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What Is The Eligibility To Be Included In The Asx 200 Index?

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By Author: Charu
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The pinnacle S&P/ ASX 200 Index (XJO) is Australia’s primary stock market index. As the name suggests, it consists of the 200 largest companies’ stocks listed on the ASX. The index is maintained by Standard & Poor’s and has been regarded as the institutional investable benchmark for Australian equity performance.

Initiated on 30th March 2000 with a value of 3133.3, ASX 200's valuation was equal to all ordinaries at that time. According to Wikipedia, the ASX 200 reached 6000 points for the first time on Thursday, 15th February 2007. Generally, Bloomberg, CNBC, Wikinvest and Yahoo! Finance use AS51, AXJO, AXJO and AXJO, respectively, to refer to it.

What is the eligibility to be included in the ASX 200?
A company needs to fulfil the below criteria to get inclusion in the ASX 200 Index:

1. Market Capitalization

The weight of a stock in the index is determined by its float-adjusted market capitalization. It is a function of current index shares, the latest available stock price and the Investable weight factor (IWF). The IWF generally represents the float-adjusted portion of the equity ...
... capital of the stock.

Hence, any strategic holdings classified as either private, corporate or government holdings reduce the IWF, resulting in a reduction in the float-adjusted market capital. Shares owned by founders, trusts, venture capitalists, company directors, and other companies are also excluded under this criteria. These are also deemed strategic holders and considered long-term holders of the stock.

2. Listing

The stocks listed on the Australian Securities Exchange are considered for inclusion in the S&P/ ASX 200.

3. Liquidity

The trading volume in terms of dollar value and the number of transactions must exceed at least 0.025% of the sum of all the eligible securities trading volume. They generally have a cap limit at a maximum of 15% for value, volume and transactions to ensure that no single company dominates trading.

Why is ASX 200 essential for the Australian stock market?

The ASX 200 doesn’t tell the complete scenario of the entire stock market but provides a pretty solid approximation. It is because the index accounts for almost 80% of the total value of the Australian stock market. Hence it serves very well for the health of the Australian stock market.

The ASX 200 can also be taken as a valuable yardstick to compare the performance of an individual stock and even an entire portfolio.

Final Words-

The stock market is not a small concept that could be understood in a matter of seconds and few studies. Instead, it requires vast knowledge before entering into the segment. Stay in touch if you are a stock market fanatic and looking to learn more about the market dynamics, investment & cryptocurrencies.

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More About the Author

Stock Market Expert and I deal with the news coming from ASX (Australia Security Exchange and London Stock Exchange). The investors will be able to find latest and updated news related share market.

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