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A share market index is an average of the share prices in a particular sector, or which belong to a specific group. Most indices are weighted in one way or another to make them a more accurate representation of the sector or market which they represent, as well as more useful. Indices are made up of constituents or component shares, the price changes of which determine how much the index might change daily.
 
For example, the Standard & Poor's (S&P500) index is a weighted average of the 500 largest companies trading on Wall Street. It is weighted for these companies’ market capitalisation. In general, the stock markets of the world follow Wall Street as represented by the S&P500. It is a very useful and widely followed barometer of world stock markets, clearly showing bull trends and bear trends. Consider the semi-log chart of the S&P over the past 25 years:
 
<figure class="figure"><img src="http://www.pdsnet.co.za/onlinecourse/images/Bulls_and_Bears.png" /> 
<figcaption class="figure-caption">S&P500 Index Semi Log Chart December 1994 to March 2021. Chart by Share Friend Pro.</figcaption>
</figure>
 
You can see here how the S&P maps out the major bull and bear trends of world markets (identified by the straight lines). You can also see that the current bull trend has been in progress for a record period of time - about twelve years (from March 2009 until February 2021). This assumes that the downward trend associated with COVID19 was an “aberration” from a technical point of view. Unlike other bear trends, the pandemic cannot be considered an economic event – even though it had a major impact on the economies of the world. Rather it was a once-off “black swan” event arising from something completely extraneous – so for the purposes of technical analysis our position is that we can ignore the “V-bottom” that it caused. Over that twelve years of the current bull trend there have been three major corrections. Officially, a correction is defined as any downward move that is greater than 10% and a bear trend is any move which is greater than 20%.
The above chart also shows the major corrections in the current bull trend – identified by the red ellipses. Nothing in the markets moves in a straight line. You will always get corrections in a bull market and rallies in a bear market. 
A bear trend is a period of widespread negativity among investors, which usually continues for between three and 8 years. Obviously, no one wants to be invested in shares during a major bear trend, because during a bear trend about 80% of shares will be falling and only 20% will be rising. The opposite is true of a bull trend.
 
One way to distinguish between bull and bear trends is to use a long-dated simple moving average – like a 200-day or a 300-day. By observing the slope of such a moving average you can determine whether the markets of the world are generally in a bull or a bear trend – and the major turning points where bull trends turn to bear trends or vice versa. Obviously, the longer the moving average that you choose the later it will alert you to a change in the direction of the trend, but the more reliable it will be.
Applying a 300-day moving average to the S&P500 index over the same 25 years we get the following chart:
<img src="http://www.pdsnet.co.za/onlinecourse/images/300-DAY_MA.png" />
This shows that using the slope of a 300-day moving average (the blue line) you could have identified the major bull and bear markets over the past 25 years. When the 300-day moving average turns down you are almost certainly in a bear market (and you should sell all your equities) and vice versa.
 
INDEXES OF THE WORLD
Almost all indices start on a particular date – and on that date they begin with an arbitrary value like 100 or 1000 as a starting point. From then on, they change every day as the prices of their constituents change.
 
Thus, for example, the Financial Times Stock Exchange (FTSE) 100 index of the 100 largest companies trading on the London Stock Exchange (LSE) was started at the beginning of 1984 with an arbitrary value of 1000 points. Since then, it has gone up more than six-fold – so the index is now trading for over 6000. The shares which are included in the index are reviewed every 3 months and only 30 of the original 100 shares are still there. The following semi-log chart shows the FTSE 100 over the past twenty or so years:
 
<figure class="figure"><img src="http://www.pdsnet.co.za/onlinecourse/images/FTSE.png" /> 
<figcaption class="figure-caption">
FTSE Index Semi Log Chart from May 1998 to March 2021. Chart by ShareFriend Pro.
</figcaption>
</figure>
 
You will immediately notice that its fundamental pattern over the past 20 years is very similar to that of the earlier chart of the S&P500 – showing that the indexes of the world tend to move in tandem – at least as far as major bull and bear trends and major corrections are concerned.
 
