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What is the ASX 200 index?
Like the S&P 500, which includes 500 of the largest companies publicly trading on the US share markets, the S&P/ASX 200 index contains the 200 largest companies trading on the Australian Securities Exchange (ASX). And just as the S&P 500 is a benchmark for understanding how the US share markets are performing, the ASX 200 measures how the ASX is tracking as a whole.
The index was created in 2000, and as of July 2024, the 200 companies on it represented approximately 80% of Australia’s equity market. The ‘largest’ in this context means the companies with the highest market cap, or dollar value, on the exchange.
The ASX 200 companies range in value from around A$380 million to over A$100 billion. This compares to the S&P 500 market caps, ranging from around US$1 billion to over US$3 trillion.
ASX 200 companies
To be included on the ASX 200, companies — also known as constituents or components — are compiled by the ASX and S&P Dow Jones Indices, a division of S&P Global Ratings. Note that exchange traded funds (ETFs) and listed investment companies (LICs) cannot be included on the ASX 200.
The index is rebalanced every quarter: in March, June, September, and December. Rebalancing is when new companies replace those being removed from the index. Removal happens for a variety of reasons, such as having been part of a merger or acquisition, being delisted from the ASX, or dropping in market value below the best performers. This ensures the 200 companies on the ASX are always the largest and top 200 performing companies listed on the exchange.
Sector breakdown of ASX companies
ASX 200 companies are segmented across 11 sectors. In June 2024, 52.2% of companies on the index were in the financial and materials sectors. This shows the strength of the Australasian banking sector (which includes many of New Zealand’s largest banks) and the Australian resources mining industry, which represents 8% of Australia's gross domestic product (GDP).
The top 10 constituents by market cap
- Commonwealth Bank of Australia (CBA.AX)
- BHP (BHP.AX)
- CSL (CSL.AX)
- National Australia Bank (NAB.AX)
- Westpac Baking (WBC.AX)
- ANZ (ANZ.AX)
- Wesfarmers (WES.AX)
- Macquarie (MQG.AX)
- Goodman (GMG.AX)
- Woodside Energy (WDS.AX)
These ten companies comprise around half the total ASX share market, a whopping 48.7%. Compare this to the top ten constituents on the S&P 500, which make up around 28.6% of the total weighting. At the end of June 2024, the median market cap of all 200 constituents in the index was A$3.759 billion.
Three exchange traded funds (ETFs) track the performance of the ASX 200 and are listed on the ASX. These passive ETFs — funds that track an index and are not actively managed by a fund manager — can help investors build a diversified portfolio. They are:
- BetaShares FTSE RAFI Australia 200 (QOZ.AX)
- iShares Core S&P/ASX 200 ETF (IOZ.AX)
- SPDR S&P/ASX 200 Fund (STW.AX)
An ETF listed on the NZX (New Zealand’s Stock Exchange) that also tracks the index is Smartshares S&P/ASX 200 ETF Units (AUS.NZ).
ASX 200 historical return
The average historical return for the S&P/ASX All Ordinaries Total Return Index in the 30 years between June 1993 and 2023 has been 9.2%. Since the index was launched in April 2000, it has returned an average of 8.5% per year. This compares to the historical return for the S&P 500 over 30 years, which has been around 10% on average (rate not adjusted for inflation). In the past 10 years, since 2014. The S&P/ASX 200 has had an annualised return of 8.06%, as charted below.
What is the ASX?
The Australian Securities Exchange (ASX) is the combined Australian Stock Exchange and Sydney Futures Exchange, which merged in 2006, and operates as a share market, payments facilitator, and clearinghouse. The ASX consistently ranks among the world’s top stock exchanges.
ASX fast facts
- A$5-8 billion average daily turnover
- 104 IPOs in 2022
- Around 7 million shareholders
- A$7 billion IPO capital raised on average between 2018 - 2022
- 150+ years of exchange experience
ASX listed companies
How many companies are on the ASX?
The ASX has more than 2,200 companies listed on it, as well as more than 350 exchange traded funds (ETFs), over 40 real estate investment trusts (REITs), and more than 100 listed investment companies (LICs) and listed investment trusts (LITs). The exchange’s ETFs are managed by some of the world’s most well-known asset and fund managers, including iShares managed by BlackRock, Vanguard, and State Street Global Advisors, which was the first to have two ETFs admitted onto the ASX in 2001.
How many New Zealand companies are on the ASX?
More than 60 of New Zealand’s largest companies are listed on the ASX, with around 50 being dual-listed. This means they’re also listed on both the ASX and the NZX. Dual-listed companies include Kiwi household names Air NZ, Kathmandu, NZME, Chorus, Briscoe Group, Fonterra, and Spark NZ.
