The JSE All Share Index is a financial index weighed by market capitalisation. It comprises 600 of more than 2 000 companies traded on the London Stock Exchange. The JSE All Share Index represents 99 percent pre free-float of the full market cap value of all eligible securities listed on the Main Board of the Johannesburg Stock Exchange (JSE).
In this in-depth guide you’ll learn:
- Why trade the JSE All-Star Index?
- What is the JSE All Share Index?
- What is an index value?
- Are there other FTSE/JSE indexes?
And lots more…
Let’s dive right in…
What is the JSE All Share Index?
|Universe||Ordinary shares listed on the JSE Main Board|
|Fixed number of companies||No|
|Weighting methodology||Free float market cap weighted|
|Ranking methodology||Ranked by gross market cap|
Who manages the FTSE/JSE All Share Index?
The FTSE/JSE All Share Index is a collaborative effort orchestrated by the Financial Times Stock Exchange (FTSE) and the Johannesburg Stock Exchange (JSE). Now known as FTSE Russell Group, the British financial organisation specialises in providing index offerings for the global financial markets.
The FTSE Russell Group combines its world-class multi-asset capabilities with the regional expertise of the JSE in Africa to offer a diverse range of FTSE/JSE equity and fixed income indexes. The indexes are designed to represent the sentiment of both domestic and international investors.
The FTSE Russell Group is a wholly-owned subsidiary of the London Stock Exchange (LSEG) and is a unit of the Information Services Division.
The Johannesburg Stock Exchange (JSE)c is based in South Africa where it has operated as a market place for the trading of financial products for over 132 years. The JSE connects buyers and sellers in equity, derivative and debt markets.
The JSE is the largest stock exchange in Africa and one of the top 20 exchanges in the world in terms of market capitalisation. As of August 2020, the market capitalization of the JSE was at US$1,005 billion.
Why trade the JSE All Star Index?
Indexes like the JSE All-Star Index provide traders and investors with an easy way to monitor the overall health of a market in a particular jurisdiction. You can gauge the current state of a market by tracking one statistical measurement.
The historical data of index prices and movement also provide investors with insight into how a market has reacted to specific events in the past. This helps investors make better decisions when buying and selling shares in companies.
Most index funds are tracked in a passive manner to gauge market sentiment or they’re traded as Exchange Traded Funds (ETFs). Index ETFs typically offer the lowest fees because there is no active management. Many investors include Index ETFs as a portion of their portfolio.
Can I trade on JSE without a broker?
No, you cannot traded the All Star Index direct with the JSE. To trade the JSE All Share Index and buy shares listed on the stock exchange, retail traders and investors are required to go through a JSE-approved broker.
There’s no method to purchase indices or shares direct from the JSE without using a broker unless the company offers a direct stock purchase plan, which is rare in South Africa. Fortunately, online brokerage fees are inexpensive; ranging from only 0.25% to 0.5% per trade.
What is an index value?
In simple terms, as prices and market values of the stocks within an index rise and fall, the index reflects this movement using a series of index values. Index values are calculated and published daily after the market closes. In some cases, index values are calculated in real time.
The change in an index’s value from one point in time to the next represents the performance of the index. In other words, the performance of the market/segment it is designed to measure.
How is the JSE All Share Index calculated?
The market value for each stock is calculated by multiplying its price by the number of shares included in the index, and each stock’s weight in the index is determined based on its market value relevant to the total market value of the index.
Stock A, for example, has a share price of $3, and there are 50 shares of this stock in the index, so its market value is $150 ($3 X 50 shares = $150).
The total market value of every stock in the index is $970, so Stock A’s weight, or representation within the index is 15% ($150 / $970 = 15%).
When an index is first created, a starting (base) value is chosen. In our example, we will use 100 as the base value. Now that we have the total market value of our index and our base value, the next step is to determine the index divisor by dividing the total market value of the index by the base index value of 100 ($970 / 100 = 9.7).
Each day, as the market values of the stocks in the index fluctuate based on changes to their prices, the new total market value of the index is divided by the same divisor (9.7) to produce a new index value.
The divisor remains constant until the index constituency changes. For example, if a stock is delisted or a stock split occurs, the divisor will be recalculated to be reflective of the new index membership.
Are there other FTSE/JSE indexes?
Yes, there are three other indexes which have been launched under the FTSE/JSE Africa Indexes partnership. The four FTSE/JSE Africa Indexes are:
FTSE/JSE Africa Indexes
The FTSE/JSE Africa Index Series represents the South African equity market and its market segments. Market capitalization-weighted and alternatively-weighted indexes are available, including equally-weighted, shareholder-weighted, and capped indexes. The FTSE/JSE Africa Index Series replaced the JSE Actuaries indices in June 2002.
FTSE/JSE Responsible Investment Index Series
The FTSE/JSE Responsible Investment Index Series represents South African companies meeting ESG (Environmental, Social, and Governance) criteria as defined by the FTSE ESG Model. Companies in the FTSE All World Index that are also included in the FTSE/JSE Shareholder-Weighted All Share Index are eligible for inclusion, subject to criteria based on the FTSE ESG Model.
FTSE/JSE Fixed Income Index Series
The FTSE/JSE Fixed Income Index Series represents the performance of South African bonds. The series includes the FTSE/JSE All Bond Index (ALBI), which comprises the top 20 conventional-listed “vanilla” bonds with fixed, semi-annual coupons and the FTSE/JSE Inflation-Linked Index (CILI). A comprehensive range of sector and maturity sub-indexes are available for both the ALBI and CILI.
FTSE/JSE Multi-Asset Composite Index Series
The FTSE/JSE Multi-Asset Composite Index Series is a range of fully integrated multi-asset benchmarks designed to provide broad measures of cross-asset market performance. The series includes a set of indexes covering different local and global asset classes; including South African equity, fixed income, and property, as well as versions that include global equity and fixed income exposures. The indexes are designed to meet local market regulatory frameworks and are consistent with Regulation 28 of the Pension Fund Act.
FOREX TRADING AFRICA DISCLAIMER
Forex is a complex instruments and trading forex involves a high risk of losing money rapidly due to leverage. You need to understand how forex trading works and decide whether you can afford to take the risk of losing money on trade orders that do not go your way.
Forex Trading Africa annually reviews brokers and financial instruments and provides information to help traders and investors make better decisions when trading on global markets. The information provided is purely to grow your knowledge and expertise in financial trading.