It's been a horrid start to the trading week for the S&P/ASX 200 Index (ASX: XJO) so far this Monday. At present, the ASX 200 has shed a nasty 0.66% of its value and is back under 7,240 points. But let's talk about the Liontown Resources Ltd (ASX: LTR) share price.
Liontown, an ASX lithium stock, is weathering the ASX 200 storm quite well today. Right now, the lithium company is actually in the green, having recorded a slight rise of 0.17% to $3.02 a share.
So how are Liontown shares surviving and thriving in the face of this brutal start to the week for most ASX 200 shares?
Well, one might assume that perhaps most ASX lithium shares are rising today and that the Liontown share price is being swept up in some sector-wide optimism. But those assumptions would be misplaced. In fact, most ASX lithium stocks are having an even worse day than the broader market.
Take the Pilbara Minerals Ltd (ASX: PLS) share price. Pilbara shares have suffered immensely today, and are down a nasty 2.34% at the time of writing.
We are also seeing other lithium stocks like Core Lithium Ltd (ASX: CXO) and Sayona Mining Ltd (ASX: SYA) retreat heavily. Core shares are down 2% right now, while Sayona has suffered a 2.7% beatdown.
So why is the Liontown share price the exception here?
Why is the Liontown share price defying the ASX 200's gloom today?
Well, we don't know for sure. There's been no fresh news or developments out from the company itself. However, there is one major development for Liontown today that might be playing a role here.
Earlier this month, the global index provider S&P Global revealed its latest adjustments to its range of ASX indexes, which of course includes the ASX 200. But it also includes the more exclusive S&P/ASX 100 Index (ASX: XTO). And Liontown was announced as the ASX 100's latest entrant.
That rebalance takes effect today. Yep, this Monday is the first day that the Liontown share price is now amongst the top 100 shares on the ASX boards, taking the place of Harvey Norman Holdings Limited (ASX: HVN).
Now, as we discussed last week, getting an invitation, or marching orders, from the ASX 100 isn't nearly as much of a big deal as it is for the far more impactful ASX 200 Index. There are a couple of reasons why ASX 200 inclusion or exclusion can make for some big share price moves.
Are investors getting excited over the ASX 100's newest member?
For one, many fund managers out there are restricted to only investing in the ASX 200 universe. So if a share is kicked out, many fund managers will have to sell out as well. Further, any ASX 200 share must be held by the bevy of index funds that also track the ASX 200.
Thus if a share is included, it will suddenly have a range of index funds buying up the shares. The same happens in reverse though. If a share is kicked out, all of those index funds will be offloading their positions.
Both of these factors are significantly nullified when it comes to the ASX 100. There simply aren't a lot of fund managers, or index funds, that are restricted to or track the ASX 100 index.
However, it's still possible that this change is boosting sentiment for Liontown shares today. Harvey Norman, the company Liontown is replacing in the ASX 100, is seeing a 0.6% drop at present. So perhaps this is indeed what is going on. Let's see what happens with the Liontown share price tomorrow.
