Australian share market indexes
A share market index basically summarises the value and
performance of a group of companies in the share market.
The two most common ones on the Australian market are the
Top
200 index (S&P/ASX 200, or XJO), and the All
Ordinaries (actually the top 500 stocks, or XAO).
More information about these at right.
General
information about our share market indexes at
www.asx.com.au.
Australian market sectors
The market indexes mentioned above, and described at
right, are known as capitalisation
indexes. There are other types of indexes,
including sector
indexes. In Australia we use the GICS system to
classify companies according to their principal activities
and to allocate them to a market sector (more about GICS
below).
Australia's Top 200 stocks (the constituents of the
S&P/ASX 200 XJO index) are allocated to one of eleven*
GICS sectors, so
that investors can more easily see the performance of a
company relative to it's own sector
index (ie. relative to it's peers, and to similar
companies in other markets).
The eleven* GICS
sectors and their sector codes are (see GICS
details below):
- XEJ - Energy
- XMJ - Materials
- XNJ - Industrials
- XDJ - Consumer Discretionary
- XSJ - Consumer Staples
- XHJ - Health Care
- XFJ - Financials
- XRE - Real Estate (REITs)
- XIJ - Information Technology
- XTJ - Telecommunication Services
- XUJ - Utilities
In addition to the above official GICS sectors, some
organisations also refer to the following GICS
sub-sectors:
- XXJ - Financials excluding A-REITs
- XMM - Metals and Mining
* - Note that for a number of years there were only 10
GICS sectors, but this was revised effective 31 August
2016 to break out the REIT sub-sector from within the
Financials sector, to be a sector of its own. See an official announcement from S&P Dow
Jones.
More
information:
More about
share market indexes
and index rebalancing
See more information about the indexes (and index
rebalancing news) at the Australian Market Index website, and
also at S&P Dow Jones Indices.
From time to time, the list of stocks in each share market
index is revised. Remember that there are rules that
determine which stocks are eligible for listing in each
index, and as time goes by, the eligibility of any one
stock can change.
The most common way that this change comes about is due to
the daily share market actions and the resultant market
capitalisation of each stock. If a stock in the Top 200
index suffers a massive share price fall, then it might
end up falling off the bottom of the list of stocks.
Company mergers can also trigger removal from an index.
Standard & Poors manages the rules for indexes, and
reviews the index constituent list each quarter or
half-year (depending on which index). See the recent
announcements on index rebalancing here. Index
rebalance announcements are made by S&P on the first
Friday of March, June, September and December. The XJO is
rebalanced each quarter, and the S&P/ASX 300 twice
yearly in March and September.
GICS codes
GICS
codes - Information about the Global
Industry
Classification Standard coding system in relation
to the various indexes and security groupings used in the
market. It can be very beneficial to understand how GICS
codes are allocated to stocks, because it often happens
that like-coded stocks move together in the market.
Note that changes were made (effective after 31 August
2016) to more clearly differentiate Real Estate
Investment Trusts (REITs) by allocating them to their own
sector - see details at S&P.
Market Averages
The term market
average has been used for many years to
refer to a stock market index. Charles Dow
referred to the major market indexes as the market averages
in his day (late 1800s).
Also see Robert's information on Dow Theory.
These days it is acceptable to refer to a market
index as a market
average. |
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Which stocks are in each index?
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*** Free
downloads
for Toolbox Members ***
Robert's monthly updated lists of
"Which stocks are in each index?"
are available here for download.
These lists are in CSV format to download
and view
for use in further analysis.
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About the Australian indexes
Market
capitalisation - This is a measure of the "size"
of a company. It is simply calculated by multiplying the
current share price by the number of shares on issue. On
the Australian market, the largest company by market
capitalisation is currently BHP. We could easily produce a
list of all stocks on the market sorted by "market cap".
Understanding this idea will help to understand the
discussion below about the market indexes.
A
note about "top stocks" - When we say that an
index comprises the "top stocks" in our market, it does
not mean each and every stock within the list of top
stocks. For example, the XJO index (S&P/ASX
200) comprises a selection of the "top 200 stocks" in
our market by capitalisation, as at the latest
rebalancing (quarterly for the XJO). Any stock which
does not qualify for listing in this index (eg. due to
not enough liquidity) is excluded from the index. So,
the "Top 200" index might be a selection of 200 stocks
from the top 300 or so on our market.
The "Australian share
market" - We often hear a reference to the
Australian share market without any other qualification.
On some radio stations and some TV stations, this will
be a reference to the S&P/ASX 200 index, while on
others it is a reference to the All Ordinaries index.
Seesome details about this in the following paragraphs.
See charts of the Australian indexes
at ASX.com.au.
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ASX Indexes - Composition
(download)
Some common questions:
- How are all the ASX indexes, and
sub-indexes, made up?
