CAC 40 - A Report Brought to You by Q8 Trade
A quick overview of the CAC 40
The CAC index is the main stock index for measuring the performance of the French economy and the French stock market, and is an abbreviation of “Cotation Assistée en Continu”.
The CAC index is calculated as an average of the share prices of 40 of the largest investment companies in France in terms of market value, which corresponds to the largest 40 multinational companies in France such as Total, Sanofi, BNP Paribas, AXA and Royal.
And did you know?
The market value of these companies ranges between 5 billion to 105 billion EUR!
It is part of the Euronext business group, and the CAC 40 is the most important indicator for measuring the performance of the French economy.
There is a special committee formed every 3 months to review companies so that these companies represent the French economy perfectly and although most of the companies included in the index are French, the share of foreigners exceed 47%!
The index was first launched for trading on December 31, 1987 and the CAC is considered as one of the most important European indices that are traded on the Euronext Paris Stock Exchange.
The index is updated every 15 seconds, starting from Monday to Friday from 8:00 AM to 16:35 PM GMT.
History of the CAC 40 index
The CAC index includes a group of the most important French companies in the proportion of its profits which have a market value of an estimated 1.1 trillion euros.
Here’s a quick history lesson:
The CAC was established since the beginning of these companies’ work on the Paris Stock Exchange in 1801 and the beginning of the index’s inception since its inception was worth 1,000 points.
In 1988, the French Stock Exchange Company was incorporated as a limited company, and the French CAC index remained with the same name.
In 1988, the index hit a low of 893.82.
In 2000, the index experienced a massive rebound to a record low of 6,922.33, due to the dot-com boom.
In 2011, with the onset of the economic crisis, the price of the French CAC 40 index fell to about 3000 and at that time, many other indicators were introduced such as the CAC 20 and the CAC Mid 60 and these indicators have gained popularity among investors.
In 2013, the CAC recorded a significant drop in more than 40 percent, especially at the end of the same year.
What you should know about the French CAC index
- All companies listed in the CAC 40 index are French companies but many of them are multinational companies where up to two thirds of their business and workers are located outside France and approximately 45 percent of their listed shares are owned by foreign investors.
- The CAC index is affected by what is happening from global events such as political tensions, economic news, natural disasters, and economic reports must be followed in both France and the European Union, to learn about interest rates, gross domestic product, unemployment rates and others. Trading the CAC 40 requires a thorough analysis of market conditions before starting trading, with a review of the latest news, data and price charts.
- The CAC 40 index is widely used for the Paris market which consists of 40 companies listed in France. These shares are subject to a quarterly review which is carried out by an independent committee and adds or removes any component.
The most important companies listed in the CAC 40 index
Total SA: It is one of the major oil and gas companies, which is an integrated international company and is based in France in addition to the spread of its operations in more than 130 countries.
Sanofi: It is called Sanofi Sa is one of the largest healthcare companies in the world, and its headquarter is located in France, and includes 55 projects in a diversified clinical development portfolio.
UPNP Paribas SA: It is a banking group with its headquarters in France. This group specializes in focusing on retail, investment and banking operations worldwide.
France Telecom: France Telecom SA is a France-based telecommunications company specializing in fixed and mobile communications.
Societe Generale: It is a banking group whose headquarters are in France and its operations are spread in 85 different countries.
ArcelorMittal: ArcelorMittal SA is one of the largest companies in the world in steel production in France with steel shipments of approximately 85 million tons and production of 90.6 million tons.
Composition of the CAC 40 index
- The Scientific Council is the committee that selects the members who will join the CAC 40 index stocks.
- The French Financial Market Authority, the French Ministry of Finance and the Central Bank participate in decision-making.
There is a set of principles, criteria and trading volume determined by the Euronext Paris Stock Exchange where these conditions must be met by the company that wishes to join the CAC 40 index.
The market value depends on the source of the stock while the CAC 40 is different from other global indicators which target the market value.
The third Friday of September is determined each year to review the market value of the indices through the index committee.
The index is weighted according to the market value of the companies listed in the CAC 40 index and the weighting percentage changes based on the change in the floating market value.
How is the price of the CAC 40 index determined?
In order to calculate the price of the index, it is necessary to determine the relative weight based on the ratio of the share price to the sum of the individual stock prices for the index.
In order to calculate the price of the CAC 40 index, you need to monitor the market very well especially the annual earnings reports of the companies listed for the index and try to keep up with the economic news.
The CAC 40 price is affected by the company’s earnings reports, and political and economic situations that have a direct impact on the price of the index, where determining the price of the index is affected by many factors.
What factors affect the price of the CAC 40?
The supply and demand of the shares of the forty companies: It is considered the main driver of the price of any indicator, but what drives the CAC 40 is not the supply and demand for the index itself, but the group of forty French companies that make up the index, where the prices of the indicators change with the change of supply and demand for them, so the prices of the indicators rise in the case of high demand.
Accordingly, there must be a good demand for the company’s field directly, in addition to the requests for services and products distributed from the company.
Political factors: The political changes that may occur in the country are still the main factor affecting the index price, as a change in global trends and events directly affects the price of the index.
The company’s performance: The company’s performance remains one of the main factors affecting the index price, so look at the current performance of the group of companies that make up the French CAC 40 index, and what it is looking for in the future in a serious manner, as investments are mainly based on obtaining future gains.
CAC 40 index trading via CFDs
Trading in contracts for difference is trading in price movements of specific financial instruments, whether it is up or down, as trading in contracts for difference allows you to profit by the movement of the index and financial tools without owning the original.
Contracts for difference are contracts that are negotiable between the person who is trading and the broker, trading is by exchanging the difference in the financial value at the beginning of the contract for the index, and its value at the date of the end of this contract, without buying and real ownership of the main financial assets.
You can take advantage of the fluctuations of the CAC 40 index by opening an account with a financial broker that provides futures trading for the CAC 40 index, and you can also trade the index through CFDs or through ETFs.
How contracts for difference work
- A trader chooses an asset from a stock, currency, or index that the broker offers to trade as CFDs.
- The trader opens a deal and specifies the process to be executed, whether buying or selling, the amount he is investing in, leverage..and other criteria that differ according to the broker.
- The trader actually concludes a contract with the broker and approves the opening price of the deal, and the additional fees, if any.
- The deal is opened and is not closed to by the trader himself and a decision to close it, or for the trader to determine the closing of the deal automatically, such as a loss or profit-making order, or if the contract period ends.
- In the case of closing the deal on a profit, the broker pays the trader, but in the event the deal is closed on a loss, the broker charges the trader a fee.
What to consider when trading the CAC 40 index
- Futures are traded on the CAC 40 on the Euronext Stock Exchange under the symbol FCE.
- The lowest percentage change in the index, called the tick, is 0.50, or the equivalent of 0.5 €.
- The currency in which the CAC 40 is traded is Euro.
- In the CAC 40 futures, each point equals 10 euros.
Example: If the CAC 40 is at 4,000 points, then in this case the value of a single contract is 40,000 euros.
Margin requirement when trading the index is 5 percent, which means 1:20 leverage.
Advantages of trading CFDs
- Leverage: One of the most important advantages of trading contracts for difference, as it is possible to use a small amount to open deals of a large size compared to owning the asset that is being traded on.
- Possibility of profit from decline: In the case of market movements going up or down, you can benefit, there are no restrictions at the beginning of the buying or selling process, in the case if you make the first sale and expect prices to fall, this is called “short selling” and in this case you can buy Then a low price and make gains.
- Trading a wide range of markets: Most CFD brokers provide the ability to trade on various assets in a wide range of financial markets worldwide, through trading platforms directly on the Internet, so this diversity in investment tools (stocks, indices, currency, commodities …) provides CFDs are a huge sector for many investment opportunities for all traders.
- Lack of government fees: In the case of buying or selling in contracts for difference, this does not require any taxes that are paid such as fees for documentation or stamping, and the reason for this is that the trader does not own the actual assets of what he is trading in, and despite this, the money that It gets from that circulation may be subject to taxes, but this happens on condition that it reaches a minimum that is specified according to what is stipulated in the law of the country of residence.
- The possibility of trading throughout the day: CFD trading is available 24 hours, five days a week, starting from Monday to Friday, and this makes the investor free to trade at any time he desires, whether the trader is full-time or a worker, and this is unlike traditional markets, A trader through CFDs can also continue trading even if the main markets are closed.
In the end…
As a trader, you must have sufficient knowledge and information about how financial derivatives work such as contracts for differences and the size of potential gains and losses from their circulation, and what concerns the factors that affect moving the index, whether economic or political factors, and the most important economic events and political news that can have an impact on the French economy so you’ll know whether or not this type of investment is right for you.
Why trade the CAC 40 index with Q8 Trade?
- Q8 Trade provides leverage to increase the value of the capital you are trading with.
- Q8 Trade provides you with the opportunity to trade the CAC 40 index via contracts for difference (CFD) as this ensures gains even if there is a decrease in prices.
- Q8 Trade provides the ability to exchange during the trading of the CAC 40 index without any fees or stamps through contracts for difference due to the reason that you do not actually own the index.
- Q8 Trade provides on its website many tools that offers benefits for you to trade the CAC 40 index such as: real-time prices, historical charts, live charts, fundamental and technical analysis and others.