What Is The S&P/ASX200?

BY Chris Andreou

|September 29, 2020

The S&P/ASX200 index, otherwise known as the AUS200, is maintained by Standard & Poor’s and is considered the benchmark institutional investable stock market index in Australia, and therefore a leading indicator of the overall health and stability of the economy.

Based in Sydney, the ASX200 comprises 200 of the largest publicly traded companies on the Australian Securities Exchange (ASX). The index has 10 sectors, however it’s mainly dominated by two, Financials and Materials. Financials alone make up around 47.2% of the index and include companies such as the major banks, while the Materials sector makes up around 14.5%, which includes companies such as Rio Tinto and BHP.

The ASX200 is one of a number of indices published by S&P Dow Jones on Australian markets (called the S&P/ASX family of indices), however it’s generally considered the main benchmark of that grouping. The total market cap of companies that comprise the ASX makes up for around 82% (as at March 2017) of Australia’s share market capitalisation.

The ASX200 is float adjusted, meaning the maximum numerical contribution to the index is relative to the stock’s value at the float of the stock.

What Moves The ASX200?

The ASX200 is a market capitalisation weighted index. That means that the more valuable a company is, the more effect it has on the entire index when the valuation of that company rises or falls.

Traders of the ASX200 should pay attention to the Australian, US and Asian economies, and particular attention to the corporate environment in these regions (such as regulatory frameworks for financial institutions) in order to assess potential buy or sell positions on ASX200.

There are several factors that drives the price of this index’s financial instrument, including:

  • The financial sector accounts for nearly a third of the index, with banking firms accounting for half of the top 10 stocks listed on the index.
  • Other markets: key decisions made by the US Fed combined with the Chinese economy on the other side, not to mention the fact that around 40% of Australian shares are owned outside of the country. Economic decisions in these key continents can therefore have a significant effect on the local index.
  • Political turmoil & government policies
  • Market data: the price of the index can drop in response to markets falling around the world. It’s also heavily influenced by economic reports such as unemployment rates, job creation, inflation, and other economic benchmarks.

How Can I Trade The ASX200?

The ASX200 is tradable under a single instrument on the TIOmarkets platforms. You can buy (go long) or sell (go short) on ASX200 and many other indices.

What Are The Best Conditions For Trading The ASX200?

As we saw during the early stages of the covid-19 pandemic, indices across the world can be prone to large swings up or down based on economic turmoil and recovery.

Trade protection: Using risk management tools like TIOshield, which lets you cancel any trade within 1 hour to recoup your money, can help protect your trades against sudden breaking news that may swing the markets one way or another.

TIOshield is only available at TIOmarkets.

Execution speeds: Slow order processing time can lead to a big difference between the price you see when you click to open a trade, and the actual price your order is opened at. This difference between prices is called “slippage”.

At TIOmarkets, we have some of the fastest execution speeds you can find, resulting in minimal slippage and more orders filled at the price you click.

Leverage: Normally, a large amount of starting capital is required to invest seriously in stocks and indices, because only a small amount of stocks is not likely to yield the kind of results most traders are seeking.

High leverage can greatly increase both the risk to your investment and the potential returns.

If you are comfortable with a high level of risk in return for higher potential gains, you may want to seek a leverage ratio that is commensurate to your investment goals.

Chris Andreou

Experienced independent trader

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Trade responsibly: CFDs are complex instruments and come with a high risk of losing all your invested capital due to leverage.