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What You Should Know About the ASX Top 20

What You Should Know About the ASX Top 20

The ASX Top 20 is a stock market index of the stocks listed in the Australian Securities Exchange from the Standard & Poor’s. It holds Australia’s 20 largest publicly traded corporations and is considered as Australia’s narrowest stock market index. The ASX 20 is highly liquid, actively traded and accounts for ~47% of Australia’s share market capitalization.

How is the index calculated?

Similar to other ASX indices, the ASX top 20 is a market capitalization index, which means, all companies that are listed in the Australian Securities Exchange (ASX) are ranked by market capitalization. The top 20 ASX stocks that meet the minimum volume and benchmarks will then be eligible for inclusion in the index.

Rebalances are done on a quarterly basis, happening in March, June, September and December. In case an important event occurs, (e.g. merger, delisting, etc.) an intra-quarter rebalance may be conducted. The market will then be given a notice in a minimum of two business days.

Index Composition and Listed Companies

The ASX top 20 companies have little diversification which only represent 8 GICS sectors. The Financials sector holds four out of the five largest companies and accounts for ~46% of the index.

Only 8 of the 11 GICS sectors are listed on the ASX top 20 index, namely, Financials (56.1%), Materials (11.3%), Consumer Staples (8.7%), Healthcare (6.8%), Telecommunication Services (5.7%), Industrials (4.4%), Real Estate (4.2), and Energy (2.8%).

Here are the ASX top 20 listed companies as of November 2017

  • AMP Limited (AMP)
  • Australia And New Zealand Banking Group Limited (ANZ)
  • BHP Billiton Limited (BHP)
  • Brambles Limited (BXB)
  • Commonwealth Bank of Australia (CBA)
  • CSL Limited (CSL)
  • Insurance Australia Group Limited (IAG)
  • Macquarie Group Limited (MQG)
  • National Australia Bank Limited (NAB)
  • QBE Insurance Group Limited (QBE)
  • RIO Tinto Limited (RIO)
  • Scentre Group Stapled (SCG)
  • Suncorp Group Limited (SUN)
  • Telstra Corporation Limited (TLS)
  • Transurban Group Stapled (TCL)
  • Wesfarmers Limited (WES)
  • Westfield Corporation Stapled (WFD)
  • Westpac Banking Corporation (WBC)
  • Woodside Petroleum Limited (WPL)
  • Woolworths Limited (WOW)

Investing in ASX 20

Investing in the ASX top 20 is done through Exchange Traded Funds (ETFs). ETFs are managed funds that track a benchmark. They trade on the ASX like ordinary shares using a ticker code. The goal of an index fund is to replicate the performance of the underlying index with less fees and expenses.

As of October 2016, the iShares S&P/ASX20 (ILC) is the only ETF that tracks the performance of the ASX top 20 index.