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AEX – An overview of Dutch financial engine
The AEX index is currently composed of 25 of the best Dutch companies that trade on the Euronext Amsterdam (formerly known as the Amsterdam Stock Exchange), derivative from the Amsterdam Exchange Index which is a stock market index. Started in 1983, the AEX is composed of a maximum of 25 of the most traded securities, the free-float AEX is now one of the main national indices of the stock exchange group Euronext, as is CAC 40 from Paris and Brussels’ BEL20.
Interesting facts on the AEX index
The AEX started off from a base level of 100 points as of the 3rd of January, 1983. As of 2011, the AEX index is reviewed four times a year, with one all-round annual review in March. This index is a capitalization-weighted index, and at each main annual review the weightings of each of the companies are capped at 15% and can range freely with share price subsequently. Their weights are calculated with respect to the close price of the relevant companies on the 1st of March (every year).
The index is comprised of a number of shares, of which the numbers are based on the constituent weights and index value at the time of readjustment.
This is the formula:
t– the day of calculation
N– the number of constituent shares in the index (usually 25)
Qi,t– the number of shares of company i on day t
Fi,t– the free float factor of share i;
fi,t– the capping factor of share i (exactly 1 for all companies not subject to the 15% cap)
Ci,t– the price of share i on day t
dt– the index divisor (a factor calculated from the base capitalisation of the index, which is updated to reflect corporate actions and other index changes).
|Name of Company||Industry||Weight (%)|
|Royal Dutch Shell||oil and gas trading||15.27%|
|Unilever||personal and household goods||15.17%|
|Philips||industrial goods and services||5.7%|
Two other important indices on the Euronext Amsterdam are one – AMX which is derived from the Amsterdam Midkap Index, and started in 1995 and composed of 25 stocks on the exchange that are ranked 26-50 in size (where AEX represents 1-25 in size). The second is AScX, that is reviewed quarterly and is derived from Amsterdam Small Cap Index and started in 2005. This is composed of the 25 stocks that trade on the exchange and these are ranked 51-75 in size. The AScX is reviewed twice a year.
The factors influencing overall index price of the AEX
The major market shock that hit the AEX index was the era of the dot-com bubble. This occurred in the late 1990s and was a feverishly rapid rise in equity markets that was accommodated by investments in Internet-based companies. During this time the value of all equity markets grew in huge capacities. The AEX reached 703.18 at the height of the dot-com bubble, only to experience the value being more than halved when the bubble burst.
Another large segment of the indexes composition is from the oil/energy sector; thus, oil markets have a particularly high influence on the performance price of the AEX. With special mention of the Royal Dutch Shell company, a British-Dutch multinational oil and gas company. Also, named one of the sixth largest companies in the world (measured in 2016 by revenue), equated to 84% of the Netherlands’ $556 billion GDP in 2013, it is fair to say that when either oil or gas from other countries is affected the repercussion are directly related to the performance price of the AEX index.
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AEX main FAQs
Is the AEX worth trading?
While the index saw reduced volatility in 2014-2016 it has returned to its historically more volatile nature as of 2020. That makes it an excellent target for traders of all types who are looking for fast moving and potentially profitable markets to trade. As a fairly diversified index it often tracks the broader Dutch market, although there are a few companies in the index which have an outsized impact on performance. These include ASML Holding in the semiconductor space, Royal Dutch Shell in Energy, and Unilever in consumer products.
What’s the best way to trade the AEX?
While you could buy an ETF that mimics the AEX there are more effective ways to speculate on price movements in this Dutch index. By using CFD products it is possible to speculate on both the long and short sides of the markets. That means you can trade and potentially profit whether the market is moving higher or lower. Many traders really appreciate this level of flexibility and convenience when looking for a way to trade on a particular asset. Another benefit to using CFDs to speculate on the movements in the AEX is the ability to use leverage to enhance potential profits.
What are the differences in the Euronext Amersterdam indices?
The AEX isn’t a well-known index, but it is probably the most well-known of the Euronext Amsterdam indices. That’s because it is a blue-chip index that is composed of the top 25 companies on Euronext Amsterdam. It is by far the most heavily traded and influential of the Dutch stock indices. It is almost as well-known and heavily traded as Germany’s DAX or the CAC 40 in Paris. The other indices from the Euronext Amsterdam are the mid-cap AMX index and the small cap AScX index. Both of these are mostly traded in the Netherlands.
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