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Cloud Technology Monthly Report | November

 

  • Cloud Infrastructure spending grew over 30% year on year.[1]  
  • COVID-19 has sped up cloud adoption rates beyond all expectations. 
  • Hardware and onsite data recovery services are losing huge market share to the Cloud.
  • Hybrid/Multi- Cloud bridges are being built between Cloud leaders.
  • Cloud is at forefront of streaming music, video and gaming which is growing fast during the pandemic.

 

Performance Review

HAN-GINS Cloud Technology ETF (SKYY) offers broad Cloud exposure to all key areas, meaning its performance is less volatile as a result. The large-cap exposure on our cloud computing ETF ensures it accurately tracks global cloud activity, not just the US market.  

COVID-19 and the need for remote working continues to drive cloud adoption rates. The overall equity market selloff hurt some of SKYY’s Big Tech holdings. Our cloud computing ETF was down -4.99% in October, but has already rebounded in early November. US Election worries discounted the equity market in October. Over 12 months, SKYY remains up 21.49% and up 13.23% for 2020.[2]

Recent impressive 3rd quarter Cloud earnings from Amazon, IBM, Google and Microsoft indicate Cloud continues to be one of the big winners during the pandemic as enterprises switch to remote working using cloud subscription services.

 

Cloud Technology ETF Performance


October


YTD
*


12 Month
**


-4.99%


13.23%


21.49%

Past performance is no guarantee of future performance.

Source: Bloomberg/HANetf *YTD figures based on 01.01.20 - 31.10.20 **12 Month figures based on 01.10.19 -31.10.20

 

For the year to date 2020 leading performers in our portfolio include:

  • NVIDIA (up 113.4%), Kingsoft (105.5), Amazon (64.3%), CEVA (49.6%), Apple (49.3%), Alibaba (43.7%), Qualcomm (42.9%), Salesforce (42.8%), Alarm.com (35.8%) and Adobe (35.6%).[3]

 

During October, the following holdings contributed most to SKYY’s return:

  • Twilio (up 12.9%), Alphabet (10.3%), Splunk (5.3%), Alibaba (3.6%), Cloudflare (26.6%), F5 Networks (8.3%), Nutanix (9.7%) and Kingsoft (7.1%). Following the US election, we expect more M&A corporate activity in the Cloud space, particularly in the Cloud Security (cybersecurity) area.  We do not expect the anti-trust concerns to impact leading Cloud players, other than limiting huge ground breaking deals.[4]

 

The Top 10 holdings of our cloud computing ETF have changed slightly over the past month: Zoom Video remains our largest holding at 6.66%, followed by Alibaba Group (5.14%), NVIDIA (4.95%), Twilio (4.83%), Salesforce (4.63%), Apple (4.48%), Alphabet (4.21%) and Amazon (4.13%).  This is partly due to Apple’s share price falling 6.0% for the month, along with Microsoft down 3.74%, Salesforce down 7.6% and IBM down 8.2%.  However, these Mega Caps have begun to recover in early November, recovering much of these losses.[5]  

It is clear Cloud Computing continues to be one of the largest beneficiaries of work from home (WFH) behaviour changes due to COVID-19. Cloud increasingly drives the Internet of Things, from Social Media and Digital Entertainment to Healthcare Innovation (trackers and telemedicine), Future Cars, Cyber Security and AI-Robotics.  In the 3rd quarter public spending on Cloud infrastructure exceeded spending on traditional IT infrastructure for the second consecutive quarter. Our Cloud report explores how this theme continues to benefit from the WFH phenomenon. 

The latest Cloud Technology is increasingly embedded into mainstream work-life activities.  Larger cloud players held by SKYY have a distinct advantage over smaller Cloud players – given their existing global reach.

 

HAN-GINS Cloud Technology UCITS ETF – Performance

Total Return NAV to Date (up to 31/10/2020)

 

1M

3M

6M

YTD

12M

Since Inception

HAN-GINS Cloud Technology UCITS ETF (Acc)

-4.99%

-0.34%

16.09%

13.23%

21.49%

34.56%

Solactive Cloud Technology Index (NTR)

-4.96%

-0.21%

16.36%

13.76%

22.18%

35.98%

 

HAN-GINS Cloud Technology UCITS ETF (SKYY) – 1 Year Performance (01/11/19 – 31.10.20)

 

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 Data as of 31.10.2020

 

Industry News

It is clear the COVID has propelled demand for Cloud Computing services beyond all prior predictions. Contract tracing, Telemedicine, Home Delivery & remote working are all being revolutionized by cloud services. 

We expect this to accelerate.  We expect the global public cloud infrastructure market will grow to 35% to $120 billion in 2021 and that Alibaba’s Cloud will overtake Google as the 3rd largest, behind AWS and Azure.[6]  

For illustrative purposes only. Past performance is no guarantee of future performance. Source: Canalys estimates, October 2020

 

We predict the biggest Cloud Computing trends in 2021 as follows:

  • Hybrid/Multi-cloud approaches will lead to a breakdown of barriers between cloud providers
  • AI will improve the efficiency and speed of cloud computing.
  • Autonomous vehicles, machine learning, smart city infrastructure, and COVID Apps/response use algorithms that can be cheaply delivered via the Cloud.
  • Gaming will be increasingly accessible via the Cloud, similar to music and movies being streamed.
  • About a third to half of most companies’ IT budget will go to cloud services.
  • With a huge spike in Healthcare Cloud services, an annual growth rate of 23% predicted.  

