It's a big day for the S&P/ASX 200 Index (ASX: XJO) today, its biggest day in months. Not because anything too remarkable is happening with the index's movements themselves this Monday. At the time of writing, the ASX 200 is essentially flat, having gained an unremarkable 0.04% so far this session to just over 6,740 points.
No, it's a big day for the ASX 200 today because the latest quarterly rebalancing has just taken effect. The ASX 200 has just had a shakeup.
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Why do indexes need rebalancing?
Like most indexes, the ASX 200 is constructed through weighting by market capitalisation. This means the largest companies by size enjoy the largest weighting in the index.
So even though there are 200 or so ASX shares in the ASX 200, the largest ones have more influence than the smallest ones. So Commonwealth Bank of Australia (ASX: CBA), for example, has a far more influential presence on the ASX 200 than, say, Bank of Queensland Limited (ASX: BOQ).
But market capitalisations are determined by a company's sales price. And, as we know, this changes every trading day. As such, the largest ASX 200 shares by market capitalisation are always in flux.
To make up for this, the ASX 200 is rebalanced every three months to ensure the index is accurately representing the Australian share market. What might have been the ASX 200's 195th largest share by market cap in one quarter might become the 205th, for example, by the time the next quarter rolls around.
As such, there are normally new companies that leave the index when this rebalancing takes place. These will be replaced by others that have seen their market capitalisation rise over the quarter in question.
So these changes to the ASX 200 Index are normally announced with a few weeks to spare. This gives index funds and other concerned parties the time to adjust and hopefully prevents no unnecessarily wild price swings on the rebalance day.
We found out what the latest rebalancing would involve a few weeks ago on 2 September. But today is the day these changes take effect. So let's go over some of the biggest changes to the ASX 200 Index that are in place from today.
A new look ASX 200
So, to get the bad news out of the way first, here is a list of the ASX 200 shares that are, well, no longer ASX 200 shares.:
- Life360 Inc (ASX: 360)
- AVZ Minerals Ltd (ASX: AVZ)
- City Chic Collective Ltd (ASX: CCX)
- Clinuvel Pharmaceuticals Limited (ASX: CUV)
- EML Payments Ltd (ASX: EML)
- Janus Henderson Group (ASX: JHG)
- Pointsbet Holdings Ltd (ASX PBH)
- Zip Co Ltd (ASX: ZIP)
In their place, here are the new faces that have just gained an ASX 200 membership card:
- Capricorn Metals Ltd (ASX: CMM)
- Charter Hall Social Infrastructure REIT (ASX: CQE)
- Johns Lyng Group Ltd (ASX: JLG)
- Karoon Energy Ltd (ASX: KAR)
- Lovisa Holdings Ltd (ASX: LOV)
- Smartgroup Corporation Ltd (ASX: SIQ)
- Spark New Zealand Ltd (ASX: SPK)
- Sayona Mining Ltd (ASX: SYA)
So some interesting names here, which perhaps some readers might be familiar with.
ASX 200 membership can be a big deal for a company's shares. For example, as of today, any ASX 200 index fund or exchange-traded fund (ETF) that tracks the ASX 200 will have now sold any of the companies in our first list. They also would have just welcomed all of the companies in our second list in their funds.
There's also the prestige that comes along with being in the flagship index of ASX 200 shares.
So today might be a bitter day for some ASX shares that didn't make the cut this time. But it will also be a happy day for the new companies being welcomed onto the ASX 200 as of this Monday.
