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The S&P/TSX 60 is an index for 60 stocks of companies with the highest market capitalization on the Toronto Stock Exchange. As it captures the largest companies listed in the country, the TSX 60 serves as the benchmark stock market index for Canada.
The index was launched on the 30th December 1998 and it offers investors an easy exposure to the lucrative Canadian equity market. TSX 60 is maintained by the Canadian S&P index committee, which is comprised of 3 representatives of Standards & Poor’s (S&P) and 3 members representing the Toronto Stock Exchange.
The TSX 60 index gives investors access to 11 sectors of the Canadian economy and is ideal for investors that seek to include exposure to large-cap Canadian stocks in their portfolios.
There are currently 3 tickers on TSE for traders to take advantage of, which include the S&P/TSX 60 (Price Return), S&P/TSX 60 N (Net Total Return) and TX60AR (Total Return).
Large-cap stocks are known to deliver long term capital growth for investors, and the TSX 60 index’s price history reflects that. The index has always maintained a gradual upward trajectory since its inception.
It drifted higher in its first decade and managed to print a high of just above 893 by June 2008, before the effects of the global financial crisis pressured it lower to its all-time low of below 460 by March 2009.
After that, the index started a multi-year rally that saw it cross the psychological 1000 barrier in 2019, before printing its all-time high at circa 1065 in February 2020.
The index collapsed to lows of circa 720 in March 2020 as the effects of the coronavirus pandemic triggered an economic shutdown coupled with low oil prices at the time. The index has since recovered and as of August 2020, it is set to take on the 1000 price barrier.
Index Composition and Calculation
The S&P/TSX 60 is a free-float capitalization-weighted index. A free float index considers only outstanding shares held by the public and it is the market capitalization that determines inclusion into the TSX 60.
TSX 60 is calculated using the standard divisor methodology applied on other S&P Dow Jones indices. There are 60 constituents in the index, and to be included, a company’s stock must meet the following:
- The underlying company must be domiciled (incorporated, formed or established) in Canada.
- It must represent a weight of at least 0.04% of the index based on the volume-weighted average price (VWAP) over the last 10 trading days before the periodic review is due.
- The company must have liquidity of at least 0.50, and at least 0.25 for dual-listed stocks. The liquidity is measured by annual float turnover.
The TSX60 index is rebalanced quarterly in March, June, September and December to ensure that its value accurately reflects the equities performance in Canada. The index committee takes into consideration data of six months ending in the month before the quarterly review. Additions or deletions are announced in the press within 10 days of the rebalancing.
Here is the sectorial breakdown of the TSX 60 index:
Factors Influencing Overall Price of the TSX 60
Various factors influence the TSX 60 due to the numerous constituents it tracks. To start with, significant price changes in one or several of the major constituents will have an impact on the overall price of the index.
Some of the major constituents include Shopify, Royal Bank of Canada and Enbridge Inc. Similarly, changes in the underlying sentiment of the major industries, such as Energy and Financials, will also affect the price of the index.
As a benchmark stock index, underlying economic and monetary conditions in Canada will impact the price of the TSX 60. Factors, such as interest rates, economic outlook and inflation, influence investor sentiment in the stock market and consequently the TSX 60 as well.
In an interconnected world, internal and global stability also have an impact on the Canadian equity market. Canada is largely a stable country (something that has contributed to the stability of the TSX 60), but the country is also one of the major producers of Oil, and with Energy as one of the highest weighted sectors of the index, it means that the price of oil can have an impact on the TSX 60.
Higher prices of the commodity will boost Energy stock valuations, which will in turn trigger higher prices for the TSX 60. On the other hand, lower oil prices will drive the index lower.
** Disclaimer – While due research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.
Why Trade the S&P/TSX 60 Index at AvaTrade
- Liquidity. TSX 60 calculation ensures that only the highest capitalized and most liquid Canadian stocks make the index’s constituents.
- Stable Price Action. Constituents that make the TSX 60 are sufficiently liquid to ensure reliable price discovery. The result is stable and predictable price action, outside crisis situations.
- Vast News Coverage. TSX 60 is one of the most reported on Canadian financial assets, which makes it easy for investors to perform both technical and financial analysis on the index. Furthermore, it is also extremely easy to find information about the major constituents of the index.
Benefits of Trading TSX 60 with us
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- What is the best way to trade the TSX 60?
Because the TSX 60 represents some of the largest companies in Canada it tends to be fairly stable in its price movements. That allows for good reads on support and resistance levels, which can be used as entry and exits points for traders. The index tends to respond to investor sentiment and economic data such as Canada’s GDP, inflation, interest rates, and employment data. Traders can often find good trades around these economic data releases, or by following the news cycle to determine whether investor sentiment is improving or deteriorating.
- Should I trade the TSX 60 if I’m not Canadian?
The Canadian markets are very accessible for traders all across the globe, particularly if you trade the TSX 60 using CFDs at AvaTrade. This avoids the complications you might encounter in trying to enact a direct investment in the TSX 60 or any of its component stocks. As one of countries with the greatest natural resources, Canada’s stock exchanges are filled with mining and oil companies. This can make trading the TSX 60 a good surrogate for trading in commodities such as oil, gold, and other metals.
- Why is the TSX 60 a good trading opportunity?
It’s well known that Canada has some of the greatest natural resource reserves in the world. That makes its mining industry a good place for investors. There are a number of stock exchanges in Canada, but the most popular by far is the Toronto Stock Exchange (TSX). It is the eighth largest exchange in the world by market capitalization, and has excellent daily liquidity. Given the huge natural resource reserves in Canada the TSX has more mining companies than any other exchange, making it the most important exchange for any industry focused on natural resources and hard commodities. Traders can gain exposure to the TSX 60 through the CFDs offered at AvaTrade.