The Australian Securities Exchange (ASX) comprises the largest 200 companies listed on the ASX based on market capitalisation. It is float adjusted which means the index only considers free floating shares when calculating market capitalisation and not those that are controlled by company insiders.
ASX 200 index performance is considered to be the strongest indicator of the overall Australian stock market trend and outlook. The index is maintained by Standard and Poor’s and was launched in April 2000. It consists of 96 per cent Australian companies representing 11 major sectors of the economy. The largest three industries included operate in the financial, materials and health care sectors and comprise over 60 per cent of the total value of the index.
ASX 200 performance
The ASX 200 index gained 113 per cent (price return) from its launch in 2000 until the end of 2019. If these figures are adjusted for total return (including dividends) the index returned almost 400 per cent. The total market capitalisation rose from $600 billion AUD to over $1.91 trillion AUD during the same period. There have been many sharp ups and downs over the life of the index, but overall returns have trended upwards.
In ASX 200 latest news, the index has recently begun to rebound from the initial shock of the global economic crash caused by coronavirus. The index is currently priced at around 5387 points, recovering almost 22 per cent since its low of 4402.5 on 23 March 2020.
This is still significantly lower than the all-time high of 7197 reached on 20 February this year. The largest constituent of the index, pharmaceutical giant CSL Ltd., jumped nearly 5.5 per cent last week after announcing better than expected earnings potential.
ASX 200 major price drivers
As in all major economies, the effects of Covid-19 will be the largest single determinant in the Australian stock market outlook 2020. Australia has done better than most other countries at controlling the outbreak of the virus. This is due to multiple factors including early containment and a high-quality healthcare system. Australia also benefits from being an island and as such was able to quickly and effectively implement border controls.
On the peripheral, but still dependent on the duration and magnitude of the pandemic, the Australian economy will be significantly impacted by the ability of China and other Asian countries to rebound from the virus.
Many Australian companies are export-focused and thus intricately linked to the performance of their Asia-Pacific neighbours. In the latest news on the Australian stock market it appears that Chinese demand for copper and iron ore is rebounding stronger than expected, which is encouraging news for export reliant mining companies.
Trade Australia 200 - AU200 CFD
ASX 200 forecast
The ASX 200 forecast is based almost entirely on the continued pandemic crisis and the ability of the global economy to gradually reopen to commerce. ASX 200 predictions are likely to change frequently in the coming months as information surrounding the impact of coronavirus continues to update.
There should be significant opportunity for gains as the market undergoes a series of short-term rallies. While the Australian economy may continue to slide overall in the short to medium term there is always the opportunity to profit from trading CFDs on downwarding markets.
Many analysts warn that the ASX 200 trend and outlook may not remain as bullish as it currently appears. Investors should prepare for a long and challenging period as recent surges seen in the latest Australian stock market news and analysis may be a result of over optimism based on relatively good news.
There should be no doubt that a recession is expected for the Australian economy for the first time in 30 years and that there is potential for it to last 3-4 quarters as the economy restructures. As recently stated by one of the analysts, “In 2008 during the financial crisis there were many different rallies, some of which were almost 20 per cent, but the market did not bottom out until March of 2009.”
As businesses adjust to the new normal there will be further losses although there will also be plenty of opportunities for traders looking to capitalise on the rising and falling market sentiments.
According to Trading Economics’ Australia 200 forecast, the index is expected to trade at 5341.09 points by the end of this quarter. Looking further, the analysts predict it to trade at 5057.72 in the 12-month period.
Is it worth investing in the Australian stock market?
The Australia 200 forecast is considered the foremost indicator of the Australian stock market as a whole. It is very difficult to predict exactly how the coming months and year will look as the majority of the outcome is related to the ability to recover from the pandemic.
While there is the possibility of so-called second waves and the full extent of the damage is not yet known, it is worth noting that Australia has fared better than almost any other developed economy at controlling the outbreak. This ability to effectively control the virus in its initial stages indicates that Australia is well equipped to handle any future developments and may be in a better position than other countries to recover from this once-in-a-century economic crisis.
The government has offered a strong stimulus package to alleviate the strain on the domestic consumer market and unemployment numbers. This fiscal stimulus has led to S&P downgrading the outlook on Australian debt, from stable to negative. While S&P released this information Moody’s rating has remained stable.
Australian industry will benefit from the fact that China, a major trading partner, was the original affected country and as such is already ramping up its economy earlier than others after months of crippling lockdowns.
For traders looking to invest in the Australian stock market there are many options available to gain ASX 200 exposure. They can buy shares in an ASX 200 company directly or purchase one of the many EFTs linked to the ASX 200 performance. They can purchase options or futures on these EFTs and profit from upward or downward price movements with CFDs at Capital.com.