Tech Megatrends Monthly Report | September

Key Takeaways- Tech equally weighted ETF

• Big Tech posted impressive 2nd quarter results.
• Tech Megatrend up 16.0% for 2021 (Year to Date).
• Themes powering gains led by Gene Sequencing, Cybersecurity, Robotics-AI, Cloud & Blockchain.
• Tech Flows out of China stocks (regulatory concerns) - into leading US Tech players propelling US gains.
• ITEK ‘s US weighting at just 55.9%. 
• COVID still fast-tracking digital adoption across Telemedicine, Data/Analytics, Wearables, Biotech, Gene Editing & Robotics.
• Biden new budget to unleash spending in EV vehicles, Genomics and Cybersecurity
• Cyberattacks – SolarWinds, Colonial Pipeline, Meat factories - driving demand to upgrade cybersecurity. 

Performance Review

HAN-GINS Tech Megatrend Equally Weighted ETF (ITEK) gained 3.7% in August and is up 42.5% over 12 months. ITEK continues to benefit from fast adoption rates across the Digital Revolution.

For 2021, Blockchain remains up 31.9% despite some volatility, followed by Genomics up 23.9%, Robotics-AI 20.6%, Cybersecurity 16.8%, Future Cars 16.1%, Cloud Computing 14.4% and Social Media 8.8%.

For August – Blockchain enjoyed a strong rebound with a 16.1% gain, followed by Cybersecurity up 8.3%, Genomics 4.6% and Robotics-AI 2.8%.

As remote WFH tends get stickier - Cybersecurity and Robotics are increasingly in demand – due to large scale hack attacks via cloud services and the growth of AI and onshoring respectively.  Increasing cloud security and data protection is vital.  Currently the Healthcare space is significantly under-invested in this area and likely to be amongst the largest corporate spenders going forward. Please note that all performance figures are showing net data.

The largest monthly contributors to performance were dominated by holdings across Blockchain, Cybersecurity, Social Medi and Genomics.  This is partly a reflection of an increase in large Cyberattacks and the upcoming Biden budget which is set to unleash billions in cybersecurity and genomics spending. 

The success of Gene Sequencing working with Biotech firms to identify COVID vaccines – ensures it is increasingly being adopted within mainstream medicine - as CRISPR and other editing techniques provide countless ways to customise medical treatment – likely providing huge cost savings.

Past performance is no guarantee of future performance. Source of all data: Solactive. Data as of 31.08.2021. Please note that all performance figures are showing net data. 

HAN-GINS Tech Megatrend Equal Weight UCITS ETF – Performance (As of 31.08.21)

Past performance for the index is in USD. 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 31/08/2021. Please note that all performance figures are showing net data. 

Industry Outlook

Much of Biden’s clean energy and infrastructure plans are likely to pass Congress and boost EV vehicle spending dramatically.  The US intent on catching China which is set for a sustained period of strong EV growth – representing upwards of one third of all China car sales by 2025.  Canalys expects 51% EV growth in China in 2021. (Source: Canalys Newsroom- China electric vehicle sales 2021 and ev vehicles growth 2021 - Bing images) 

Big Tech continues to benefit from remote WFH behaviours, but many smaller Cloud, Cybersecurity and Social Media players are also benefiting from the shift.  Most corporate IT budgets are now devoted to Cloud spending – as hardware budgets have been dramatically cut.

Demand for cybersecurity is expanding and likely to also be big beneficiary of the WFH trends along with increasingly large cyberattacks. The SolarWinds, Colonial Pipeline and Meat factories hack attacks, are driving demand to upgrade cybersecurity. 

Big Tech post Record Earnings - impressive 2nd quarter results:

• WFH continues to boost huge Cloud spending as well as Cybersecurity.
• Microsoft had its best ever quarterly revenue - Azure Cloud revenue up 51% yoy.
• Google parent Alphabet enjoyed its biggest jump in quarterly sales in 14yrs. Advertising revenue up 69% yoy; YouTube had blowout qtr.
• Apple posted its best fiscal 3rd qtr in its 45-year history. Record profits on strong iPhone 12 launch with 5G. (up 50% yoy). All product lines >12% growth yoy 

Sources of all data: https://www.theguardian.com/technology/2021/jul/27/google-apple-and-microsoft-to-report-record-breaking-profits and https://www.cnbc.com/2021/07/27/alphabet-googl-earnings-q2-2021.html

Asia is projected to account for the largest share of the industrial robotics market over the next 5 years – due to the increased industrialization there and the shortage s of the local workforce.  To combat COVID type situations in future – and supply chain challenges – many US manufacturers are onshoring their plants creating huge demand for industrial robots that are often cheaper than employing US workers.

Constituent News

The table below shows our top gainers in June – spread across most of our subthemes.  ITEK’s global mix of 114 holdings is representative of the Digital Revolution. Our US exposure is currently 55.9%, with Asia at almost 20% and Europe at 18%.  Most of our Top 10 holdings are between 1.0% - 1.2%, prior to rebalancing.

• ITEK is equally weighted across all 8 subthemes and 114 underlying holdings.
• ITEK’s Top 5 holdings equal just 7%, and Top 10 only 12.3% of its portfolio.
• Provides equal exposure to all key Digital Revolution themes.
• ITEK is considerably underweight large Megacaps compared to competitors.
• Unlike Nasdaq and other tech benchmarks which remain very overweight a few Big Tech players, ITEK’s FAANG exposure remains under 7% - versus 40% in the Nasdaq 100.

Standouts contributors to our August returns are listed below. 

Past performance is no guarantee of future performance. Source of all data: Solactive. Data as of 31.08.2021. Please note that all performance figures are showing net data. 

Learn more about our tech equally weighted ETF.