These ASX 200 shares are being dumped out of the index and replaced with…

The ASX 200 is rebalancing…

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Key points

  • S&P Dow Jones Indices has announced changes to the ASX 200 index.
  • This will see a total of four ASX 200 shares dumped out of the benchmark index later this month.
  • They will be replaced with a lithium explorer and three other shares.

S&P Dow Jones Indices has just announced changes to the S&P/ASX 200 Index (ASX: XJO).

These changes are for the March quarterly rebalance, that will take place at the commencement of trade on 22 March.

ASX 200 exits

A total of four ASX 200 shares will be kicked out of the index later this month.

These are struggling biotechnology company Mesoblast limited (ASX: MSB), casino and resorts operator SKYCITY Entertainment Group Limited (ASX: SKC), New Zealand telco Spark New Zealand Ltd (ASX: SPK), and shopping centre operator Unibail-Rodamco-Westfield (ASX: URW).

This could be bad news for these shares, as when a company is removed from the ASX 200, it can lead to an increase in selling. This is because index funds that track the ASX 200 will need to sell these shares in order to reflect the changes.

In addition, some fund managers have mandates that mean they are only allowed to own shares that are included in certain indices. With these shares now dumped out of the benchmark index, they could soon be dumped out of portfolios of fund managers that are only allowed to own shares included in the ASX 200.

ASX 200 additions

Replacing these shares in the benchmark index on 22 March will be lithium exploration company AVZ Minerals Ltd (ASX: AVZ), plus sized fashion retailer City Chic Collective Ltd (ASX: CCX), gold explorer De Grey Mining Limited (ASX: DEG), and property company Home Consortium Ltd (ASX: HMC).

Their inclusion in the index could have a positive effect on their respective share prices for the same reasons mentioned above, but in reverse. Fund managers (with ASX 200-only mandates) that have wanted to own these shares will soon be able to, and index funds tracking the ASX 200 will have to purchase shares as part of the rebalance.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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