This type of index, which begins with an arbitrary “base value”, was developed by the German economist Hermann Paasche.
 
Today, most indices are also constantly adjusted for various corporate actions like share splits, consolidations, takeovers and share dividends. This is known as “scaling” the index and such indices are called “scaled indices”.
 
But the most important adjustment made to indexes is their weightings for their market capitalisations. The market capitalisation of a company is calculated by multiplying the number of shares which it has in issue by the current share price in the market. It is literally the value which the market gives to the company as a whole. Obviously, this means that the market capitalisations of companies within an index go up and down as their shares go up and down every day in the market.
 
<h2>FREE FLOAT</h2>
 
The free float (sometimes called the “public float”) of a listed company is defined as those issued shares which are freely available for trade on the stock exchange because they are held by members of the public. Shares which are held by the founders of the company or by foreign investors are excluded. Also, shares which are part of an employee share option scheme or which are part of an agreement which prevents them from being sold for a period of time are excluded. Shares held by the Government Employees Pension Fund (GEPF) are also excluded. So the free float of a company is generally far less shares than its total issued capital. From the free float, you can then calculate the “free float market capitalisation” of the company. By contrast, the market capitalisation found by multiplying the company’s issued shares by its current market price is known as the “full market capitalisation”.
 
The JSE actuarial indices use the free float market capitalisations of listed companies to calculate their indices. A company's influence on that index is determined by the size of their free float. Some companies have a massive market capitalisation, but a very limited free float – which means that their impact on indexes is relatively small, despite their size. For example, British American Tobacco (BTI) has a massive market capitalisation of over R1,4 trillion – but it only has a 10% free float – so its impact on the JSE Alsi40 index (J200) is only about 2%. Conversely, the Mondi Plc. (MND) has a market capitalisation of about R119bn, but it has a 100% free float so its impact on the JSE Alsi40 is also about 2%.
 
Let's look at the figures of the two companies mentioned above at the time of writing, as an example:
 
<table style="border-collapse: collapse; width: 99.9355%;" border="1">
<tbody>
<tr>
<th style="width: 20.129%;">Company</th>
<th style="width: 16.1935%;">Full Market Cap.</th>
<th style="width: 19.4839%;">Free Float Percentage</th>
<th style="width: 20.129%;">Free Float Market Cap.</th>
<th style="width: 24%;">Weighting in Top 40 Index</th>
</tr>
<tr>
<td style="width: 20.129%;">British American Tobacco</td>
<td style="width: 16.1935%;">1445323344365.88</td>
<td style="width: 19.4839%;">10%</td>
<td style="width: 20.129%;">148468961629.637</td>
<td style="width: 24%;">2.41%</td>
</tr>
<tr>
<td style="width: 20.129%;">Mondi Plc</td>
<td style="width: 16.1935%;">119922484872.75</td>
<td style="width: 19.4839%;">100%</td>
<td style="width: 20.129%;">119530494246.446</td>
<td style="width: 24%;">1.94%</td>
</tr>
</tbody>
</table>
 
You can see from the table above that despite BTI having a much larger market capitalisation, because of it's free float of only 10%, it's weighting is very close to that of MND, who's market capitalisation is much smaller, but has a free float of 100%. The free float determines the free float market capitalisation, and it is this number which is used to calculate a company's weighting.
 
The JSE requires that a company has a free float of at least 5% to be included in an index. The exception to this rule is a foreign inward listing with a free float market capitalisation of at least 1% of the free float market capitalisation of the JSE/FTSE Mid Cap index. So for example:
 
The only two companies at the time of writing which have a free float of less than 5% and which are included in the JSE indices are Glencore and Anheuser-Busch. Glencore's free float is 3% and Anheuser-Busch's free float is 1%. And their free float market capitalisations are R28142796988.641 and R18396199441.18 respectfully. As 1% of the free float market capitalisation of the Mid-Cap index was R1358814000, and both companies are foreign inward listings, they are well within this target range, and were therefore included.
<h2>MARKET CARPETS</h2>
 
The Market Carpets feature within your charting software displays all the sectors of the JSE and their relevant performance over a set period of time.
 
