Why is the ASX All Ordinaries lifting to a fresh 7-week high?

What’s been pushing the All Ords higher lately?

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The All Ordinaries Index (ASX: XAO) is having a strong day so far on the ASX boards this Tuesday. At the time of writing, the All Ords is up a healthy 0.23% to 7,772 points. That’s the highest level the ASX’s oldest market index has been at since 8 September, a good 7 weeks ago.

While it’s still 1.5% or so from the all-time high of 7,902 points that we saw back in early September, today’s development will still no doubt be welcomed by most ASX investors.

So what’s been pushing the All Ords up to this new 7-week high?

All ordinary companies? The All Ords in focus

To understand that, let’s break down how the All Ords is constructed.

Like most market indexes, the All Ordinaries is weighted by market capitalisation. That means the largest companies by market cap get the largest weighting and influence in the index. Unlike the S&P/ASX 200 Index (ASX: XJO), which covers the largest 200 companies on the ASX, the All Ords extends to the largest 500 companies.

That means that the biggest ASX companies get slightly less weighting in the All Ords than they do in the ASX 200. But there’s not a lot of difference in practice. As such, the All Ords is still very much dominated by the largest 10 companies on the ASX.

According to the index’s provider S&P Global, those 10 companies are presently (as of 30 September) the following:

  1. Commonwealth Bank of Australia (ASX: CBA)
  2. CSL Limited (ASX: CSL)
  3. BHP Group Ltd (ASX: BHP)
  4. Westpac Banking Corp (ASX: WBC)
  5. National Australia Bank Ltd (ASX: NAB)
  6. Australia and New Zealand Banking Group Ltd (ASX: ANZ)
  7. Macquarie Group Ltd (ASX: MQG)
  8. Wesfarmers Ltd (ASX: WES)
  9. Woolworths Group Ltd (ASX: WOW)
  10. Telstra Corporation Ltd (ASX: TLS)

Together, these 10 companies constitute 38% of the All Ords’ weighting (for the ASX 200, it’s 44.3%). Commonwealth Bank alone accounts for 7.8% of the All Ords right now (8.9% in the ASX 200). As such, we can say that wherever these 10 companies go, the All Ordinaries is probably going to follow.

So, let’s see how they’ve performed over the past month. CBA shares have gained a healthy 0.94% since 27 September. CSL has lost around 3.04%. BHP has managed to eke out a 1.46% gain. Westpac, NAB 0.73% and ANZ are up by 1.65%, 4.84% and 2.48% respectively.

Meanwhile, Macquarie Group is up a solid 10.51%, with Wesfarmers gaining a more muted 1.27%. Woolworths has managed a 4.15% gain which is almost exactly mirrored by Telstra’s 4.02% loss.

Looking at these numbers, it seems we have the ASX banks, Macquarie and Woolworths to mostly thank for the All Ords’ new 7-week high today.

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited and Telstra Corporation Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited, Telstra Corporation Limited, and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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