The benefit of being on both the New Zealand and Australian exchanges, aka dual-listed, means Kiwi companies can increase their global visibility and reach a wider pool of potential investors, while also being able to support the New Zealand economy.
Just under 20 New Zealand companies are sole-listed on the ASX, which means they are only available to investors on the ASX. These include Xero, DGL, Volpara, Aroa Biosurgery, Adherium, Neuren Pharmaceuticals, and Harmoney.
How does a company list on the ASX?
A company must meet several requirements to be allowed to list on the ASX. These include:
- Having a minimum of 300 shareholders at A$2,000 each
- At least two directors who are Australian residents
- Pass a profit test or an assets test
Listing is typically done through an IPO (initial public offering) and the listing process takes around five months. The exception is for companies listed on foreign exchanges (those outside of Australia). These companies can apply for an ASX Listing or ASX Foreign Exempt Listing as long as they meet the minimum requirements of the ASX.
The ASX can also choose not to list any company it considers unsuitable. This has only happened in exceptional cases - typically because the companies are not considered mature enough in their growth development to be eligible to list.
ASX 100 companies
The S&P/ASX 100 includes the top 100 companies listed on the ASX by market cap. At the end of June 2024, the median market cap of the 100 constituents was A$9.386 billion. There are currently no ETFs on the ASX that track the S&P/ASX 100.
ASX 50 and 20 companies
Like the S&P/ASX 200 and 100 indexes, the S&P/ASX 50 includes the 50 largest companies by market cap listed on the exchange. At the end of June 2024, the index had a median market cap of A$18.268 billion, which is the median value of all the companies included in it. An ETF that tracks the index is SPDR S&P/ASX 50 Fund (SFY.AX).
The Vaneck S&P/ASX MidCap 50 ETF (MVE.AX) is an exchange traded fund that tracks the S&P/ASX Midcap 50 Index. That is, 50 companies on the S&P/ASX 100 excluding any on the S&P/ASX 50. This essentially means, the ASX100 minus the companies listed on the ASX 50, which is the 51st to the 100th performing companies that have midcaps - that is they're valued less than the top 50 companies.
In July 2024, the index’s top 10 companies were:
- CAR Group (CAR.AX)
- NEXTDC (NXT.AX)
- REA Group (REA.AX)
- Orica (ORI.AX)
- Altium (ALU.AX)
- Soul Patts (SOL.AX)
- Ampol (ALD.AX)
- Pro Medicus (PME.AX)
- Endeavour Group (EDV.AX)
- Seven Group (SVW.AX).
For investors wanting to diversify with a 63.5% weighting in Australia’s finance and materials sectors, BlackRock’s iShares S&P/ASX 20 ETF (ILC) tracks the index, which comprises the largest 20 companies by market cap listed on the ASX. It has a median market cap of A$59.742 billion, and a combined total market cap exceeding A$1 trillion.
The history of the Australian stock market
Today’s ASX traces its roots back to the mid to late 19th century across all Australian states.
1800s
Each of Australia's six state capitals had its exchange: Melbourne in Victoria was formed in 1861, Sydney in New South Wales was formed in 1871, Hobart in Tasmania was established in 1882 and later merged with the Launceston exchange, Brisbane in Queensland was founded in 1884, Adelaide in South Australia started in 1887, and Perth in Western Australia was formed in 1889.
1937
The six exchanges formalised their interstate connection by establishing the Australian Associated Stock Exchanges (AASE).
1987
In April, following legislation passed by the Australian Parliament, all state exchanges came together as one exchange. This was six months before the US stock market Black Monday crash of October 1987. Just prior to the crash, the ASX had experienced unprecedented market volatility — along with Asia, New Zealand, Hong Kong, Singapore, and Mexico — due to the Fed’s significant trade deficit.
1998
The ASX became the world’s first exchange to become a public company and trade their own ASX stock (ASX.AX) on their own ASX exchange where people could buy and sell it.
2006
The Australian Stock Exchange merged with the Sydney Futures Exchange, based in Sydney, where it’s still located today.
If you’re an investor looking to spread your investments across a mix of sectors and geographies, the S&P/ASX 200’s more than 50% weighting in the finance and materials sectors could be taken into account if you’re looking to diversify your portfolio.
Hatch does not provide financial advice and nothing on this website should be taken as a recommendation to invest in any product or company mentioned. All investment involves risk and there’s always a risk you might lose money, including what you started with. Before making any investment decisions, consider seeking financial advice from a licensed provider.
We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.
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