The ASX 200 Index follows the price of the 200 largest companies listed on the Australian Stock Exchange by market capitalisation (the total value of the shares of that company actively traded in the market).
To be included in the index, a company must be listed on the Australian Stock Exchange (ASX) and must meet a basic liquidity requirement: a minimum amount of its shares must be changing hands on a regular basis. Only shares that are freely available – those not controlled by governments, private equity funds, directors or company founders – count towards the total market capitalisation.
The ASX 200, as it is more frequently referred to, is a popular index with traders and investors in Australia. It includes many leading Australian companies, like Foster’s Group, Macquarie and Qantas. However, it has a strong bias towards mining companies, partly because BHP Billiton and Rio Tinto, two of the biggest mining companies in the world, are components, and partly because Australia’s strong mining industry has produced a large number of companies in the resources sector.
The Australian economy has, in recent years, been a beneficiary of global demand of natural resources, particularly in Asia. In some respects, the ASX 200 Index is a benchmark of the performance of mining shares and the relative health of the global mining industry in general.
Apart from the mining sector, the ASX is also heavily laden with financial services companies, and some of its biggest constituents are banks like Commonwealth Bank of Australia and WestPac Banking Corporation.