Australian Securities Exchange and Interest Rates
The Australian Stock Exchange (ASX) and the Australian Stock Exchange Index (ASX 200) comprise a heavily traded securities, debentures, derivatives, and FOREX market that has grown precipitously over the past decade. Additionally, the monetary policy of the Australian Federal Reserve has facilitated economic policy in favor of growing its companies represented within the ASX 200 index.
The truth is that all central planners adjust rates for their most elite global and domestic businesses due to the sensitivity these businesses have to the cost of borrowing and servicing debt. Additionally, interest rates spur inflationary concerns, which cause the price of raw materials and natural resources to rise. The demand for interest rate sensitive securities, derivatives, and natural resources also increases, which may further cause the increase of interest rates.
The research into the correlation between interest rates, the stock price of SUN, and the stock price of CSL reveal there is a positive correlation between interest rate movements and the stock prices of SUN and CSL. However, this is an overall measure. The data contains instances where there is a negative correlation. As interest rates decline, stock prices rise. This micro trend in the data suggests that once rates reach the asymptote, or the marginal decrease causes demand in the market and yields equity growth.
Introduction
The ASX is the Australian Market exchange that trades all listed Australian companies domiciled in Australia. The ASX is the 7th largest foreign exchange market (FOREX) in the world in terms of currency trading, and interestingly, home of the 5th most traded currency as well as the 4th most traded currency pair, the AUD and the AUD/USD, respectively Given the global growth and the transfer of wealth from western nations to the east, the rise in the ASX FOREX is not surprising, yet it is impressive. [1: http://www.asxgroup.com.au/the-australian-market.htm]
The ASX also incorporates the debenture, or bond market, which is the 4th largest debenture exchange within the Asian Pacific Rim. The equities or stock market is the 8th largest in the world with the metric of outstanding market capitalization. The market capitalization is A$1.3 trillion with A$5 trillion traded in the secondary market. (ASX Group, 2011) The ASX has developed into a player within the world-wide market exchange and has enabled Australia to become a choice for companies to flourish.
According to the ASX Group, "Spurred by its political and economic position, Australia has become an attractive investment destination for global investors as well as home to many major multinational financial services providers. With a diverse investor group comprised of 40% foreign investors, 40% domestic institutional investors and 20% retail investors, the Australian equity market is well placed in the global economy." (ASX Group, 2011)
According to the ASX Group, "Australia's steady economic growth has also been aided by a resources boom that has seen its economy emerge as one of the largest global suppliers of raw materials (coal, iron ore, etc.). This fertile resources sector makes up around 7.5% of Australia's total economy, with the remainder being comprised of financial services (10.8%, manufacturing (9.3%) and construction (7.8%). This distribution broadly mirrors that of the Australian equity market, with the largest sectors being financial services (35%) and resources (23%). (ASX Group, 2011)
Growth of the ASX is a function of its global interrelationships between its largest trading partners including the United States, Japan, and China. These trading relationships with strong and established economies netted a real economic growth rate of return for Australia of 3.0% over the most recent decade. Among the companies represented within the ASX, the growth of Australia's mining sector has substantially increased the natural resources and mining companies licensed in Australia.
The ASX 200 is an index of 200 stocks that is a sample of the total population of companies within the ASX 200. The sample isn't random, however, as these are the most stable 200 companies within the ASX and so represent the proverbial, 'pick of the litter'. As mentioned previously, Australia has been propelled by its booming mining industry and the index has gained in value from such companies as BHP Billton and other natural resources companies (Wall Street Journal, 2007).
Investopedia provides two alternative definitions for the ASX 200 Index. The first definition asks What Does ASX 200 Index mean? According to Investopedia, "The ASX 200 benchmark stock index for the Australian markets. It was created for the sake of investment managers who held Australian securities and needed a sufficiently large and liquid portfolio with which they could compare their investment...
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