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Tech stocks rally following royal commission

Market analysts are WAAAXing lyrical.

Senior Digital Journalist, Your Money

Editor’s note: This article contains information only. It is not intended as general or personal advice. Your Money recommends seeking professional advice specific to your personal circumstances.

Australia’s tech stocks make up just a small market capitalisation on the ASX, but they’ve been outshining much of the market in recent weeks.

Read: This is Australia’s answer to Nasdaq’s FAANG stocks

Australia’s so-called WAAAX stocks (Wisetech, Appen, Afterpay, Altium and Xero) have been surging since the beginning of 2019, following what was a tumultuous end to 2018 for Australia’s stockmarket.

Since the start of January, Wisetech is up more than 18 per cent, Afterpay is up 70 per cent, Appen a whopping 88 per cent, Altium 53 per cent and Xero 18 per cent.

So what’s behind the upward momentum?

According to independent market analyst Benjamin Yeo, there are two major drivers.

First, the tech sector has been one of the unlikely winners from the financial services royal commission.

As investors turn away from the financial sector – they’ve looked to other areas of the market to find solid returns. Yeo told Trading Day the tech sector is one that has been “rewarded greatly.”

“There is a renewed focus on the tech sector and probably also the resources sector… Just among that handful of [WAAAX] stocks here, they’ve really performed exceptionally well,” he said.

Tech companies in Australia’s top 200 have delivered an 18 per cent return year to date, while our major financial stocks have increased by just eight per cent in that same period.

According to Yeo, the second driver behind the tech rally has been the impressive company profit results in the last couple of weeks.

“Those two factors are certainly the catalysts which I believe have then led to a good running performance since December,” he said.

The surge in growth comes despite fears of a global economic slowdown and continued market volatility.

Typically, when there are widespread fears of a slowdown, investors move funds out of the more volatile stocks such as technology, into safer investments, such as blue chip equities and bonds.

Despite the positive gains in recent weeks, Yeo advised investors to enter at their own risk.

“These companies are high growth, high burn companies… you’ve really got to be quite careful.”

Watch the video above for more.

Read more: This is Australia’s answer to Nasdaq’s ‘FAANG’ stocks
More: Tech stocks sold-off amid market highs
More: Tech titans ride ‘irrational’ rally on Wall Street

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