The ASX released its latest quarterly update this morning, containing some major changes to the index's composition.
Blackmores Limited (ASX: BKL) and Sirtex Medical Limited (ASX: SRX) have been dropped from the S&P/ASX 100 (ASX: XTO) (INDEXASX: ^AXTO) following the recent declines in their share price. Blackmores and Sirtex shares are down 39% and 45% respectively over the past year.
Elsewhere, there were plenty of other changes with Coca-Cola Amatil Ltd (ASX: CCL) and SEEK Limited (ASX: SEK) being dropped from the S&P/ASX 50 (ASX: XFL) (INDEXASX: ^AXFL). A2 Milk Company Ltd (Australia) (ASX: A2M) is being added into the S&P/ASX200 (ASX: XJO) (INDEXASX: ^AXJO) at the expense of OFX Group Ltd (ASX: OFX), which was dropped.
In and of itself, being added or removed from an index is little more than a reflection of how much a company's share price has risen or fallen recently. Some companies, like Ausdrill Limited (ASX: ASL) are being added back to the index after being dropped in earlier times.
Being added or removed to an index can result in opportunities for shareholders however, as many funds have mandates that limit them to holding ASX100 or ASX200 shares, for example. Thus, being removed from an index would force funds to sell, and this can result in changes to prices – especially among smaller companies with lower trading volumes.
Blackmores in particular could see a sharp price decline, as it is a fairly illiquid company with only a small amount of shares on issue. A couple of others to keep an eye on for bargains could be Capitol Health Ltd (ASX: CAJ) and Lifehealthcare Group Ltd (ASX: LHC), although many of the companies being dropped appear to be due to actual business issues, not just increased pessimism among investors.
