Introduction to the ASXStock Market

The ASX or Australian Stock Exchange is the market in which companies in Australian can list, raise capital and activate strategic plans not possible without the funds available on the ASX Stock Market.

Like any market, the ASX stock market brings together buyers and sellers of Australian financial instruments, not limited to stocks, but also derivatives, bonds, options, managed funds, exchange traded funds and more.

The ASX stock market allows for all the financial instruments to be managed in one place, with online brokerssuch as IG Markets, Commsec and ANZ Share Training. When a transaction is made through the ASX Stock Market, the funds clear and settle through CHESS.

CHESS or the Clearing House Electronic Sub-Register System is the computer system used by the ASX to manage the settlement of share transactions and to record shareholdings. In practical terms, it allows brokers and other market participants to settle trades via CHESS by themselves or on behalf of their clients.^[1]

These funds of the transaction of buying and selling on the ASX Stock market, are admitted to ASX under the ASX Listing Rules and must provide information on their performance and investments. All companies, funds and other product issues are regulated under the Corporations Act 2001 and supervised by the Australian Securities and Investments Commission (ASIC).^[2]

This level of regulation provides investors with the comfort that they are protected when things go wrong, in reality the Corporations Act and ASIC is there to protect the investors from deceiving or misleading conduct, fraud and other irregularities in the way companies report and account for their business activities.

ASIC does not protect investors from losing all their money due to mismanagement or risks of ‘doing business’ which may cost investors their funds – even in some cases, such as with leveraged products, more capital than they originally invested.

The ASX stock market is no place for amateurs. Within the ASX Stock Market there are a range of key performance indicators that show an investor, companies, markets and politicians alike how the Australian economy is tracking.

The "ASX200" is a benchmark index that was created in the year 2000 and consists of the 200 largest public companies by market capitalisation listed on the ASX.^[3] This index tracks the movement of the market across a wide range of industries – which the financial services at the time of writing this article (28^th of April 2019) was by far the largest with approximal 30.1% of the ASX200 index.

Although you can’t invest in an ASX stock market index, there are Exchange Traded Funds, or ETF’s that are set up by fund management companies that are designed to track the ASX200 or the ASX50 or a wide range of indexes allowing people to trade on the ASX stock market, rather that a particular industry or sector.

This can allow first time investors some security and protection against specific market risks companies may face, while exposing it to simply the risks the ASX stock market as a whole face – such as geopolitical insecurity, domestic politics etc.

In addition, for sophisticated investors it can indeed offer hedging opportunities as part of a larger portfolio strategy.

Before starting out in the ASX stock market it is always important to speak to experts that are licenced, experience and qualified in guiding you through your personal, financial and investment goals.

 

[1]https://www.westpac.com.au/personal-banking/investments/the-share-market/what-is-CHESS/

[2]https://www.asx.com.au/products/managed-funds/buying-selling.htm

[3]https://www.wise-owl.com/investment-education/asx-200-explained-what-is-the-asx-200

We welcome you to give our team a call to discuss your investment goals and objectives.

You can call Walker Capital Australia on +61 2 8076 2210, and we’ll see how we can help you achieve your investment goals.

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