What is the ASX 200 and how to trade it? - Index Series

Education / 5 Min Read
Milan Cutkovic / 23 Nov 2021

The ASX 200 is a stock market index that contains the top 200 Australian shares listed on the Australian Securities Exchange (ASX). The ASX 200 provides a great starting point for beginners who want to invest in stocks because it offers exposure to some of Australia's most successful businesses but also has enough diversity that long-term investors don't feel like they're too exposed to just one sector or industry.

In this article, we cover a complete overview of Australia's most popular stock index: the S&P/ASX 200 index. Widely seen as the leading benchmark for Australian investors, there are multiple ways you can start index trading today to gain exposure to the ASX 200. Before we discuss how to trade indices like the ASX 200, let us have a look at what this index represents and the largest companies included in it.

What is the S&P/ASX 200 index?

The S&P/ASX 200 is the leading stock index in the Australian market and is often used as a benchmark against which the performance of individual shares or funds is compared to. The index is designed to track the performance of the 200 largest eligible stocks listed on the Australian stock exchange measured by their float-adjusted market capitalization.

The index covers more than 80% of the entire Australian stock market by size. The S&P/ASX 200 was launched in April 2000 and is priced in AUD (Australian Dollars).

How is the ASX 200 calculated and how are ASX 200 companies selected?

The ASX 200 is a float-adjusted market cap weighted index, meaning that the share a company holds in the index is connected to its total market value.

For a stock to be eligible to be an index constituent, it needs to meet several eligibility criteria:

  1. Listing: The stock must be listed on the ASX.
  2. Types of securities: Common and equity preferred stocks are eligible, but hybrid products such as convertible stocks, bonds, and warrants are not.
  3. Market capitalisation: To be part of the ASX 200 index, the stock must be institutionally investable and the market cap plays a key role in the selection of the stock.
  4. Liquidity: The stock must be frequently traded, with the liquidity measured relative to its peers.

The ASX 200 index is frequently rebalanced to ensure proper market capitalisation and liquidity. Quarterly rebalancing occurs in March, June, September, and December.

What are the ASX 200 trading hours?

The cash equity market is open from 10:00 AM to 4:00 PM AEST.

The SPI 200 Index Futures and Options can be traded from 5:10 PM to 08:00 AM AEST and again from 09:50 AM to 04:30 PM AEST during Daylight Saving Time and from 05:10 PM to 08:00 AM + from 09:50 AM to 04:30 PM AEST when the clocks switch again in mid-March.

What sectors are in the ASX 200?

As the information below shows, the ASX 200 is heavily dominated by banks. The financial sector makes up 31% of the overall index, followed by Materials, Healthcare, and Consumer Discretionary companies. 186 out of 200 companies are based in Australia, while 8 are based in New Zealand, 4 in the United States, and 1 each in the United Kingdom and France.

ASX 200 sectors shown in a pie chart

Source: S&P Global

What are the top 10 companies in the ASX 200?

5 out of the 10 largest companies in the ASX 200 share market index are banks. As we have seen in the sector breakdown above, the index is also heavily dominated by the financial sector, which makes up almost a third of the index.

While the ASX 200 is a good way to diversify compared to buying only a few individual shares, investors should still be aware of the limitations and that further diversification might be needed (such as investing in foreign stock markets and/or fixed-income securities).

ASX200 top 10 constituents

Source: S&P Global

ASX 200 share price

Since its launch date, the ASX 200 index had several downturns with the two notable ones being the 2007-2009 crash (during the Great Financial Crisis) and the more recent March 2020 decline that was caused by the coronavirus pandemic. The index recovered quickly from the COVID setback and followed its American/European peers to new record highs.

AUS200 trading chart

How to trade ASX 200?

Contract for Difference (CFDs) is one of the ways you can trade the ASX 200 cost-effectively and efficiently. Generally, brokers offer a CFD based on the Cash Index (AUS200) and a CFD based on the underlying Futures contract (SPI200).

When you trade the index using CFDs, you can speculate on the direction of the underlying instrument (the ASX 200) without owning it or any of its constituents. You can make use of leverage and you will have the ability to go both long and short.

This can prove especially useful during a downturn. Most investors want to avoid a reshuffling of their portfolio as the costs can quickly add up and it is incredibly difficult to time the market correctly. Therefore, instead of selling a large part of your portfolio when you anticipate a correction, you could use CFDs to speculate on falling prices.

Whether the Cash CFD (AUS200) or Futures CFD (SPI200) will be more suitable for you will primarily depend on your trading style. If you hold positions for a short period of time, you might prefer the AUS200 as it has low spreads. On the other hand, if you are a long-term trader you might prefer the SPI200 as there are no swap charges.

How to invest in ASX 200?

Exchange Traded Funds (ETFs) are the easiest way to invest in the ASX 200 index. It is more cost-effective than buying the individual shares and the rebalancing is done quarterly.

While ETFs can be leveraged too, you will usually have less flexibility than trading CFDs. However, if you are a long-term investor and don't really want to actively trade the product, you might find the ETF an efficient solution.

