adoption rates of innovative technologies (social media, robotics, genomics, cloud, and cybersecurity).
  • Mobile App store spending to double within 4 years – China is the largest market and growing faster than the US. 
  • Internet of Things is at the centre of impressive Tech Megatrend spending growth. 
  • Gene therapies are becoming more mainstream in the search for vaccines and personalised medicine.

Performance review

HAN-GINS Tech Megatrend Equal Weight UCITS ETF (ITEK) has continued its impressive performance. In July it returned 9.97%, following June gains of 6.70%. ITEK shows an impressive year to date return of 22.98%. 

Over the past 12 months, ITEK has gained 33.05%. For 2020, performance across the equally weighted 6 subthemes has been dominated by Cybersecurity (up 36.7%), Genomics (31.6%), Social Media (30.9%), Future Cars (20.3%), Cloud Computing (16.5%) and Robotics-AI (5.0%). 

For July, the top performing sectors were: Social Media which gained 29.3% followed by Future Cars at 11.7%. These gains were powered by Asian, US and Russian Social Media players including Twitter, Pinterest, Mail.ru Sohu and Sogou. Future Cars were led by Tesla and Advanced Micro Devices plus Nvidia. See tables on page 5 for full breakdown.

(Source: FactSet/Solactive and Bloomberg Data as of 31/07/20)

 

July YTD*  12 Month** 
9.97% 22.98%  33.05% 

 

Past performance is no guarantee of future performance.

Source: Bloomberg/HANetf *YTD figures based on 01.01.20 - 31.07.20 **12 Month figures based on 01.08.19 -31.07.20

 

Work From Home behaviours have powered faster adoption rates across the Tech Megatrends space. Online spending has continued to surge, with Amazon and Apple both hitting new highs, gaining 14.7% and 16.5% respectively. App Store spending is at record highs and predicted to continue growing by 20% annually until 2024[1].

Social Media engagement has never been higher, allowing App Store spending and advertising online via Twitter. Social media usage has spiked due to the lockdown amongst adults, with estimates that adult social media users will average 82 minutes per day on such sites in 2020, a gain of 7 minutes from 2019[2].  We do not expect Work From Home behaviours to change as COVID lingers through the rest of 2020 and into 2021.

The lockdown continues to see a spike in online video streaming – both for work and pleasure (Google Meets, Microsoft Teams). We see a big shift towards online entertainment – away from traditional movies and sports.

Tesla’s rerating by leading bank analysts in June and July helped propel the entire sector up, but ultimately social media was the big winner in July as Asian, European and US platforms enjoyed record usage. Our Tech ETF is now sitting at an all-time high NAV exceeding $11 per share as of 31st July. (Source HANetf, Bloomberg)

HAN-GINS Tech Megatrend Equal Weight ETF (ITEK) – 1 Year performance (01.08.19 – 31.07.20).

Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: Bloomberg / HANetf. Data as of 31/07/20

Innovative Technology News 

The Internet of Things is at the centre of the impressive Tech Megatrend spending growth being experienced. While COVID is fast tracking engagement, such behaviours are unlikely to change. COVID has propelled the future into the present – speeding up the Tech Revolution that was already well underway.

Global spending in Apps will surpass $100 billion for the first time in 2020, continuing to grow at approximately 20% year-over-year through 2024. This means a doubling in App spending is predicted by 2024.[3] Please see charts on the next page.

Mobile gaming, which is included in our new Digital Entertainment subtheme, will likely dominate App spending through 2024. Chinese App store spending is already larger than US and is projected to grow faster too (CAGR 17% vs 14% respectively).[4]

Worldwide consumer spending in mobile apps is projected to reach $171 billion by 2024, which is more than double the $85 billion from 2019.[5]    

We expect cybersecurity spending to continue to grow on the backs of remote working gaining more adoptees.  Silicon Valley leaders such as Microsoft, Apple and Google are allowing their employees to continue working from home well into 2021.

App Store Revenue by Country 

Projected consumer spending

For illustrative purposes only. Source: Sensor Tower Research - https://techcrunch.com/2020/04/01/mobile-app-spending-to-double-by-2024-despite-economic-impacts-of-covid-19/

Asia has also enjoyed a big rally in tech stocks, led by Chinese online giants Alibaba and Tencent which hit record highs in July[6], with some trading on more affordable PE ratios than their US counterparts. While Amazon has a forward PE ratio currently over 80, Alibaba sits on a PE ratio of 28[7]. The Trump administrations current crackdown on TikTok and WeChat (Tencent) will likely limit such price gains going forward for Chinese social media players.

Electric vehicle producers are seeing greater adoption rates too. Large players such as GM, Volvo and Ford are rolling out record numbers of hybrid and EV type models. Europe’s adoption of green technology and ESG standard for investing is pushing the long-term obsolescence of the internal combustion engine. The EU’s stringent targets to reduce carbon emissions is helping lead to the adoption. France’s new $8.8bn stimulus plan to reboot its auto sector with a $7,000 EV subsidy will give it a leg up, while Germany’s new coronavirus stimulus bill also boosts EV subsidies, almost doubling the discount for non-luxury vehicles to roughly $10,000. Germany has also now mandated installing EV chargers at all gas stations[8].

