What is an INDEX and how important for investors in stocks market?

What is an INDEX and how important for investors in stocks market?


When it comes to investing in foreign stocks It would be impossible to avoid getting to know foreign stock indices. We will tell you about foreign stock indices that we often hear about to get to know each other better. We will definitely mention 2 countries that are of interest to all investors. That is the United States and China.

US stock indexes
There are several stock exchanges in the United States, two of which are the New York Stock Exchange (NYSE) and the other is the Nasdaq. The NYSE was a pre-existing market, while the Nasdaq was created to fund smaller companies. Unable to be listed on the NYSE, which at that time was filled with various technology stocks such as Microsoft, Apple, Facebook, etc.


There are 3 stock indices that are often mentioned as follows:

👉Dow Jones: The oldest index in the US stock market. The index is calculated based on the prices of large companies with stable performance. An industry-leading and nationally recognized stock of 30 stocks traded on both the NYSE and Nasdaq, but mostly stocks from the NYSE.

👉S& P 500: Calculated from 500 major stocks from both the NYSE and Nasdaq, the S& P 500 companies' value represents 80% of the total US stock market value. And today, most investors see the S&P 500 index as the index that best represents the overall picture of the US market and economy.

👉Nasdaq: Used to be a market for small caps especially technology stocks before. But as time passes small tech stocks that day Become the world's leading stock today. Due to the rapid growth of the technology industry itself.
It is important to note that the Dow Jones Index is derived from the calculation of the average stock price. High priced stocks Therefore, it has more influence on the index than usual, unlike the S& P 500 and Nasdaq indexes, which are calculated by weighting the company's market capitalization. From an investor's point of view, the S& P 500 is recognized as the best representation of the US investment market. As it covers stocks from a wide range of companies and industries.

You can also calculate stock indices of your particular interest from the available platforms and websites. You can visit how to create indexes yourself using Hydra here.


China Stock Index

Generally, stocks of Chinese companies are divided into two main groups: A-Shares, which are Chinese companies registered and listed on the stock exchanges in China, Shanghai and Shenzhen, traded in yuan, and H-. Shares are stocks of Chinese companies registered in mainland China. but listed on the stock exchange in Hong Kong Therefore traded using the Hong Kong dollar currency.

There are 3 stock indices that are often mentioned as well:

👉CSI 300: Contains 300 A-Shares from both the Shanghai and Shenzhen markets.

👉Hang Seng China Enterprises Index (HSCEI): Is an index reflecting the overall performance of Chinese corporate stocks traded in the Hong Kong market (H-Shares).

👉MSCI China 10/40 Index: Is an index produced by Morgan Stanley. The index comprises all medium and large Chinese stocks combined. under the principle of investment diversification according to the 10/40 formula.

Reasons why we should get to know foreign stock indices

Because foreign stock markets are another important factor that affects the all stock market, for example, when there is a change of government. Or the president of a powerful country will affect foreign policy. Following foreign stock indices will allow us to see the direction of investment. And make it possible to plan their own investments in the future effectively.


Why should investors know foreign stock indices?

  • In deciding to invest in stocks In addition to analyzing the stocks we want to invest in What investors should consider adding is looking at the overall composition at that time whether there is a favorable atmosphere or affecting investment opportunities or not. This may be a component of macro factors such as the direction of stock markets in foreign countries. Movement of funds from foreign countries (Fund Flow) Domestic liquidity economic conditions Investment Confidence Index Consumer Confidence Index And the psychological component of investing that at that time investors are confident in investing. Therefore, in this article, I will introduce foreign stock markets that investors should get to know. To provide information for making investment decisions, including

  • US stock market major stock price indices The Dow Jones Index is an index based on blue chip stocks. It is the stock of large companies with stable performance. Known to the whole country, 30 numbers traded on the New York Stock Exchange and Nasdaq in the United States. All 30 companies are well known. It is a leader in its industry and is very large. Dow Jones Index It is one of the oldest indices in the United States and is considered a general indicator of the market and economy because all 30 companies are the largest and most influential companies in the American economy.

  • British stock market major stock price indices The Financial Times Index, which is the world's third-largest market by market capitalization, behind only the New York Stock Exchange and the US Nasdaq.

    Japanese stock market The major stock price index, the Nikkei Index, is the world's fourth-largest market capitalization and Asia's oldest index. It can be used as a reflection of Japan's economy.

  • Hong Kong Stock Exchange major stock price indices Hang Seng Index (Hang Seng) The Hang Seng Index is regarded as being particularly close to Thai investors. As a major trading center in Asia There is also a trading period before Thailand for about an hour and a half. In addition, the Hong Kong Stock Exchange is a channel for raising foreign capital to invest in China. The company's shares in China will be listed on the Hong Kong Stock Exchange in the form of H-shares, licensed by the China Securities Regulatory Commission.

  • Singapore Stock Exchange major stock price indices Straits Times Index Singapore is considered an international business and financial center. Especially the Singapore stock market with a stable financial position. And there is a lot of money from foreigners to invest. And there are a variety of investment products for customers to choose from.

  • The reason why we need to get to know foreign stock indices as mentioned above Because these international stock market indices are important to other stock market indices. Because foreign stock market indices are indicators of changes in various factors. Occurring abroad and impacts all over the world, including other countries such as a change of government or the president of a powerful country will affect the policies of the country.

    Revolutions and coups affect stability, economic conditions, and various policies of the country.

  • The economic conditions of foreign countries affect the global economy. Including exchange rate figures, interest rate inflation, unemployment rate and productivity because many countries have trade with other countries. If our trading country has economic problems It will undoubtedly affect our country.

    Problems related to financial institutions, such as the European group, need money to enhance liquidity and solve debt.

  • The trade war between the United States and its trading partners especially China If unable to negotiate a conclusion will result in economic stagnation and slowdown.

  • The movement of funds or Fund Flow by the expensive stock market will be sold for profit. To invest money in the stock market with low prices to generate maximum profit The movement of funds will be more rapid. Resulting in higher investment volatility.

  • Therefore, in the current investment analysis only analysis of domestic economic conditions may not be enough anymore. Investors need to analyze the overall picture of the global economy. Including superpower countries and countries that are trading partners of their own countries and the economic conditions of different countries. How are they? Through looking at foreign stock indices. To see how they trend to go up and down as well. Because foreign stock indices It is an indicator of economic. Conditions and investment psychology in the stock market to a certain extent. The stock market, we have a chance to be positive. (If domestic factors do not change). If the market is opened to neighboring red markets .We may have to prepare ourselves mentally that our home market may be red as well.

  • In summary, in order to be successful in investing, In addition to having knowledge of what we invest in Investors need to have time to follow the news. In a timely manner At the same time, investment strategies are reviewed to be in line with rapidly changing situations. For new investors Investing through mutual funds by professionals who manage our investments for us. Probably another option that meets the requirements, however, you need to have knowledge to choose to invest in mutual funds that meet the needs.

    Therefore, before every investment Don't forget to invest in knowledge. Good luck in investing.


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