There a variety of ETFs available from different providers. When choosing an ETF, you should go through the factsheet that is provided by your broker and make yourself familiar with the specifications of the product and the charges involved.

Read more → Continuation and reversal patterns

What moves the ASX 200?

The index will move up and down as investors trade the constituent shares. Large price movements in shares that have a higher weighting in the index will cause larger fluctuations in the value of the index.

On the other hand, companies with a smaller market cap will not have a significant impact on the price movement of the index.

The main factors causing the ASX 200 price to move are:

  • Economic data - Australian economic data will affect the domestic stock market. Depending on the nature of the data, some companies will be more affected, while others will be less or not affected at all. For example, rising interest rates would most likely affect the share price of banks.
  • Earnings - Quarterly and annual results, forecasts or company news can all affect the share price of a company, and therefore the value of the ASX 200. As the index is dominated by a small group of companies and two sectors in particular (Financials and Materials), it is worth paying additional attention to their results. 
  • Currency fluctuations - Larger movements in the value of the Australian Dollar can affect the price of the ASX 200. A strong AUD could make life more difficult for exporters, dragging their share price lower.
  • Commodity prices - Australia is a major commodities exporter, and those companies will be particularly affected by the movements in the global commodities market. A surge in commodity prices will boost the share price of mining companies, while a downtrend in the commodity market will generally depress the share price of those companies.

What is the average return on ASX 200?

According to S&P Dow Jones Indices, the S&P/ASX 200 had an average total return of 9.3 percent each year over a 10-year period.

What does the performance of the S&P/ASX 200 show us?

The ASX 200 certainly had its ups and downs, but overall, the average return makes the index far more attractive than bonds or holding cash in the bank. It all comes down to personal risk appetite.

For example, risk averse investors might not be comfortable with the fluctuations in the stock market. However, one tactic that can help is dollar-cost averaging (DCA). This is an investment style in which investors divide the total amount to be invested over a certain period of time. For example, instead of investing A$100,000 in the stock market today, you may spread this out over 12 months (which would mean investing A$8333 per month). While DCA could potentially lead to lower returns over the long-term, some investors who feel nervous about investing a large lump sum still prefer it.

Regardless of that, the ASX 200 is an excellent tool for tracking the overall performance of the Australian stock market as the index accounts for more than 80 percent of Australia's stock market capitalisation and is frequently rebalanced.

