Outstanding company performance and favourable economic conditions are obviously fantastic for ASX shares.
But occasionally stocks might get a nice boost from an unexpected circumstance.
That's exactly the great fortune Johns Lyng Group Ltd (ASX: JLG), Sayona Mining Ltd (ASX: SYA), and Lovisa Holdings Ltd (ASX: LOV) investors find themselves in this month.
That's because those three ASX shares have been named as new additions to the S&P/ASX 200 Index (ASX: XJO).
They will be welcomed into the flagship index before trading begins on Monday 19 September.
Image source: Getty Images
Not just prestige, but actual practical ramifications
So why is joining the ASX 200 such a boon for stocks?
That's because passive funds that follow the index are forced to buy the shares, thereby pushing up demand.
And of course, the share price heads upward as demand increases.
This will be some relief for investors of insurance building repairer Johns Lyng. The price for that stock has dipped 15.5% over the last couple of weeks.
Shareholders for lithium producer Sayona Mining will be glad too, with that stock losing about a third of its value since 19 April.
Lovisa shares have gained a whopping 71% since mid-June, so the ASX 200 addition could light another fire under the rocket.
More to watch
Those three stocks aren't the only ones entering the exclusive 200 club though.
Investors may keep an eye on these other companies to see how they might move as 19 September approaches:
- Capricorn Metals Ltd (ASX: CMM)
- Charter Hall Social Infrastructure REIT (ASX: CQE)
- Karoon Energy Ltd (ASX: KAR)
- Smartgroup Corporation Ltd (ASX: SIQ)
- Spark New Zealand Ltd (ASX: SPK)
Conversely, for each stock that's added to the ASX 200, one gets removed.
And that's potentially bad news for those companies, as passive funds that follow the index are forced to sell.
When supply increases, the share price dips.
So watch out if you're holding any of these ASX shares, which will be kicked out of the ASX 200 on the morning of 19 September:
