It's a big day for the Sayona Mining Ltd (ASX: SYA) share price this Monday. Not because of the wild volatility we have seen with the lithium company's shares, mind you. At present, the Sayona share price has lost a nasty 3.45% so far this session to 28 cents a share after bouncing around all morning.
But that's not the main reason why investors will be talking about this company today. No, today, is the first day that Sayona mining can claim membership of the ASX's most prestigious club – the S&P/ASX 200 Index (ASX: XJO).
The ASX 200 is the flagship index of the Australian share market. It summarises the performance of the largest 200 shares of the ASX by market capitalisation into a single metric. For an ASX share to be eligible for ASX 200 inclusion, it has to fulfil a few criteria. But the most important factor is that it needs to be among the largest 200 ASX shares by market cap.
Since a company's market capitalisation is basically determined by a company's share price, the 200 largest shares on the ASX share market change all the time. To reflect this, indexes like the ASX 200 are typically rebalanced every three months. This ensures that the index accurately reflects the state of the share market.
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Sayona share price makes its ASX 200 debut
Fortunately for the Sayona Mining share price, this latest rebalancing has been kind. Today, Sayona shares officially join the ASX 200 Index. The company joins other lucky entrants like Karoon Energy Ltd (ASX: KAR) and Lovisa Holdings Ltd (ASX: LOV) in gaining an ASX 200 membership card.
In their place, shares like Zip Co Ltd (ASX: ZIP) and EML Payments Ltd (ASX: EML) have been kicked out of the index.
Now, you might think that ASX 200 inclusion would be beneficial to a company's share price. This is logically sound. ASX 200 membership means any ASX 200 index fund that tracks the index now has to hold the new shares.
Plus, there are many fund managers that have an ASX 200-only mandate. As such, there are potentially more investors that can invest in these companies now. But the index providers know that changing the index can spark some share price destabilisation because of this.
As such, we typically find out well in advance what any index changes might be coming. In this case, we found out that Sayona shares would be joining the index way back on 2 September.
So everyone involved had plenty of time to prepare. That probably explains why we aren't seeing a massive rush of goodwill into the Sayona share price this Monday. But even so, it's still a great day for this company.
