Bad day for KOSPI, which ended the day on Monday, July 4 with slight decreases of 0.22%, to 2,300.34 points. The KOSPI posted a maximum volume of 2,318.31 points and a minimum volume of 2,276.63 points. The trading range for KOSPI between its highest and lowest point (maximum-minimum) during this day stood at 1.8%.
Compared to the last week, the KOSPI registers a decrease of 4.23%, therefore in year-on-year terms it still accumulates a drop of 30%. The KOSPI is 23.05% below its maximum so far this year (2,989.24 points)
Stock market indices… for what?
A stock index is an indicator that shows how the price of a certain set of assets changes, for which you need to have data from different companies or sectors of a part of the market.
These indicators are mainly used by the stock markets of different countries of the world and each one of them can be integrated by firms with specific requirements, such as having a similar market capitalization or belonging to the same type of industry, in addition, there are some indices that only take into account a handful of shares to determine their value or others that consider hundreds of shares.
Stock indices serve as an indicator of confidence in the stock market, business confidence, the health of the national and global economy, and the return on investment in a company’s stocks and shares. Generally, if investors lack confidence, share prices will tend to fall.
Likewise, they function to measure the performance of an asset manager and allow comparison between profitability and risk; measure the opportunities of a financial asset or create portfolios.
This type of indicators began to be used at the end of the 19th century after the journalist Charles H. Dow. closely watched how company stocks tended to go up or down together in price, so he created two indices: one containing the top 20 railroad companies (since it was the biggest industry at the time), as well as 12 actions of other types of businesses
Currently there are various indices and they can be grouped according to their geography, sectors, company size or even the type of asset, for example, the Nasdaq US index is made up of the 100 largest companies largely related to technology. such as Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Facebook (FB), Alphabet (GOOG), Tesla (TSLA), Nvidia (NVDA), PayPal (PYPL), Comcast (CMCSA), Adobe (ADBE) .
How is a stock index measured?
Each stock index has its own way of being calculated, but the main component is the market capitalization of each company that is part of it. This is obtained by multiplying the value of the day of the title in the corresponding stock market by the total number of shares that are in circulation in the market.
Firms listed on the stock exchange are required to present a balance of their composition. This report must be delivered every three or six months, as appropriate.
Reading a stock index also implies noticing its changes over time. New indices always start with a fixed value based on the prices of the securities on their start date, but not all follow this method. Therefore, it can be misleading.
If one index sees an increase of 500 points in a day, while another only adds 20, it might appear that the first one outperformed. However, if the former started the day at 30,000 points and the other at 300, it can be assumed that, in percentage terms, the gains for the latter were considerable.
Major stock indices
Among the main stock market indices in the United States is the Dow Jones Industrial Average, better known as Dow Jones, of which 30 companies are part. Likewise, the S&P 500, which includes 500 of the largest companies on the New York Stock Exchange. Finally, the Nasdaq 100 appears, uniting 100 of the largest non-financial firms.
On the other hand, the most prominent indices in Europe are the Eurostoxx 50, which covers the 50 largest companies in the eurozone. On the other hand, the DAX 30, the main German index that contains the most prominent companies on the Frankfurt Stock Exchange; the FTSE 100 of the London Stock Exchange; the CAC 40 of the Paris Stock Exchange; and the IBEX 35, of the Spanish stock market.
On the Asian continent, we have the Nikkei 225, made up of the 225 largest companies on the Tokyo Stock Exchange. There is also the SSE Composite Index, which appears as the main one in China, made up of the most relevant companies on the Shanghai Stock Exchange. The same role played by the Hang Seung Index in Hong Kong and the KOSPI in South Korea.
Regarding Latin America, there is the IPC, which contains the 35 most influential firms of the Mexican Stock Exchange (BMV). At least a third of them are owned by magnate Carlos Slim.
Another is the Bovespa, made up of the 50 most important companies on the São Paulo stock exchange; the Argentine Merval; the IPSA of Chile; the MSCI COLCAP of Colombia; the IBC of Caracas, made up of 6 companies from Venezuela.
Also, there are other types of global stock indices such as the MSCI Latin America, which includes the 137 most important companies in Brazil, Chile, Colombia, Mexico and Peru.
Similarly, there is the MSCI World, which includes 1,600 companies from 23 developed countries; the MSCI Emerging Markets, made up of more than 800 companies from developing countries; and the S&P Global 100, made up of the 100 most powerful multinational firms on the planet.