Stock Market Indices

Stock price index is an indicator that shows the movement of the stock prices. Index is used as an indicator of market trend; it means that index movement describes market condition at one moment, whether it is active or dull.

Through the index, we can know the stock price movement trend today, is it increasing, steady, or declining. For example, if at the beginning of the month, the index is 300 and at the end of the month becomes 360, we can say that the average stock price experiences an increase of 20%.

Index movement becomes an important indicator for investors to determine if they would sell, hold, or buy one or several stocks. Because stock prices move every second and minute, index value will move ups and downs very rapidly as well.

There are 6 (six) types of indexes in the Jakarta Stock Exchange:

1. Individual index, the index that uses the price of each stock as its basic price, or index of each share listed in the JSX.
2. Sector Stock Price Index, the index that uses all stocks that included in each sector, such as finance, mining, etc. In the JSX, sector index is divided into 9 sectors: agriculture, mining, basic industry, miscellaneous industry, consumption, property, infrastructure, finance, trades and services, and manufacture.
3. Jakarta Composite Index, the index that uses all listed shares as the index’s component.
4. LQ 45 Index, the index that consists of 45 chosen stocks by considering 2 variables: trading liquidity and market capitalization. There are new stocks listed in the LQ 45 index every 6 months.
5. Jakarta Islamic Index (JII). JII is an index consists of 30 stocks that accommodate the Islamic Canon Law investment or an index that is based on Islamic Law. In other words, this index includes stocks theat fulfill the criteria of investment in Islamic Law. The stocks included in this index are stocks issued by issuers that run their business activities not in contrast with the Islamic Law, such as:

• Gambling business and any games that include gambling or prohibited trading.
• Conventional financial institution, including conventional banking and insurance.
• Businesses that produce, distribute, and trade food or drink that are prohibited by Islamic Law.
• Businesses that produce, distribute, and/or provide products and services that destroy morality and harmful.

Main Board and Development Board Indices. Stock price indices that specifically based on group of stocks listed in JSX, Main Board Group and Development Board Group.

Articel Source: http://www.idx.co.id