Every sector in the share market has an index which is updated every trading day as the prices of its component shares change. These indices are shown in the “Market Carpets” feature of your software. To see this, click on the “Scans” menu at the top of your chart. Then click on the second item in the drop-down menu which is “Market Carpets”. It will take a moment or two for your computer to do the calculations and then it will display the performance of all the sector indexes on the most recent trading day.
 
In the top right-hand corner of the Market Carpets screen, you will see that you can choose either “Price Performance” or “Up-days, Down days”. The price performance option simply measures the change in each index’s level over the period and ranks them on that basis. The up-days, down-days uses the “net advance/decline” method. This means that it counts the number of days in the period where the index rose and then subtracts from that the number of days where it fell. The net figure is then used to rank the indexes. In general, you will find the price performance method more useful.
 
Next to that you can select a period over which you want the market carpet to be drawn. The default is 1 day, but you can select different periods from 1 day up to 5 years. The colours of the index boxes in the diagram indicate how well that index did in a range from -10% to +10% according to the colour chart given.
 
Then, you can also display the information either as a market carpet or as a “market meter”.
 
Inside each index box you will see a number of smaller boxes which represent the component shares in that index (including the index itself). If you put your mouse over one of these smaller boxes you will get a tool tip which displays the name of the share and its percentage change over the period which you have selected.
 
<figure class="figure"><img src="http://www.pdsnet.co.za/onlinecourse/images/Market_Carpets.png" /> 
<figcaption class="figure-caption">ShareFriend Pro Market Carpets Feature</figcaption>
</figure>
 
So, the market carpets feature of your software enables you to see at a glance which are the best-performing and the worst-performing sectors on the JSE.
 
In 2002, the JSE began working with the London Stock Exchange (LSE) to produce the JSE/FTSE indexes. These indexes conform to international standards – which has the problem that some of the indexes are not really appropriate for the South African market.
For example, when you look at the market carpet diagram you will notice that some of the boxes like the Automobile and Parts index (JSE-Autm) contain only a single share (plus its index). Obviously, such indexes cannot really be described as averages and are not very useful to the investor. Others, like the mining index (JSE-Mini) have plenty of component shares and are thus very useful.
 
There are actually 65 JSE/FTSE indexes in your software and the market carpets only displays the performance of 32 of them. The remaining JSE indexes have been left out for one of two reasons:
 
1. They are not specific to one sector of the market, but cover the entire market in one way or another. For example, the JSE Alsi40 index has component shares from many different sectors and they are chosen just because they are the largest 40 shares trading on the JSE.
 
2.They are old indexes which the JSE continues to calculate and publish because some of their clients still want and use them. Good examples of these are the gold and platinum indexes (JSE-gold and JSE-plat).
 
So at this point we are going to explain the other indexes which you have in your software.
 
<h2>COMPARATIVE RELATIVE STRENGTH</h2>
 
The real benefit of indexes to the private investor is that they can be used to compare with other data streams.
 
The relative strength indicator (found at the bottom of your chart as “Comparative RSI”) is simply a formula which divides one data stream by another and then draws a graph of the result.
 
For example, the price of Dischem was 2694c at the close of trade on 14th February 2019. On that day, Clicks closed at 17700c. So if you divide 2694 by 17700 you would get 0,1522 – that is a relative strength point.
 
