A new index for tech companies on the ASX will help to raise awareness of smaller publicly-listed IT firms and improve visibility of the sector as a whole for investors.

The ASX will launch the S&P AllTech index on 21 February next year, incorporating all listed tech stocks on the exchange.

The index is part of the ASX’s efforts to attract more young tech companies to list in Australia and to position itself as a “late-stage VC funding market”.

The exchange is currently actively looking to increase the number of tech companies on board, which make up just 2 per cent of companies at the moment.

It is expected to attract tech companies looking to complete initial public offerings in the tens of millions or hundreds of millions valuation range, and act as an alternative to much larger listings on the Nasdaq in the US.

The ASX has been working with S&P for most of this year to develop the index, which will be based on the Global Industry Classification Standard criteria.

It will be an update of the current S&P / ASX 200 Information Technology Index, which only covers tech companies in the ASX 200 top companies.

“The existing index is narrow and for it to be investible it needs a broad club of liquid names that reflect innovation and disruption,” ASX Executive General Manager of Listings and Issuer Services Max Cunningham told the Australian Financial Review.

“The IT index has the latter, but not a broad enough group, so we have worked with S&P to include GICS sub-categories spanning communication services like interactive media and healthcare technology, so it will better reflect a broader group, with more investment-grade companies.”

The index will make it easier for investors and the general public to track the performance of the listed Australian tech sector without the need to individually analyse companies.

It will also allow investors with less knowledge of the sector to still invest in it.

It will also likely bring more attention on smaller listed tech companies, Cunningham said.

“I think it will raise the profile of those companies, and by doing so it should raise the underlying liquidity,” he said.

“It will also give people a good benchmark to point to...hopefully the media will follow it and it will give those companies an opportunity to demonstrate how they are individually performing compared to their tech peers.”

IT is currently the third-largest sector on the ASX, with 204 listed companies, and is in eighth place in terms of value, and fourth in volume.

The sector has been performing strongly in recent years, with the current IT index rising by 80 per cent in the last five years.

Wise Tech is the one of the largest Australian tech companies listed on the ASX, and its boss Richard White said increasing the visibility of the tech sector is crucial to the overall economy’s success.

“We strongly believe that increasing the visibility and viability of technology investment and innovation in the local market is one of the keys to making Australia a global technology hub, and that’s one of the reasons WiseTech Global listed here,” White told the Australian Financial Review.

“Raising Australian investor visibility of technology as a high-growth, value-creating sector, and one that is utterly critical for our long-term economic development, deserves high levels of attention and meaningful, long-term action.”