Contracts for Difference (CFDs) allow investors to potentially profit from both up and down moves in market prices.
When you want to go long and potentially profit from upwards moves on these indices, it’s as simple as clicking the buy button. If you want to go short because you think prices will fall, you just click the sell button.
Capital.com is pleased to be expanding its offering, adding eight new equities indices on which users will be able to take long or short positions.
Let’s take a look at these new additions to get a flavour of the opportunities on offer.
The FTSE China A50 index is comprised the largest 50 “A-share” companies by market capitalisation of companies listed on the Shanghai and Shenzhen stock markets.
A-shares simply refer to the shares of mainland China-based companies, which until 2003 were only open to investment from mainland Chinese residents. These days, however, foreign institutions can invest in such companies through the government’s Qualified Foreign Institutional Investor (QFII) initiative.
Part of the FTSE family of indices, the China A50 is heavily weighted towards companies in the financial sector. Banks are by far the largest grouping, making up around 33% of the index, followed by insures, which comprise 14%. Food & beverage is the next largest grouping, with 11%.
Insurer Ping An Insurance is the largest single constituent, representing just over 11% of the index. This is followed by banking name China Merchants Bank (6%), beverages company Kweichow Moutai (6%), banking group Industrial Bank (4%) and real estate firm China Vanke (6%).
Over the past five years, to the end of March 2018, the China A50 has risen by 84%. The index, however, is still a long way off the peak level it reached in October 2007, at the onset of the global financial crisis, when it stood at over 23,000 points.
The China A50 currently stands at just over 12,000 points.
The FTSE MIB index is the most widely followed Italian stock market benchmark.
Representing around 80% of Italy’s stock market capitalisation, the FTSE MIB is comprised of what are deemed to be the country’s largest 40 publicly-listed companies, taking into account both capitalisation and liquidity.
The index also seeks to replicate the sector weights of the Italian stock market. FTSE Russell ensures that no one stock comprises more than 15% of the total index weighting. If a constituent does have a natural weighting of more than 15%, then FTSE will cap that particular stock at 15%. The weights of smaller firms in the index are then increased accordingly.
FTSE conducts a review to decide any changes that are needed to the constituent firms in the index each quarter, in March, June, September and December. As at the end of December, utility group Enel was the largest constituent, comprising around 12% of the index.
In order of ranking, this was followed by banking names Intesa Sanpaolo (11%) and UniCredit (10%), oil & gas producer Eni (10%), and insurer Generali (6%).
Over the past five years, to the end of March 2018, the FTSE MIB has gained 46%.
The Netherlands 25, or AEX as it is also known, is the most commonly cited index of Dutch equities, representing the performance of 25 of the largest and most actively traded Netherlands-listed companies.
Operated by Euronext, the composition of the index is reviewed on a quarterly basis, in March, June, September and December. One of the main rules that Euronext applies is to cap individual constituents’ weightings at a maximum of 15% of the index.
As at the end of March 2018, the largest member of the index was oil & gas company Royal Dutch Shell (15%), followed by consumer goods firm Unilever (14%), semiconductor equipment manufacturer ASML (13%) and banking group ING (14%). Some way behind, the next largest constituent is healthcare name Philips Kon (5.6%).
As the four largest companies in the index together account for 56% of the index, industry representation is heavily skewed towards these names. The oil & gas industry therefore represents the biggest sector in the index, at around 15%. Personal & household goods and technology are the next largest sectors, both having around 14%, followed by banks (12%).
Over the past five years, to the end of March 2018, the AEX has risen by 51%.
The Poland 20, or WIG20 as it is also known, is the most widely followed stock market index tracking Polish equities. Calculated by Warsaw stock exchange operator GPW, the WIG20 represents the largest companies listed on the Polish stock market by market capitalisation.
Periodic adjustments to the index’s composition are made in June, September and December with an annual review conducted in March each year.
One of the main rules GPW follows is to cap constituents at a maximum index weighting of 15%. As at the end of 2017, the largest single constituent of the index was PKO Bank Polski, at 15%. The second largest member of the index was petroleum group PKN Orlen (13%), followed by insurer PZU (11%) and banking name Bank Pekao (9%).
Concentration is high, with the top ten names in the index accounting for around 80% of its market capitalisation.
Having sold off sharply in 2015, the WIG20 has made a good recovery over the past couple of years. An improving domestic economic outlook has helped the index to rally by around 30% from November 2016 to the end of March 2018.
The FTSE Strait Times index is the most widely followed stock market gauge following the shares of companies listed in Singapore. Tracking the biggest 30 Singapore listed-companies by market capitalisation, the index is calculated jointly by the FTSE Russell, Singapore Press Holdings and Singapore Exchange.
A review of the constituent companies is undertaken on a semi-annual basis, in March and September. In terms of sectors, banks are by far the biggest grouping, comprising around 42% of the index.
Industrial goods & services and real estate are the next largest sectors within the index, each with around 15%, followed by telecommunications (9%), food & beverage (5%) and travel & leisure (5%).
The top three holdings in the index are all banks; DBS Group accounts for 16%, followed by Overseas-Chinese Banking (14%)vand United Overseas Bank (12%).
Among the top ten holdings, which together comprise 71% of the index, are also mobile telecoms name Singapore Telecommunications (8.3%) and industrial group Jardine Matheson Holdings (5.5%).
The index has risen by just 7% over the past five years, having experienced a sharp sell-off during 2015 and then steadily recovered the losses over the past few years.
The Switzerland 20, or Swiss Market Index (SMI) as it is also known, is a blue-chip index representing the largest companies listed in Switzerland by market capitalisation. As such, the SMI accounts for around 80% of the total capitalisation of the Swiss stock market.
Calculated by Switzerland stock exchange operator SIX Swiss Exchange, its composition is reviewed on an annual basis. One of the main rules that SIX applies is to cap the maximum weight of each component at 20% of the index.
Healthcare companies are the biggest grouping within the index, comprising around 37%, followed by consumer goods (24%), financials (22%) and industrials (14%). Within consumer goods, foods giant Nestle is the largest single constituent of the SMI, with just over 18%.
It is closely followed by pharmaceuticals giants Roche and Novartis, which each represent just under 18% of the index. Together, the three largest individual names account for around 53% of the index, a relatively high level of concentration.
The next largest name in the index, some way behind, is investment banking name UBS, which accounts for 7%.
Over the past five years, to the end of March 2018, the SMI has advanced 11%.
These new indexes offer new trading opportunities and may form part of a risk hedging programme. Traders active in related market should consider studying these new instruments. Trading is always risky, but spreading risk across a range of instruments and asset classes can help.