Overview of the Australian Share Market
Overview of the Australian Share Market

The Australian share market is one of the world’s largest, and is currently ranked 15th with a market capitalisation of A$1.6 trillion (US$1.3 trillion).

Size and liquidity

This is largely in line with the size of the Australian economy, as measured by Gross Domestic Product (GDP). However, much like the size differential between the American and the Australian economies, the size of the ASX is dwarfed by that of the New York Stock Exchange (NYSE) which is more than 12 times larger in terms of market capitalisation.

Today, the ASX has an average daily turnover of A$5.6 billion and facilitates an average of 1.3 million trades a day. The ASX is currently trading on a 20.2 times Price Earnings (PE) multiple, compared to the long term average 17.6 times PE multiple and compared to the current 17.8 times PE multiple of the NYSE. It also trades at a 4.2% Dividend yield, one of the highest of all global exchanges. Investors also benefit from franking credits, which increases the attractiveness of dividends.

While there are about 2185 stocks listed on the Australian market, most of the value is made up of the top 200 stocks by market capitalisation. Thus the market barometer is largely viewed as the ASX200 index (XJO) and is seen as the most important Australian share market index because it serves as the benchmark for fund managers. Other well-known indices include the All Ordinaries Index, comprising the top 500 stocks by capitalisation, the Accumulation index, comprising the top 200 stocks and assumes dividends are continuously reinvested, and the individual sector indices, such as the ASX 200 financials or ASX 200 Materials.

Size of Global Share Markets

Market Cap (USD trillions)

Sectors and their weightings

Of the 2185 stocks listed on the ASX, around 33% are junior metals and mining stocks by number, yet the entire listed Materials sector accounts for only 15% of the ASX by index weight. In contrast, financials only account for 5% of the number of stocks listed, yet is the largest sector in terms market capitalisation; accounting for 36% of the index.

Stocks are classified into sectors according to their major business type.

Initial and Secondary Market

One of the key aspects of global share markets is the ability for companies looking to list to raise capital via an Initial Public Offering (IPO) or for already listed companies to conduct further capital raisings (secondary capital). In 2016, $21.2 billion was raised via IPOs on the ASX, while $33.3 billion of secondary capital was raised by established listed companies in the market.


The chart below shows the performance of the Australian share market since the publication of the first share price index in 1938. During this time major world, political and economic events have impacted and shaped the Australian market. Notably, the market is characterised by cyclicality and is subject to times of extreme upward trajectory (Bull market) and sudden and violent down trends (crashes or Bear market). The most notable recent crash, the Global Financial Crisis (GFC), occurred in 2008 and saw the ASX200 retreat by c.50% over the calendar year.
The ASX 200 is currently trading at around the 5850 mark, nearing its 5 year high. In the past 12 months, the ASX 200 has increased by c.11.5%; while the ASX 200 Accumulation Index, which includes reinvested dividends, has risen c.18%.


Trading on the Australian Exchanges was initially conducted by a call system, where an exchange employee called the names of each company and brokers bid or offered on each. In the 1960s, this changed to a post system. Exchange employees called "chalkies" wrote bids and offers in chalk on blackboards continuously, and recorded transactions made. An electronic system was introduced in the 1980’s, and by the 90’s all trades were actioned by placing orders on computers.

Ten years after the official advent of the Gold Rush, Australia's first stock exchange was formed in Melbourne

Thirty years after it lit the first gas street light in Sydney, AGL took its place in history again, becoming the second company to list on the Sydney Stock Exchange.

Two years after the Broken Hill Mining Company (private company) was established by a syndicate of seven men from the Mt Gipps sheep station, the company was incorporated to become the Broken Hill Proprietary Company Limited (BHP) and listed on the Melbourne Stock Exchange.

The Australian Associated Stock Exchanges (AASE) was established.

Publication of the first share price index.

Sydney Stock Exchange closed for the first time due to the declaration of World War II.

The Poseidon bubble (a mining boom triggered by a nickel discovery in Western Australia) caused Australian mining shares to soar and then crash, prompting regulatory recommendations that ultimately led to Australia's national companies and securities legislation.

The separate Melbourne and Sydney stock exchange indices were replaced by the Australian Stock Exchange indices.

Brokers' commission rates were deregulated.

The Australian Stock Exchange Limited (ASX) was formed on 1 April 1987, through incorporation under legislation of the Australian Parliament. The formation of the national stock exchange involved the amalgamation of the six independent stock exchanges that had operated in the states' capital cities.

Electronic trading commences as the market moves from floor to screen

The FAST system of accelerated settlement was established, and the following year the CHESS system was introduced, superseding FAST.

The exchange members (brokers etc.) voted to demutualise. The exchange was incorporated as ASX Limited and in 1998 the Company was listed on the ASX itself, with the Australian Securities and Investments Commission enforcing the listing rules for ASX Limited.

ASX demutualised and became a listed company. It was the first exchange in the world to demutualise and list on its own market, a trend that has been imitated by several other exchanges over the years.

Note: This article is intended to provide general advice only, and has been prepared without taking account of your objectives, financial situation or needs, and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. If any advice in this document relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the Product Disclosure Statement for that product before making any decision.