AVZ Minerals Ltd (ASX: AVZ) and Ioneer Ltd (ASX: INR) shares have started the week in a very positive fashion.
In early trade on Monday, both lithium explorer's shares are outperforming the market materially.
For example, the AVZ share price is up over 14% to 67.5 cents and the Ioneer share price is up 10.5% to 74.5 cents.
Why are the AVZ share price and the Ioneer share price storming higher?
The catalyst for the rise in the AVZ and Ioneer share prices this morning appears to have been news out of MV Index Solutions and VanEck.
According to reports, MV Index Solutions has decided to add both AVZ Minerals and Ioneer to the Global Rare Earth/Strategic Metals Index at the December quarterly rebalance.
This will see the two companies join the likes of Allkem Ltd (ASX: AKE), Jiangxi Ganfeng Lithium, Livent Corp, and Pilbara Minerals Ltd (ASX: PLS) in the index when it rebalances on 17 December.
Why is this good news?
This has the potential to be good news for both shares for a number of reasons.
One is the exposure that it will receive from being included in a popular index which covers one of the hottest industries in investment markets right now.
The other is that fund managers are often restricted from buying shares unless they are included in certain indices. It is conceivable that some fund manager may only be allowed to gain exposure to lithium or battery materials if the shares they want to buy are included in this index.
And finally, any ETFs that are tracking the index will need to buy shares to reflect these changes. This adds to buying pressure and can be a boost to share prices.
The VanEck Rare Earth/Strategic Metals ETF, for example seeks to replicate the price and yield performance of the MVIS Global Rare Earth/Strategic Metals Index. It currently has net assets of $1.1 billion invested in the fund.