Of course, the relative strength level on its own means nothing. It is the trend of the relative strength that will show you whether Dischem’s share price is outperforming Click’s share price or vice versa. If the relative strength rises it means either that Dischem is rising more quickly than Clicks or that it is falling less quickly. Either of these situations will cause the relative strength graph to rise. Consider the chart:
 
<figure class="figure"><img src="http://www.pdsnet.co.za/onlinecourse/images/Dichem_-_Clicks.png" /> 
<figcaption class="figure-caption">
Relative Strength of Dischem and Clicks December 2016 to March 2021 – Chart by ShareFriend Pro
</figcaption>
</figure>
 
From November 2016, when it listed on the JSE, Dischem out-performed Clicks. Since then, Clicks performed better until August 2020. Since August 2020, Dischem has been dominant again.
 
Let’s consider another example.
 
Your software contains a chart of the Krugerrand price in rands going back to 1985. Since then, the gold coin has appreciated steadily – compensating for the steady decline in the value of the rand. What is interesting is to do a relative strength of the Krugerrand against the rand price of gold. The following chart shows the Krugerrand (the top chart) and its relative strength against the rand price of gold (the bottom chart) – over the past ten or so years:
 
<figure class="figure"><img src="http://www.pdsnet.co.za/onlinecourse/images/Krugerrand_Vs_Rand_Gold.png" /> 
<figcaption class="figure-caption">Krugerrand (the top chart) and its Relative Strength against the Rand Price of Gold (the bottom chart) over Ten Years</figcaption>
</figure>
 
In general, the Krugerrand trades at a slightly higher price than the rand price of gold because it is in a highly tradable and transportable form – which gives it a slight additional value.
 
What you can see from the relative strength chart (the bottom chart) is that, as you would expect, the relative strength remains fairly constant. However, there is a variation between 1 and 1,15 – which shows that changes in the rand price of gold are not always immediately reflected in the Krugerrand price. Perhaps there is an opportunity to buy Krugerrands when they are at or slightly below parity with the rand price of gold and then sell them when they are trading for 10% to 15% more than the rand price. Certainly, if you were thinking of buying Krugerrands, you would prefer to do so when they were under-performing the rand price of gold rather than the other way around.
 
Your software contains about 1200 different data streams including shares, currencies, indexes, commodities and many other tradable securities. Finding reliable relationships amongst these financial indicators can give useful insight into when particular securities are over- or under-priced.
 
From the examples above, you can see that you should spend some time looking for relationships between various data streams, especially indexes, to look for useful relationships.
 
You may also refer to module 26 of the PDSnet Online Investment course for further explanation of this indicator.
 
<h2>JSE/FTSE INDEXES</h2>
 
The component shares of the JSE indexes are all weighted for their free-float market capitalisation. In addition, they are scaled indexes which take into account corporate actions like share splits and consolidations. What follows is a brief description of each of the JSE indexes which are not sector-specific, but which average other useful groups of shares.
 
<h3>JSE FINANCIAL AND INDUSTRIAL INDEX (J250)</h3>
 
At the time of writing, the JSE Financial and Industrial index (J250) included 138 industrial and financial shares. The largest component was Naspers which accounted for more than 25% of the index, followed by Richemont with more than 9%, and Standard Bank and FirstRand with about 4%. Other major shares included ABSA which represented over 2%, MTN with about 3%, Old Mutual with around 2%, Remgro with about 2% and Sanlam with nearly 3%. As you can see the major blue-chip companies dominate the index, especially Naspers and Richemont – both of which have businesses which are primarily located overseas. So, when considering this index, you should first look at these two shares to see if they are the reason for a particular move.
 
<h3>JSE TOP 40 TRADABLE INDEX (J200)</h3>
 
The JSE Top 40 (Tradable) Index consists of the 40 largest companies by free-float market capitalisation on the JSE. This index is dominated by Naspers (over 23% at the time of writing) and BHP Billiton (over 11% at the time of writing) and Richemont (over 8% at the time of writing). Other significant shares include ABSA (just less than 2% at the time of writing), FirstRand (over 3% at the time of writing), MTN (over 2.5% at the time of writing), Standard Bank (about 4% at the time of writing) and Sasol (about 4% at the time of writing). You should keep in mind that some of these shares are commodity shares – like BHP Billiton and Sasol – so major moves in commodity prices can skew the index on occasions.
 
