A securities exchange is an organized market where financial investments such as stocks, bonds, mutual funds, and commodities are bought and sold. Australia’s primary securities exchange was founded in 1987 and is known as the Australian Securities Exchange or ASX. The ASX is operated by a public company (ASX Limited) and was established by merging the country’s six state securities exchanges at that time. In 2006, the ASX was further combined with the Sydney Futures Exchange. The ASX is not to be confused with the Sydney Stock Exchange (SSX), a separate entity. While the largest stock markets worldwide are based in North America, East Asia, and Europe, the ASX is still placed within the top 10 exchanges based on equity market values.
Trading volumes and stock index performance
The monthly trading volume of the ASX was dominated by equity trades, which are the buying and selling of company shares or stocks. As of July 2023, the largest companies listed on ASX included BHP Group, Commonwealth Bank, and CSL Ltd. The average daily equity trading value in Australia in the last quarter of 2022 stood at 3.4 billion Australian dollars.
Like all major stock markets, the ASX, in conjunction with Standards & Poor’s, maintains stock indexes. The most common are the S&P/AXS 20, S&P/AXS 50, S&P/AXS 100, S&P/AXS 200, and S&P/AXS 300, representing the largest 20, 50, 100, 200, and 300 companies listed on the exchange respectively. The All Ordinaries price index, which includes the performance of the 500 most important companies listed on the ASX, was significantly impacted by the global coronavirus pandemic. However, it has since recovered and stood at 7,221.7 at the end of 2022. On the other end of the scale, the S&P/ASX Small Ordinaries index, representing small-cap Australian equity portfolios, experienced a similar drop in performance between January and March 2020.
A challenging year for IPOs
Many experts agree that 2022 was a weak year for the IPO market for both Australian and global stock exchanges. Difficult macroeconomic conditions, geopolitical issues, rising inflation, and lifting interest rates all contributed to lower IPO activity globally. In Australia, fewer small-cap companies raised equity capital through IPOs, and the value raised dropped by over 90 percent compared to 2021. In 2021, the number of IPOs on the ASX reached around 194. The latest analysis shows the volume of IPOs listed in 2022 dropped to just half of that. In the first quarter of 2023, the declining trend seemed set to continue, with the IPO pipeline heavily dependent on external macroeconomic and geopolitical factors.