- Which stocks are in which index?
- How does the S&P/ASX 200 index (XJO)
compare to the All Ordinaries index (XAO)?
- and to the S&P/ASX 300 (XKO)?
- What about the S&P/ASX Mid-cap 50
(XMD)?
The 2-page PDF file "ASX
Indexes
- Composition" gives a good
diagrammatic overview, and lists some of the
stocks in each index.
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XJO - S&P/ASX 200 index -
This is basically the top 200 stocks in the Australian
share market. That is, the top 200 by market
capitalisation. It is the investable benchmark for the
Australian equity market. The S&P/ASX 200 is comprised
of the S&P/ASX 100 plus an additional 100 stocks.
Source - www.asx.com.au.
See more information at www.marketindex.com.au/methodology.
XAO - All Ordinaries index - This is
basically the top 500 stocks in the Australian share
market. The index is made up of the weighted share prices
of about 500 of the largest Australian companies.
Established by ASX at 500 points in January 1980, it is
the predominant measure of the overall performance of the
Australian share market. The companies are weighted
according to their size in terms of market capitalization
(total market value of a company's shares). Source -
www.asx.com.au.
See more information at: www.marketindex.com.au/methodology.
VIX - Volatility indexes
The VIX Volatility index has existed in the US for quite
some time. It is basically a measure of the amount of fear
in the share market. Introduced in 1993, the Chicago Board Options Exchange
(CBOE) Market Volatility Index (VIX) is regarded as a "key measure of market
expectations of near-term volatility conveyed by S&P 500
stock index option prices" (source and more
details: www.cboe.com). Other volatility
indexes index, including the relatively new Australian market VIX.
ICB codes
The ICB system (Industry Classification Benchmark) is a
classification system somewhat similar to the GICS
system, and uses a system of 10 industries, partitioned
into 20 supersectors, which are further divided into 41
sectors, which then contain 114 subsectors (see Wikipedia for details). This
system is not in widespread use in Australia. The 10
industry classifications are:
- Oil & Gas
- Basic Materials
- Industrials
- Consumer Goods
- Health Care
- Consumer Services
- Telecommunications
- Utilities
- Financials
- Technology
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Major market indexes
and stock exchanges
The orderly trading of shares, currencies, futures or
commodities happens in a market,
but more specifically in an exchange.
The two columns at left focus on aspects of the
Australian share market, and some of the indexes in the
Australian market.
Around the globe there are many other markets /
exchanges - some are share markets, and some commodity
markets - and across those markets there are many, many
different indexes that summarise the performance of a
selected group of stocks, or commodities.
Some major market indexes
From time to time you might here
something on the radio or TV regarding stock market
performance. The following might help you undertand a
little more about what they are talking about.
"Wall
Street" - Some of the stock market reports (in
Australia) loosely refer to "Wall Steet". This is
usually a reference to the Dow Jones Industrial Average
index (see more below).
SPI
- This is usually a reference to the Australian Share
Price Index futures contracts (the ASX SPI 200 Index Futures), and
the value is often quoted in the mornings before the
Australian market opens. Many people suggest that it is
an indication of the likely opening level of the
Australian market. However, in this regard it is not
very useful or helpful for the average retail investor.
Here is a list of some of the more closely watched
market indexes:
- Dow Jones
Industrial Average (DJIA) - This index is
often just referred to as "the Dow" and is comprised
of only 30 major stocks from the US market (from the -
NYSE - New York Stock Exchange and the Nasdaq). See more details.
- Dow Jones
Transportation Average (DJTA) - This index
represents twenty key transporation companies in the
US. See more details.
- S&P 500 index
- This is a broader market index covering 500 major US
stocks from the NYSE and Nasdaq. See more details.
- US Russell 2000
index - This is a small-cap stock market index,
managed by the Russell Investments company. See more details.
- NASDAQ index
- This is an index representing a selection of
technology stocks, and is managed by Nasdaq OMX.
- German DAX
- French CAC-40
- London FTSE
- New Zealand NZ50
- Hong Kong Hang Seng
- Chinese Shanghai
Composite.
Some major stock
exchanges
Here is a list of just some of the major stock
exchanges around the world, with links to more details
about each exchange:
For a longer list of stock exchanges around the world,
see Wikipedia.org.
Other stock exchanges
Some major commodity exchanges
Here is a list of some of the major comodities
exchanges around the world, with links to more details
about each exchange:
Index rebalancing
As mentioned in the left hand column, market indexes
need to be rebalanced from time to time. When the
constituent stocks in a share index fall out of favour,
and the share price falls, the market cap falls and can
end up with a low market cap that no longer qualifies to
be in the index.
There are rules for rebalancing market indexes, and the
rules vary from market to market, and from index to
index.
For example, the US Russell 2000 index is rebalanced
annually as at 30 June (see more details).
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