List of ASX 200 companies

Ticker Company Name
AGL AGL Energy Ltd
AMP AMP Ltd  
ANZ Australia and New Zealand Banking Group Ltd
APA APA Group
ARB ARB Corporation Ltd
ASX ASX Ltd
ABP Abacus Property Group
ABC Adbri Ltd
APT Afterpay Ltd
ALQ Als Ltd
ALU Altium Ltd
AWC Alumina Ltd
AMC Amcor Plc
ALD Ampol Ltd
ANN Ansell Ltd
ARG Argo Investments Ltd
ALL Aristocrat Leisure Ltd
ALX Atlas Arteria
AIA Auckland International Airport Ltd
AZJ Aurizon Holdings Ltd
AST Ausnet Services Ltd
AFI Australian Foundation Investment Company Ltd
BHP BHP Group Ltd
BFL BSP Financial Group Ltd
BWP BWP Trust
BOQ Bank of Queensland Ltd
BAP Bapcor Ltd
BPT Beach Energy Ltd
BEN Bendigo and Adelaide Bank Ltd
AAA Betashares Australian High Interest Cash ETF
NDQ Betashares Nasdaq 100 ETF
BSL Bluescope Steel Ltd
BLD Boral Ltd
BXB Brambles Ltd
BRG Breville Group Ltd
BKW Brickworks Ltd
CLW Charter Hall Long Wale REIT
CSL CSL Ltd
CSR CSR Ltd
CAR Carsales.com Ltd
CNI Centuria Capital Group
CIP Centuria Industrial REIT
CHN Chalice Mining Ltd
CGF Challenger Ltd
CIA Champion Iron Ltd
CHC Charter Hall Group
CQR Charter Hall Retail REIT
CNU Chorus Ltd
CIM Cimic Group Ltd
CWY Cleanaway Waste Management Ltd
CUV Clinuvel Pharmaceuticals Ltd
COH Cochlear Ltd
CDA Codan Ltd
COL Coles Group Ltd
CBA Commonwealth Bank of Australia
CPU Computershare Ltd
CRN Coronado Global Resources Inc  
CTD Corporate Travel Management Ltd
CMW Cromwell Property Group
CWN Crown Resorts Ltd
DXS Dexus
DDR Dicker Data Ltd
DHG Domain Holdings Australia Ltd
DMP Domino's PIZZA Enterprises Ltd
DOW Downer Edi Ltd
APE Eagers Automotive Ltd
EBO Ebos Group Ltd
EDV Endeavour Group Ltd
EVT Event Hospitality and Entertainment Ltd
EVN Evolution Mining Ltd
FPH Fisher & Paykel Healthcare Corporation Ltd
FBU Fletcher Building Ltd
FLT Flight Centre Travel Group Ltd
FMG Fortescue Metals Group Ltd
GPT GPT Group
GNE Genesis Energy Ltd
GMG Goodman Group
GOZ Growthpoint Properties Australia
HVN Harvey Norman Holdings Ltd
HLS Healius Ltd
HMC Home Consortium
IGO IGO Ltd
IFL IOOF Holdings Ltd
IEL Idp Education Ltd
ILU Iluka Resources Ltd
IMU Imugene Ltd
IPL Incitec Pivot Ltd
IFT Infratil Ltd
INA Ingenia Communities Group
IAG Insurance Australia Group Ltd
IRE Iress Ltd
IOZ Ishares Core S&P/ASX 200 ETF
IOO Ishares Global 100 ETF
IVV Ishares S&P 500 ETF
JBH JB Hi-Fi Ltd
JHX James Hardie Industries Plc
LFS Latitude Group Holdings Ltd
LLC Lendlease Group
LFG Liberty Financial Group
LIC Lifestyle Communities Ltd
LNK Link Administration Holdings Ltd
LTR Liontown Resources Ltd
LYC Lynas Rare EARTHS Ltd
MQG Macquarie Group Ltd
MFG Magellan Financial Group Ltd
MGOC Magellan Global Fund (Open Class) (Managed Fund)
MGF Magellan Global Fund
MPL Medibank Private Ltd
MP1 Megaport Ltd
MCY Mercury NZ Ltd
MEZ Meridian Energy Ltd  
MTS Metcash Ltd
MLT Milton Corporation Ltd
MIN Mineral Resources Ltd
MGR Mirvac Group
NXT NEXTDC Ltd  
NAB National Australia Bank Ltd
NSR National Storage REIT
NWL Netwealth Group Ltd
NHC New Hope Corporation Ltd
NCM Newcrest Mining Ltd
NHF Nib Holdings Ltd
NIC Nickel Mines Ltd  
NEC Nine Entertainment Co. Holdings Ltd
NST Northern Star Resources Ltd
NVX Novonix Ltd
OZL OZ Minerals Ltd
OSH Oil Search Ltd
ORI Orica Ltd
ORG Origin Energy Ltd
ORE Orocobre Ltd
ORA Orora Ltd
PDL Pendal Group Ltd
PMGOLD Gold
PXA Pexa Group Ltd
PLS Pilbara Minerals Ltd
PNI Pinnacle Investment Management Group Ltd
PBH Pointsbet Holdings Ltd
PMV Premier Investments Ltd
PME Pro Medicus Ltd
QBE QBE Insurance Group Ltd
QUB QUBE Holdings Ltd
QAN Qantas Airways Ltd
REA REA Group Ltd
RIO RIO Tinto Ltd
RHC Ramsay Health Care Ltd
REH Reece Ltd
RWC Reliance Worldwide Corporation Ltd
RMD Resmed Inc
S32 SOUTH32 Ltd
STW SPDR S&P/ASX 200 Fund
SYD Sydney Airport
STO Santos Ltd
SCP Shopping Centres Australasia Property Group
SCG Scentre Group
SEK Seek Ltd
SVW Seven Group Holdings Ltd
SGM Sims Ltd
SKC Skycity Entertainment Group Ltd
SHL Sonic Healthcare Ltd
SOL Washington H Soul Pattinson & Company Ltd
SKI Spark Infrastructure Group
SPK Spark New Zealand Ltd
SDF Steadfast Group Ltd
SGP Stockland
SNZ Summerset Group Holdings Ltd
SUN Suncorp Group Ltd
SUL Super Retail Group Ltd
TPG TPG Telecom Ltd
TAH Tabcorp Holdings Ltd
TNE Technology One Ltd
TLS Telstra Corporation Ltd
SGR The Star Entertainment Group Ltd
A2M The a2 Milk Company Ltd
TCL Transurban Group
TWE Treasury Wine Estates Ltd
UWL Uniti Group Ltd
QUAL Vaneck MSCI International Quality ETF
VEU Vanguard All-World Ex-US Shares INDEX ETF
VAP Vanguard Australian Property Securities INDEX ETF
VAS Vanguard Australian Shares INDEX ETF
VGS Vanguard MSCI INDEX International Shares ETF
VTS Vanguard US Total Market Shares INDEX ETF
VCX Vicinity Centres
VUK Virgin Money Uk Plc
VEA Viva Energy Group Ltd
WAM WAM Capital Ltd
WPR Waypoint REIT
WEB Webjet Ltd
WES Wesfarmers Ltd
WBC Westpac Banking Corporation
WHC Whitehaven Coal Ltd
WTC Wisetech Global Ltd
WPL Woodside Petroleum Ltd
WOW Woolworths Group Ltd
WOR Worley Ltd
XRO Xero Ltd
YAL Yancoal Australia Ltd
Z1P ZIP Co Ltd
ZIM Zimplats Holdings Ltd

 

Looking to learn more about other indices:

 

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The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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