<h3>JSE ALTX 15 INDEX (J233)</h3>
 
This index is supposed to contain the 15 largest companies trading on the Alt-X, but at the time of writing there were only ten that qualified for inclusion and they are dominated by Renergen, which represented about 19.5%. The remaining shares were Alaris, Advanced Health, Etion, ISA, Jubilee, Silverbridge and Workforce. Obviously, these shares are riskier and generally more thinly traded than those on the main board, but sometimes there can be some good buys among them. When considering these shares, you should look closely at the average daily volumes traded. Make sure that there is sufficient volume to allow you to sell out on your stop-loss if you need to.
 
<h3>FTSE/JSE ALT-X INDEX (J232)</h3>
 
The Alternative Exchange or Alt-X was brought in by the JSE to replace the Venture Capital Market (VCM) and the Development Capital Market (DCM) and its main purpose is to allow smaller shares to list than are allowed on the main Board. Most stock markets around the world have some sort of junior exchange to accommodate smaller companies wanting to list. The New York Stock Exchange (NYSE) has the American Stock Exchange or “Amex”. The London Stock Exchange (LSE) has the Alternative Investment Market or AIM. The JSE’s Alt-X contains many interesting shares for private investors to consider. Your first concern when looking at Alt-X shares is whether they have sufficient volume traded on average every day to allow for stop-loss transactions should they be necessary. Many of the shares in the Alt-X are very thinly traded and so are not practical for private investors. The requirements for listing on the Alt-X are a 10% shareholder spread, R2m in share capital and a minimum of at least 100 shareholders. The objective of most Alt-X listed companies is to move to the Main Board of the JSE when they are large enough to qualify. Listing requirements can be found here: <a href="https://www.jse.co.za/content/JSEProcessItems/AltX%20Listing%20Requirements.pdf">https://www.jse.co.za/content/JSEProcessItems/AltX%20Listing%20Requirements.pdf</a>
 
<h3>JSE DIVIDENDS PLUS INDEX (J259)</h3>
 
The JSE’s Dividend Plus Index is designed to include only those shares from the JSE Top40 and the JSE Mid-Cap which pay the best dividends based on their dividend yield. The components of the index are weighted according to their dividend yields every quarter and only the best 30 are included. Of the 30 shares, at the time of writing, the one with a high weighting was BHP Group Plc (over 6%). Telkom had a dividend yield of around 4,8% - which is a good yield for a blue-chip share – indicating that it was relatively cheap in terms of its distributions. MTN had a weighting above 3% - but that was probably because of its troubles in Nigeria and elsewhere. The primary usefulness of this index is to buy into it through the Satrix Divi ETF. You could possibly consider this for your Tax-Free Savings Account (TFSA)..
 
<h3>JSE FINANCIAL 15 INDEX (J212)</h3>
 
The Financial and Industrial 15 index consists of the largest 15 companies by free-float market capitalisation, but it excludes Naspers and Richemont. At the time of writing, these 15 companies were ABSA, Capitec, Discovery, FirstRand, Growthpoint, Investec, Nepi Rockcastle, Old Mutual, PSG (prior to the unbundling of Capitec), Redefine, RMB, Reinet, Standard Bank and Sanlam. Of these the largest weightings were given to FirstRand (just less than 15%) Standard Bank (over 17%) and Sanlam (just less than 10%). This index is much more representative of the movement of blue-chip shares which are focused in South Africa because it excludes Naspers and Richemont.
 
