What is the 'S&P/ASX 200 Index'

The S&P/ASX 200 Index is the benchmark institutional investable stock market index in Australia, comprising the 200 largest stocks by float-adjusted market capitalization. It is one of a number of indices published by S&P Dow Jones on Australian markets (called the S&P/ASX family of indices), but is considered the main benchmark of that grouping.

BREAKING DOWN 'S&P/ASX 200 Index'

The S&P/ASX 200 is designed to measure the performance of the 200 largest index-eligible stocks listed on the Australian Securities Exchange (ASX) by float-adjusted market capitalization. Index constituents are drawn from eligible companies listed on the ASX. Companies have to be listed on the ASX to be included, but these can be either primary or secondary listings (a secondary listing is that by a company which has its primary listing in another country or on another exchange). All common and preferred stocks are eligible for inclusion, but hybrid stocks (securities that have some fixed income characteristics) are not.

The Importance of the  S&P/ASX 200 Index

The rationale behind using float-adjusted market capitalization is to have a benchmark index that is tradable, thus suitable for use as a benchmark by large institutional asset managers. Stocks that have low free floats (i.e., they are tightly held) are hard to trade and not considered appropriate for inclusion in benchmark indices at their total market capitalization. Only stocks that are regularly traded are eligible for inclusion, to ensure that the index is liquid. The index publisher, S&P Dow Jones, thus describes the S&P/ASX 200 as being the preeminent Australian benchmark because it is representative, liquid and tradable.

The index was launched in April 2000, and is rebalanced quarterly to ensure the stocks included in the index meet the eligibility criteria. Despite the inclusion of 200 stocks, the index is dominated by large companies. As at May 2018, the largest 10 stocks in the index accounted for over 44% of the index. Five of these 10 stocks were banking groups, and financials in total accounted for just under a third of the index. The second largest sector was materials (resources), at 19%. In May 2018 the index had a trailing P/E ratio of 18.23 and a dividend yield of 4.16%.

There are a number of exchange-traded funds (ETFs) and exchange-traded notes (ETNs) based on the S&P/ASX 200, as well as futures, options and options on futures available for trading. A list of the investable products related to the S&P/ASX 200 is provided in the monthly fact sheet published by the index provider. The S&P/ASX 200 VIX index, also published by S&P Dow Jones, measures the 30-day implied volatility of the Australian stock market.

RELATED TERMS
  1. All-Ordinaries Stock Index

    An all-ordinaries stock index is comprised of common shares from ...
  2. Australian Stock Exchange (ASX)

    The Australian stock exchange acts as a market operator, clearing ...
  3. Benchmark

    A benchmark is a standard against which the performance of a ...
  4. Constituent

    A constituent is a single stock or company that is part of a ...
  5. Russell 2500 Index

    The Russell 2500 Index is a broad index, featuring 2,500 stocks ...
  6. Price-Weighted Index

    A price-weighted index is a stock market index where each stock ...
Related Articles
  1. Investing

    3 Best Dividend-Paying Australian Equity Mutual Funds

    Discover analyses of the top dividend-paying Australian equity mutual funds, and learn about the characteristics and historical performances of the funds.
  2. Investing

    S&P 500: The Market’s Heavyweight Nears a Record

    Up and Away: While investors obsess about Dow 20,000, the market value of the S&P 500 is nearing a record $20 trillion
  3. Investing

    3 Australian Mutual Funds to Avoid

    Learn about several catalysts that may have a negative effect on the Australian economy. Discover three mutual funds to avoid in 2016.
  4. Investing

    Benchmark To Show Winning Returns

    You can't win if you don't keep score. Read on to learn how to measure your returns.
  5. Investing

    S&P 500 Index: A Performance Analysis of Long-Term Returns

    Discover how to gain insight into the returns generated by the S&P 500 Index over the long term and how this can assist your investment goals.
  6. Investing

    Active Management: Is It Working for You?

    There are guidelines when comparing an actively managed investment strategy with a benchmark.
  7. Insights

    This Bull Market Is Supported by the Index Funds Investment

    The massive growth of index funds has been supporting the bull market and could lead to a steeper correction when it happens.
  8. Financial Advisor

    The 4 Best U.S. Equity Index Mutual Funds

    Find out which four index mutual funds are among the best U.S. equities index mutual funds for core holdings in your investment portfolio.
RELATED FAQS
  1. Why Do Investors Use the S&P 500 as a Benchmark?

    Learn about the advantages and disadvantages of using the S&P 500 as a benchmark for portfolio performance, and understand ... Read Answer >>
  2. How do indexes determine which stocks are removed or added to them?

    Stock indexes are formed based on the kinds of stocks or financial securities they want to track. For example, the Standard ... Read Answer >>
  3. How Do I Find Mutual Funds That Track Indexes?

    Two good sources for finding index funds are Fidelity Investments and Vanguard. Read Answer >>
  4. What are the main benchmarks that track the banking sector?

    Read about the most important benchmarks that can be used to track the banking sector, and why banking benchmarks tend to ... Read Answer >>
Trading Center