Source: https://www.fox5vegas.com/election_hq/healthcare-cloud-computing-market-by-product-saas-iaas-and-paas-and-geography-apac-europe-mea/article_4be9a70f-eb48-50a1-83a6-8d22c8007090.html

 

Cloud Spending Trends

The demand for cloud services will continue to grow. The trend will not be temporary as the world will not go back to previous behaviours. Workers will become increasingly flexible regarding where they work, with cloud providing the most efficient and cost-effective solution based on time spend on the service.  

The latest Q3 sales figures from the industry’s leaders show the rapid adoption rates of the cloud computing revolution. Cloud infrastructure services in Q3 2020 grew 33% to US$36.5bn.  This was US$2bn higher than the Q2 2020 $9.0bn more than Q3 2019.[7] Stricter lockdown measures across Europe will likely boost these number further in Q4.  

In Q3, the cloud leader Amazon Web Services grew its market share of infrastructure spend to 32% - a $2.6bn increase in revenue over Q3 in 2019.[8] AWS generates more revenue than the following 3 cloud service provider together. Amazon's sales were up 37% and profit nearly tripled from last year. Their AWS Cloud unit posted 29% annual revenue gains, now 57% of Amazon's overall profits.[9] Microsoft’s Azure cloud business posted impressive 48% revenue gains on annual basis to reach a 19% market share.10 Google Cloud retained its 3rd place position with a 7% share.

 

Constituent News

Below we highlight some of the best performing Cloud ETF holdings in SKYY’s portfolio.  Included are the stock’s individual price gains, as well as its contribution to SKYY’s portfolio return. Recent additions such as Zoom Video and Twilio haven been amongst our top performers and contributor to our recent returns. This broader Cloud definition, includes all cloud communications, ensuring our cloud computing ETF is one of the most diversified cloud offering - across all 4 key cloud areas of Infrastructure, Platform and Software as a Service, plus Security.

Top 10 Constituents

Weight

Zoom Video

6.66%

Alibaba

5.14%

NVIDIA Corp

4.95%

Twilio

4.83%

Salesforce.com

4.63%

Apple Inc.

4.48%

Alphabet

4.21%

Amazon.com Inc

4.13%

Equinix

3.94%

Oracle Corp

3.86%

 

Regional Breakdown

Weight

North America

92.01%

Europe

2.95%

Asia

6.16%

Source: FactSet/Solactive and Bloomberg Data as of 31/10/20

 

Below are the leading contributors to SKYY’s year to date and September performance leaders – led by NVIDIA, Kingsoft, Zoom Video and Amazon for the year to date.  September had a number of smaller firms contribute to performance as the large caps swooned.

 

Top Performing Holdings – Year to Date 2020 (01/01/2020 – 31/10/2020)

Name of Holding

Average Weight (%)

Total Return (%)

NVIDIA

4.24

113.35

KINGSOFT CORP LTD

0.41

105.52

AMAZON

4.35

64.31

CEVA INC

0.20

49.55

APPLE INC

4.18

49.32

ALIBABA GROUP

3.80

43.65

QUALCOMM INC

3.85

42.89

SALESFORCE

4.34

42.81

ALARM.COM

0.24

35.75

ADOBE INC.

4.22

35.56

 Past performance is no guarantee of future performance Source: Morningstar Direct Data as of 31/10/2020

 

Top Performing SKYY Contributors – October 2020

Name of Holding

Average Weight (%)

Total Return (%)

Contribution to Return (%)

TWILIO

4.83

12.90

0.52

ALPHABET A

3.70

10.27

0.37

SPLUNK

3.72

5.27

0.18

ALIBABA GROUP

4.71

3.64

0.17

CLOUDFLARE

0.73

26.57

0.16

F5 NETWORKS INC

1.02

8.28

0.08

NUTANIX INC.

0.56

9.74

0.05

KINGSOFT

0.55

7.05

0.04

AVAYA HOLDINGS

0.25

13.16

0.03

8x8 INC.

0.22

11.13

1.52

PURE STORAGE

0.53

4.61

0.02

ALARM.COM

0.34

5.57

0.02

NETAPP INC

1.32

1.15

0.02

Past performance is no guarantee of future performance Source: Morningstar Direct Data as of 31/10/2020

 

Fund Details

HAN-GINSCloud Technology UCITS ETF, is a UCITS compliant domiciled in Ireland.  

The SKYY cloud ETF tracks the Solactive Cloud Technology Index and seeks to provide exposure to companies active in the field of cloud computing, such as service providers or producers of equipment or software focused on cloud computing.  

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

EXCHANGE BB CODE RIC ISIN CURRENCY INCOME
London Stock Exchange SKYY LN SKYY.L IE00BDDRF924 USD Acc
London Stock Exchange SKYP LN SKYP.L IE00BDDRF924 GBP Acc
Borsa Italiana SKYY IM SKYY.MI IE00BDDRF924 EUR Acc
XETRA 5XYE GY 5XYE.DE IE00BDDRF924 EUR Acc
SIX SKYYSW SKYY.S IE00BDDRF924 CHF Acc

 

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