<h3>JSE FINANCIAL AND INDUSTRIAL 30 INDEX (J213)</h3>
 
An index prepared by the JSE actuaries which is a weighted average of the 30 largest financial and industrial shares trading on the Johannesburg Stock Exchange. The Financial and Industrial 30 index includes the top 30 financial and industrial shares by free-float market capitalisation trading on the JSE. Unlike the JSE-Fin 15, this index does include Naspers and Richemont. At the time of writing, Naspers accounted for over 33% of the index, while Richemont accounted for over 12%. Standard Bank and FirstRand both accounted for about 5% and the rest of the shares were much smaller. The benefit this index has is that it does not contain any commodity shares – but it is still hugely influenced by overseas markets and events which are not directly pertinent to the South African economy itself.
 
<h3>JSE FINANCIALS INDEX (J580)</h3>
 
This is an index of the financial shares trading on the JSE. It includes 60 companies (counting Investec Ltd and Investec Plc as a single company) including the larger real estate investment trusts (REIT). The property sector had grown substantially until the start of 2018. Since then, it has been falling firstly because of the 360One report and because of COVID-19. It remains a major component of the JSE as it recovers. What is interesting in this index is the percentage free float of the various companies. For example, at the time of writing, Hammerson had only a 13% free float and so was only given a weighting of 0,36%. Its market capitalisation of R48bn was reduced to a free-float market capitalisation of just 6.5bn. The largest weighting was given to Standard Bank with a free-float percentage of 79% and a weighting of 13.62%. FirstRand had a higher market capitalisation than Standard, but its free float was only 57% so its weighting is only 11,5%. As you can see, adjusting for free float has an enormous impact on indices.
 
<h3>JSE FLEDGLING INDEX (J204)</h3>
 
This index consists of ordinary shares which comply with all listing requirements but are too small to be included in the All-Share Index and which are not tested for liquidity. The JSE is broken down into 4 indices – the JSE Top 40 (the 40 largest companies by free-float market capitalisation), the JSE Mid-Cap (the next 60 largest shares) and the JSE Small-Cap (which is the remaining shares in the JSE Overall after the Top 40 and the Mid-Cap). Shares which are too small or not well enough traded to get into the JSE Overall index are in the “Fledgling” index. They are not measured for their free float – so there are plenty of really thinly traded shares in this index. At the time of writing, there were 113 shares in the Fledgling index. The largest share in this sector by free float market capitalisation was Alviva Holdings which had a weighting of just over 4% of the index. Next was Tower Property Fund which had a weighting of over 3.5%. No other share had a weighting above 3.5%. The most important aspect of these shares is that many of them are very thinly traded so as a private investor you need to pay special attention to their average volume traded. Make sure they have enough volume to allow you to stop out of the share if your need to. Most of the fledgling shares are included in the Alt-X, which is a market for small to medium companies in the growth phase and has less stringent listing requirements. You can also look at and compare the JSE Alt-X index.
 
<h3>JSE INDUSTRIALS INDEX (J520)</h3>
 
The JSE Industrial index contains just 20 shares and, at the time of writing, was dominated by Remgro with a weighting of over 33% and Bidvest with a weighting of over 23%. These two shares had a very high free-float percentage (97% and 100% respectively) which accounts for their dominance. Barloworld also featured with a weighting of 9.7% and KAP with 4.7%. Obviously, this excludes foreign-oriented heavy hitters like Naspers and Richemont – so it gives a good indication of South African involved industrial companies. These companies are obviously suffering from the current low growth being experienced by the South African economy.
 
<h3>JSE INDUSTRIALS 25 INDEX (J211)</h3>
 
The Industrial 25 index contains the largest 25 shares in the industrial sector weighted for their free-float market capitalisation. This index is again dominated by Naspers (over 44% weighting at the time of writing) and Richmont (over 16% weighting at the time of writing). Together these two shares accounted for 60% of the index. Of the remaining companies (including Shoprite), the only one at the time of writing which had a material weighting was MTN with just less than 5%. In our view, this index is not much use to private investors because overseas interests dominate it.
 
