Treasure Chest: Pending Potential Index Changes

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By Greg Peel

Standard & Poor's will announce the results of its March index review on Friday morning, with March 16 being the last trading day before the changes are implemented.

As always, it must be noted that while “Top X” indices give due consideration to simple market capitalisation and liquidity requirements there is also a subjective element, in that the publishers try to maintain diversification of sectors and businesses in each index in order to be a best representation of the Australian economy.

For the S&P/ASX 20, JP Morgan's quant analysts are not expecting any changes, but suggests Asciano ((AIO)) could replace Macquarie Group ((MQG)).

The same goes for the ASX 50, and the analysts don't think Dexus ((DXS)) is likely to replace Toll Holdings ((TOL)).

For the ASX 100, the analysts believe the revamped Centro Retail Fund ((CRF)) should replace Goodman Fielder ((GFF)) and that Beach Energy ((BPT)) could replace Transfield ((TSE)).

In the benchmark ASX 200, JP Morgan sees Centro Retail replacing Kagara Zinc ((KZL)) and believes Super Retail ((SUL)) could replace White Energy ((WEC)).

Moving down into the smaller caps, to the ASX 300 the analysts are expecting the addition of Noble Mineral Resources ((NMG)), Drillsearch Energy ((DLS)), Northern Star Resources ((NST)), Red 5 ((RED)), Hillgrove Resources ((HGO)), Neonenergy ((NEN)), Azimuth ((AZH)), Redfork Energy ((RFE)), Orocobre ((ORE)), Goldroad ((GOR)), ABM Resources ((ABU)), Buru Energy ((BRU)), RHG ((RHG)), Sundance Energy ((SEA)), Alcyone Resources ((AYN)), and Empire Oil & Gas ((EGO)).

They are expected to replace Hastie Group ((HST)), Skilled Group ((SKE)), Austal ((ASB)), STW Communications ((SGN)), Clough ((CLO)), Challenger Infrastructure Fund ((CIF)), and Straits ((SRQ)).

Yes, a world of diversity in those additions (?). If you are wondering why there are more additions than subtractions in any index, the answer is an index does not necessarily have to include the number of stocks it suggests. It is often more.

For the All Australia 50, JP Morgan is not expecting any changes and does not think OZ Minerals ((OZL)) will replace Toll Holdings.

For the All Australia 200, the analysts suggests Centro Retail should replace Australian Agricultural Company ((AAC)) while there is a possibility Super Retail, Troy Resources ((TRY)) and maybe Ivanhoe Australia ((IVA)) could replace Alkane Resources ((ALK)), Kagara and maybe White Energy.

Traders should take note that index-tracking fund managers will, within the allotted period, need to blindly buy additions and sell subtractions.
 

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