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        Before Investing in AU Markets

        Views 12282023.08.09

        Introduction to the Australian Securities Market

        In this section, we'll introduce Australia's major exchanges, major indices, and some securities products.

        Australia's Major Exchanges

        The Australian Securities Exchange is Australia's primary stock exchange and the largest by trading volume and number of listings. Since its creation, the best and most popular way of referring to the company is by its enduring three-letter code - ASX.

        In 1987, six independent stock exchanges were incorporated into the Australian Stock Exchange Limited. Each of these exchanges provided trading services dating back to the 19th century. In 2006, the Australian Stock Exchange Limited merged with the Sydney Futures Exchange. Since then, the company has been commonly known as ASX.

        ASX was at one stage the only stock exchange in Australia until the creation of CHi-X  Australia. As an alternative trading venue for the ASX, CHi-X was established in 2011. It provides trading services for all ASX-listed stocks, accounting for nearly 20% of the market share. In early 2022 Chi-X changed its name to CBOE Australia.

        Main Indices

        Traditionally, Australia had three main stock indices, including the All Ordinaries, All Industrials, and All Resources. Since 2000, ASX and S&P Dow Jones Indices have jointly launched new stock indices to better reflect the dynamics in the Australian capital market.

        These new indices are the S&P/ASX 100, the S&P/ASX 200, and the S&P/ASX 300. Among them, the S&P/ASX 200 index (also known as the SPI) was officially released on April 31, 2000, and is designed to measure the performance of the 200 largest index-eligible stocks listed on the ASX. It is considered the most important index to measure the performance of the Australian stock market.

        The S&P/ASX 200 index is market-capitalization weighted and started with a value of 3133.3. The index saw two major rising trends. The first one occurred from 2000 to 2007 with a rally of over 100%. In November 2007, it touched 6,851 points, but it then fell back to 3,100 points amidst the Global Financial Crisis between 2007 and 2009. The second long-term uptrend started from the 2009 bottom and has now  surpassed the previous historical high recorded in 2007 (as of January 25, 2022).

        Common Financial Products


        Shares are a kind of security. Public companies sell their shares to investors to raise the funds needed for growth and development. Investors are able to share the profits from companies' growth or market volatility, while they also need to take risks.

        Shares are one of the most common types of investment in the securities market. As of 25 January 2022, there are more than 2,000 companies listed on the ASX with a total market value of A$2.8646 trillion. Many well-known banks, mining companies, large retail businesses, etc., are listed on the ASX.

        ETFs and other ETPs

        Exchange-traded funds (ETFs) and other exchange-traded products (ETPs) are potential choices if investors want to invest in the securities market but don't know how to choose or don't want to take the risks of picking individual securities.

        ETPs are products traded on an exchange that gives exposure to a variety of securities. ETFs and other ETPs trade, clear, and settle in a similar way to shares on the ASX. All ETPs are open-ended, which means that The number of units on an issue can increase or decrease in response to demand and supply. This helps them trade at or near their net asset value (NAV).

        ETFs typically seek to track the performance of an index, a currency, or a commodity, such as gold. ETFs are the main type of ETPs. By the end of 2021, of the over 200 ETPs traded on the ASX, 2/3 are ETFs whose value exceeds A$100 billion.

        Most ETFs aim to track the return (before fees and expenses) of the relevant index by investing directly in securities that comprise the index in proportion to the weightings of securities in the index. This is known as "full replication". Some ETFs may use a sampling strategy, holding a sub-set or a representative sample of the securities included in the index.


        For investors who wish to invest in real estate assets but don't have enough funds on hand, Australian real estate investment trusts (A-REITs)  are a potential choice with greater flexibility.

        A-REITs are listed investment vehicles that provide exposure to property assets such as office towers, shopping malls, industrial buildings–even hotels and cinemas. Like managed funds, they are pooled investments overseen by a professional manager. And because they are listed on the ASX, you can buy and sell them through your broker in the same way as shares.

        As of the end of 2021, there are almost 50 A-REITs trading on the ASX, with a total market capitalization of nearly A$180 billion.

        LICs and LITs

        Listed investment companies (LICs) and listed investment trusts (LITs) provide exposure to a basket of underlying securities, often shares.

        Investors' cash is pooled in a managed fund and a professional investment manager selects the fund's securities and invests it. Listed on ASX, you buy and sell shares in LICs and LITs through your broker.

        In addition to these large-scale main trading products, there are other financial products that investors can also trade on the ASX, including bonds, options, warrants, futures, funds, hybrids, etc.

        It should be noted that all investments involve risks and investors must make investment decisions based on their own circumstances or seek professional advice before investing in the Australian securities market. 

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