<h3>JSE LARGE CAP INDEX (J205)</h3>
 
The JSE Large Cap index contains 46 very large companies. In many ways this index is similar to the JSE Top 40 index. At the time of writing, Naspers accounted for over 23% of it, followed by BHP, which accounted for over 11%, and Richemont, which was at over 8%. The rest of the companies were all above R40bn in market capitalisation – so they are very large. An anomaly is Anheuser Busch which had a R1,6 trillion market capitalisation but only a 1% free float and so was only weighted 0,3% in the index. Anglo American scored a weighting of over 6%.
 
<h3>JSE LARGE AND MID CAP INDEX (J206)</h3>
 
The Large and Mid-Cap index combines the Large Cap and the Mid Cap indices into a single index. At the time of writing, it had 103 shares in it and Naspers made up over 20% of it and BHP was at over 10%. There are some big financial shares here like Standard Bank (just over 3% at the time of writing), Sasol (just over 3,5% at the time of writing) and Firstrand (just under 3% at the time of writing). So this index is useful if you want to see the performance of the larger companies trading on the JSE. But again shares like Anheuser Busch don’t shape because of their very low free float.
 
<h3>JSE MID CAP INDEX (J201)</h3>
 
The Mid Cap index is supposed to be the next 60 largest shares trading on the JSE, after the Top 40. In practice it sometimes contains 59 or 61 shares. For actuarial reasons. At the time of writing, it only consisted of 57 shares. Many of these mid-cap shares are, in fact, high-quality blue chips and they are definitely worthy of your attention as a private investor. At the time of writing, the largest component of the index was Clicks which accounted for over 4.5%. After that came Gold Fields at over 4%, with Impala Platinum and The Foschini Group also at about 4%. Then there were quite a few largish companies in the 3% range – like Life Healthcare, The Spar Group, Sappi, Netcare, Quilter, AVI and Truworths International. So, this index really does tell you what is happening in the South African economy. Many of these shares do have overseas interests, but the bulk of the Mid Cap does business here in South Africa. It is worth noting that quite a few of these shares are commodity shares – so the index is skewed for the progress of commodities. For quite a while the most popular mid-caps have been property shares and industrials but changed in 2018 at least as far as property is concerned, since the concerns surrounding the Resilient Group came to light followed by COVID19.
 
<h3>JSE SMALL CAP INDEX (J202)</h3>
 
The JSE Small Cap index consists of all the shares which are included in the JSE overall – except for those in the JSE Top 40 and the JSE Mid Cap. The Top 40 index is an average of the 40 largest companies in the JSE Overall index, followed by the mid-cap index, which is the next 60 largest companies and, finally, the small cap index which is an average of the balance of the shares in the JSE overall index. At the time of writing, there were 61 shares included in this index. The largest share in this group was Investec Property Fund Ltd (IPF), with under 4%, but with the fall in property shares following the 360One report and COVID19 IPF has fallen substantially. Other shares with a 3% weighting were Transaction Capital, Equites Property Fund, PPC Ltd, Datatec, Sun International, Advtech and Astral Foods. So, this is a fairly well-balanced index of smaller companies with no dominant shares. When looking at these shares pay attention to the average daily volume traded. Some of them are very thinly traded and will be difficult to stop out of. Many of these shares are listed in the Alt-X and they are typically smaller companies which have recently obtained their listings, and which are in a strong growth phase. This clearly makes them much higher risk for the investor than companies in the mid-cap index, but they can also offer very good returns – if you pick the right one. Usually, the CEO of one of these companies will be happy to grant you an interview if you tell him that you are an investor. It is well worth visiting the premises of such companies and seeing first-hand how they make their money. You can often learn much more from the CEO’s face and attitude than from his results. It is also interesting to compare the small cap index with other indexes – like the Top 40 index or the mid-cap.
 
