ICE to launch micro-future on Asian tech index

Intercontinental Exchange (ICE) is to launch micro-sized futures based on its new Asia Tech 30 Index, which tracks the 30 largest technology and tech-related companies listed on selected Asia-Pacific exchanges.

The US dollar-denominated Micro Asia Tech 30 Index Futures contract will join other mini-futures listed on ICE Futures Singapore when it launches on April 26, including cash-settled Mini Brent Crude and Mini US Dollar Index futures, the venue’s president Lucas Schmeddes told Global Investor on Thursday.

“We think there is a particular appeal for smaller-sized contracts in Asia,” Schmeddes said. “We decided to launch the contracts as what we call micro-sized, which is equivalent to a notional value of around $10,000 (£7,198) so that they can be accessible to a wider range of market participants.

“The smaller the size of the contract provides a more granular way of managing exposure to the underlying basket of technology companies.”

The firms covered in the ICE Tech 30 Index, known as ICEAT30, are spread across China with an approximate allocation of 37.40%, Japan (24.67%), South Korea (19.15%), and Taiwan (18.78%) based on the last quarterly review of index constituents.

The index constituent count was set at 30 companies to make it easy for end-users such as exchange traded fund issuers to track and follow, Schmeddes said. Between its base date of March 19, 2010 and April 9, 2021, ICEAT30 has delivered an annualised gross total return of approximately 13.86%.

ICE’s decision to develop the index reflects a record quarter of equity-raising for Asian tech companies, with more IPOs in the pipeline.

“Asia’s tech sector is becoming an incredibly exciting and fast evolving space for investors,” Schmeddes said. “We believe that there is demand for a fresher approach to classifying and representing today’s technology companies, looking out of the traditional technology sector into tech-related sub-industries found in the consumer discretionary and media and communications sectors.

“This allows our Asia Tech 30 Index to gain exposure to companies in the space of e-commerce, consumer electronics, video games and social media.”

According to Schmeddes, the new future will allow more investors to gain exposure to growth trends in Asia’s tech sector from blue chip conglomerates such as Samsung to emerging e-commerce platforms such as Meituan.

“The futures contract allows investors to express a view via one single contract on 30 tech stocks listed across multiple exchanges, time zones, and currencies in a simple, capital efficient manner,” he said, “and we think this should appeal to people because the index is not just focused on a single country or part of Asia, but represents companies from multiple countries such as China, Japan, Taiwan and South Korea.

“The Asia tech sector is a rapidly evolving area and so by being rebalanced each quarter, the index is nimble enough to include newly listed IPOs, and because the futures contract settles against the index it would also gain exposure to those IPOs. We think that is a really exciting proposition.”

Ice Futures Singapore, which launched in November 2017, was the US group's first Asian exchange. In addition to the Mini Brent Crude and Mini US Dollar Index futures, the exchange offers Mini US Dollar/Offshore Renminbi futures, Mini US Dollar/Singapore Dollar futures and Bakkt Bitcoin Futures.