What is the FRA40?
FRA40 index is also known as the Paris Brokers Association Index, CAC 40. It was created in 1987 by Euronext Paris.
The FRA40 index is known as the French version of the “Dow Jones Industrial Average of the United States”. It is an important indicator of the French stock market. It reflects the performance of the 40 largest and most liquid stocks listed on Euronext Paris (formerly Bourse Paris). In addition, FRA40 is also one of the three most popular stock price indices in the Europe (the other are UK100 and GER40).
Since the constituent stocks of the FRA40 index including most of the important corporate magnate in various fields of the French economy, investors can observe the French economy more clearly through the performance of the FRA40 index. In addition, since the French economy accounts for 1/5 of the entire European economy, for investors who want to invest in the entire euro zone, could keep focus on the trend of the FRA40 index, which is also more capable to grasp the trend of the entire European economy.
Constituent stocks of FRA40
The FRA40 index has an independent steering committee that reviews the constituents of the index on a quarterly basis. The companies listed on Euronext Paris are ranked according to their free-float market capitalization and stock turnover in the previous year. Then the the top 40 companies will be listed into the FRA40 index.
The French index is dominated by non-essential goods and services, followed by industry, finance, health care, and technology.
Its constituent stocks include: Sanofi, STMicroelectronics, Michelin, AXA and other magnates in many fields, so it can better reflect the economic trend of France and the whole of Europe.
The structural composition of the FRA index and the US index is very different. Compared with the US index, US index is the largest industry with technology. While FRA40 is more like a boutique industry. Therefore, if investors want to invest in French indices, they must have an understanding of the dynamics of the boutique industry.
The FRA40 uses the market capitalization-weighted method. Therefore, the larger the market value of the company, the greater the impact on the index. However, Unlikely many market capitalization-weighted indices such as the Nasdaq 100 and S&P 500, etc., the size of a company’s market capitalization is not the only criterion for inclusion in the CAC40 index.
Therefore, the constituent stocks in the FRA40 are not necessarily the top 40 stocks by market capitalization on Euronext Paris. The French index also has a limit of the maximum weight of individual stocks to 15% to avoid excessive concentration of the index weight.
How to trade FRA40 on HXFX?
1. First, click here to register an HXFX account for free.
2. Next, download the APP and log in to complete the real-name authentication.
3. Contact customer service to receive your exclusive free trial bonus.
4. Click “Quote”, select “FRA40” and click “Trade”. After the quotation page is displayed, you can click “Sell” or “Buy” to trade the index according to the trends.
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