<h2>OTHER INDICES</h2>
 
If you type “I-“ into the charting software, your share explorer will bring up all the other world indexes and prices which are in your database. There are 30 of these and they will give you a daily understanding of what is happening on other markets around the world. Some of them are particularly interesting, like the Baltic Dry Index and the MSCI Emerging Markets index. You should note that to bring the JSE into line with international markets, the JSE ceased producing the JSE Gold index, the JSE Platinum index, the JSE Coal Index, the JSE Diamonds index and the General Mining index with effect from 23rd March 2021. The shares in these indexes were incorporated into the JSE Precious Metals and Mining index – which is mostly known as the JSE Mining index (JS5513)
What follows is a brief explanation of the first six of the international indexes and prices in your software (for explanations of the other consult the PDSnet Stock Market <a href="/index.php/stock-market-glossary/">Glossary</a>):
 
Amex Composite Index (AMEX) –
This is an index of approximately 250 shares trading of the NYSE Amex exchange. The NYSE Amex exchange started life as the “curb” exchange because it consisted of trades in shares which were too small to list on the New York Stock Exchange (NYSE) and so had to trade outside on the curb of the pavement where brokers used specific lamp posts to make a market in certain securities. So today it is the third largest national exchange in America after the NYSE and the Nasdaq.
 
Sydney All Share Index (AUST) -
The Australian All Ordinaries Index or All Share Index is a weighted average of the 500 largest companies trading on the Australian Securities Exchange (sometimes also known as the “Sydney Stock Exchange”). This exchange has companies in the Asia-Pacific region and has a market capitalisation of about $1,9 trillion which makes it more than twice the size of the JSE. The “All-ords”, as it is known, covers about 95% of the market capitalisation of the Australian Stock exchange.
 
Baltic Dry Index (I-BALTIC) –
– The Baltic Dry Index (BDI) is a composite index calculated by the Baltic exchange in London and made up of the Capesize, Panamax and Supramax averages. This is a measure of ship sizes. Capesize refers to a ship which is too large to go through the Suez Canal and so has to circumnavigate the Cape. A panama ship is too large to go through the Panama Canal and a Supramax ship is small enough to go through either canal. So, the BDI is an index which measures the level of shipping in the world – which is a good indicator of trade levels and the world economy.
 
Paris CAC Index (CAC-40) – The Cotation Assistee en Continu is an index of the 40 largest shares trading on the Paris stock exchange, now known as the Euronext Paris. It commenced with a base value of 1000 in 1987. It uses the free float market capitalisation of its component shares. Consider this chart:
 
<figure class="figure"><img class="figure-img img-fluid" src="http://www.pdsnet.co.za/onlinecourse/img/mod31_CAC40.jpg" alt="" />
<figcaption class="figure-caption">CAC40 Index (top chart) and its Relative Strength Performance (bottom chart) Against the S&P500 Index</figcaption>
</figure>
 
Here you can see how the CAC has under-performed the S&P for the past decade.
 
Gold 1000Z GC Comex (I-COMEX) – The Comex, which was previously the commodities exchange, is a division of the New York Mercantile Exchange (NYMEX). It trades futures and options in a variety of precious metals and base metals. This data stream is for the price of the 1000 ounce gold futures contract. This contract is specifically aimed at private investors who want to trade gold in small quantities. The contract can be traded almost 24 hours a day. In many ways this data stream is very similar to the spot price of gold – as you would imagine.
 
Germany DAX Index (DAX-INDX) –
This is a simple index of the thirty largest shares trading on the German stock exchange. The Dax is a Paasche index which began on 30-12-1987 at a base value of 1000. The Dax generally follows the other indexes in Europe like the French Cac index and the British FTSE. And they all follow Wall Street which is best measured by the S&P500. The Dax only includes 30 shares, so it does not really represent the broad spectrum of German business – but it is the most commonly used index for assessing the German share market.