The S&P/ASX 200 is widely regarded as the institutional investable benchmark in Australia. It is composed of the largest 200 companies listed on the Australian Securities Exchange by float-adjusted market capitalization. Although the majority of the companies are domiciled in Australia, a lot of them derive a significant portion of their revenue from foreign markets. As of year-end 2017, only 60 companies in the S&P/ASX 200 derived their revenue solely from the domestic market, while the rest of the companies had exposure to foreign markets (see Exhibit 1). Consequently, potential risk from political and economic shocks in foreign markets cannot be ignored. Hence, it is worthwhile to review the global revenue exposure of the index.
Some of the key highlights from the total revenue exposure breakdown of the S&P/ASX 200 as of year-end 2017 are as follows (see Exhibit 2).
- Only 62% of the index’s total revenue came from Australia.
- The index had the highest international revenue exposure to the U.S. (7.9%), followed by China (7.6%) and New Zealand (5.9%).
- At the sector level, total revenue exposure was most dominated by financials (28%), followed by materials (21.6%) and consumer staples (17%).
Further observation of international revenue exposure revealed the following (see Exhibit 2).
- Out of the 37.9% attributed to international revenue, 17.7% came from the materials sector and 7.0% came from financials.
- The materials sector’s revenue exposure to China (6.6%) exceeded its domestic revenue exposure (3.9%).
Since almost 38% of the S&P/ASX 200 revenue came from foreign countries, the economic and political conditions in foreign markets could have a significant impact on the index’s performance. Hence, understanding global revenue exposure is essential to comprehend the index’s inherent potential risk.
 We used the FactSet Geographic Revenue Exposure (GeoRevTM) dataset to calculate revenue exposure. It provides a geographic breakdown of revenues at the country level for all companies with available data. Due to the lack of standardization in the reporting of geographic revenue segments, the dataset uses a normalization/estimation process to assign revenues to specific countries. For more information please visit https://www.factset.com/data/company_data/geo_revenue.