For illustrative purposes only. Source: BNEF. Note: Electric share of annual sales includes battery electric and plug-in hybrid

Constituent News 

The largest number of top holdings are currently represented by Genomics, Cyber Security and Cloud Computing, due to the strong gains across these subthemes in July.

US exposure has dropped below 60% particularly due to foreign Social Media companies and Biotech players such as Biontech. Genomics and Cyber Security are currently the two largest themes approaching 20%. 

The semi-annual equal rebalancing in September will mean their weightings subside back to around 15%-16%.

On the next page is a table showing which holdings contributed most to performance during July. A large proportion of Social Media, Genomics, Future Cars, and Cyber Security companies are represented. Most striking has been the stock market gains across Asia and Russian social media players Sohu (up 149.40% in July), Sogua (up 106.22%), Yandex (15.03%) and Mail.ru (17.56%). 

Amongst US holdings – Pinterest gained 54.67%, Tesla 32.50%, Advanced Micro Devices 47.18%, Twitter 22.19%, Crowdstrike 12.87% and Zscaler 18.58% - amongst the most impressive returns this past month. 

Cyber Security players Zscaler and CrowdStrike are now both amongst our Top 10 holdings.

Other Future Car players benefitted included Hyundai up 30.74% and Nvidia up 11.76%.

Ultimately new highs being enjoyed by Big Tech heavyweight players Amazon, Apple, Alibaba and Amazon helped propel the Tech ETF to impressive new highs. 

Robotics –Automation players MEDIATEK were up 23.97% in July and Intuitive Surgical up 20.29%, both showing impressive gains – partly as a result of the lingering effects of COVID-19.

With current holdings now at almost 100 holdings – ITEK offers an increasingly broad diversified play across the entire Fourth Industrial Revolution sphere.

ITEK’s Top 20 Performance Contributors – July 2020

Constituent

Sub-theme

Total
Return
(%)

Contribution
(%)

SOHU.COM LTD-ADR

Social Media

149.40

1.68

SOGOU INC-ADR

Social Media

106.22

1.26

PINTEREST INC- CLASS A

Social Media

54.67

0.69

TESLA INC

Future Cars

32.50

0.53

ADVANCED MICRO DEVICES

Future Cars

47.18

0.51

BIONTECH SE-ADR

Genomics

23.44

0.43

ZSCALER INC

CyberSecurity

18.58

0.38

MEDIATEK INC

Robotics & Automation

23.97

0.32

MAIL.RU GROUP-GDR REGS

Social Media

17.56

0.25

TWITTER INC

Social Media

22.19

0.25

HYUNDAI MOTOR CO

Future Cars

30.74

0.25

YANDEX NV-A

Social Media

15.03

0.22

CROWDSTRIKE HOLDINGS INC - A

Cyber Security

12.87

0.21

AMAZON.COM INC

Cloud Computing

14.71

0.21

INTUITIVE SURGICAL INC

Robotics & Automation

20.29

0.21

APPLE INC

Cloud Computing

16.51

0.19

IPSEN

Genomics

13.77

0.18

QUALCOMM INC

Robotics & Automation

15.79

0.18

SINA CORP

Social Media

12.36

0.17

ALIBABA GROUP HOLDING-SP ADR

Cloud Computing

16.37

0.17

NVIDIA CORP

Future Cars

11.76

0.16

SKYWORKS SOLUTIONS INC

Future Cars

13.86

0.16

CHECK POINT SOFTWARE TECH

Cyber Security

16.68

0.16

OKTA INC

Cyber Security

10.36

0.15

FACEBOOK INC-CLASS A

Social Media

11.71

0.15

SAP SE

Cloud Computing

13.36

0.15

EQUINIX INC

Cloud Computing

11.84

0.14

PALO ALTO NETWORKS INC

Cyber Security

11.43

0.13

SAMSUNG SDI CO LTD

Future Cars

10.42

0.12

HEXAGON AB-B SHS

Robotics & Automation

11.45

0.12

Past performance is no guarantee of future performance Source of all data: Solactive / FactSet. Data as of 31/07/20

 

Sub-Theme Performance - July 2020

Contribution Total Return (%) Weight (%)  Performance of Category (%) 
Social Media 4.77  15.49  29.34 
Future Cars   1.93  15.21  11.68 
Cyber Security 1.18  18.50  7.04 
Cloud Computing  1.10  15.78  6.87 
Robotics & Automation  0.65 15.60  4.12 
Genomics  0.30  19.44  1.65 

Past performance is no guarantee of future performance Source of all data: Solactive / FactSet. Data as of 31/07/20

 

Top 10 Constituents  Weight 
Sohu.com Ltd 2.65%
Sogou Inc 2.23% 
Zscaler Inc 2.20% 
BioNTech SE 2.13% 
Pinterest Inc 1.94%
Tesla Inc 1.89% 
Media Tek Inc 1.77% 
Crowdstrike Holdings Inc 1.67% 
Yandex NV 1.56% 
Okta Inc 1.52% 

 

Regional Breakdown Weight 
North America   57.80% 
Asia  26.35% 
Europe  14.78% 
MENA  1.06% 

 

Sub-Theme Breakdown  Weight 
Genomics  19.44% 
Cyber Security   18.50% 
Cloud Computing   15.78% 
Robotics & Automations   15.06% 
Social Media 15.49%
Future Cars  15.21% 

Source: Bloomberg/ HANetf. Data as of 31/07/2020

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