What are we tracking? An overview of European indices
April 11, 2007I have already mentioned how important diversification is in order to minimise the impact that one sector’s / index’s performance can have on your overall returns, and by examining stock indices abroad I’m hoping to provide you with a decent selection of possible indices to invest in.
This time I will have a look at European indices, but since there are plenty of countries to choose from, I will only look at one key index per country. Despite this restriction I felt that you might be overwhelmed by too much information at once (and let’s not forget I’ve got finals in 3 weeks…) which is why I have divided the topic into two posts.
If there is any (European) country you are particularly interested in and that I haven’t mentioned, please leave a comment or start your own research here or here.
- Belgium: The BEL20 is the main stock index for the Euronext Brussels. The shares represented by the index are chosen by the Euronext market authorities based on criteria like market capitalisation. There is a striking dominance of financial companies which represent about 40% of the index’s market capitalisation, compared to a weight of < 8% given to technology- and telecom-related shares. The index has experienced a growth of 64.32% in the last 5 years.
- France: The main French benchmark index is the CAC 40, which is a capitalisation-weighted measure of the 40 most significant values among the 100 highest market caps on the Paris Bourse. It was started at a base value of 1,000 in December 1987. The companies represented in the CAC 40 are mainly multinational companies which means that despite their French origins about 45% of the shares are owned by foreign investors. Companies included in the index are for example AXA, BNP Paribas, Carrefour or Renault. The index has gained 27.14% within the last 5 years.
- Germany: The Xetra DAX is the most important stock index in Germany. It is a blue-chip index consisting of 30 major companies trading at the Frankfurt Stock Exchange. Companies represented by the index include Adidas, BASF, BMW, Daimlyer Chrysler, Deutsche Bank, Lufthansa and SAP, all of which have contributed to a growth of 35.15% in the last 5 years.
- Italy: The S&P MIB is currently Italy’s most important stock index and lists the 40 most largely-capitalised stocks traded on the Borsa italiana. It has been commonly used since September 2004 when it replaced the MIB 30. The index grew by 30.64% within the last 5 years.
- Netherlands: The Amsterdam Exchange Index (AEX) is a stock market index that is composed of the 25 largest companies that trade on the Euronext Amsterdam. The maximum weight any company can have within the index is restricted to 15%. ABN Amro, Philips and Unilever are just a few of the many well-known companies represented by index, which experienced a huge fall in 2002. Therefore the overall growth for the last 5 years is currently only 1.39% even though it grew by 48.41% within the last three years.
- Portugal: The Portuguese Stock Index (PSI 20) lists the 2o largest and most liquid share issues from all companies on the Portuguese stock market. The constituent weights are limited to 20% of the index capitalisation. The PSI 20 experienced a growth of 54.56% in the last 5 years.
The next post is going to cover Spain, Switzerland and the Scandinavian countries in the North who are usually known for their great economic strength - I’m curious whether that’s reflected in the growth rate of their stock indices!
Read part 4 of “What are we tracking?” for more European indices >>
