Every now and then, stock indexes have to change what stocks they consist of, to ensure they represent the market, this is known as an index rebalance or index reweighting. When these changes are announced it often has a large impact on the stocks that are leaving or entering the index.
There are many ETFs and other funds that track these indexes, so when a stock leaves, the tracker fund has to sell, and if a stock enters the index, they have to buy.
We are now about a third in from FTSE’s last index changes that were announced on the 2nd of September. And already we are seeing potentially large changes for the 2nd of December announcement.
Below is a list of the entries and exits that would happen if the index rebalance was today. You often see the largest changes in stocks that have to be traded at a much higher volume than the average for the stock. Hammerson, for example, only has a three month average daily volume of 6m shares. But when it enters the index, we estimate that almost 10 days worth of volume needs to be bought. This is based on that there are about $6b of assets under management by passive funds that are set up specifically to track/mirror the index constituents of FTSE250. There will be a lot of other funds that have FTSE250 as a benchmark to some extent, so this value is quite conservative. In the below list we also highlight four companies that are staying in the index because they are having a significant weighting change.
|Stock||Weighting Change||Shares needed to be bought or sold||Average Volume||Info|
|Ninety One Group||0.21||5.87m||782.25k||Staying in|
|Dunelm Group||0.21||844.80k||335.12k||Staying in|
|3i Infrastructure||0.24||5.03m||641.84k||Staying in|
|Rolls-Royce Holdings||0.86||34.73m||18.04m||Will be added|
|Baillie Gifford Shin Nippon||0.2||5.16m||807.59k||Will be added|
|Hammerson||0.18||58.91m||6.03m||Will be added|
|Capital Gearing Trust||0.17||226.80k||19.58k||Will be added|
|discoverIE Group||0.17||1.62m||92.83k||Will be added|
|The Rank Group||-0.05||-3.45m||226.15k||Will be removed|
|Cineworld Group||-0.14||-30.74m||27.18m||Will be removed|
|Greencore Group||-0.14||-8.27m||2.21m||Will be removed|
|Petrofac Limited||-0.1||-5.15m||1.94m||Will be removed|
|Pershing Square Holdings, Ltd.||-1.28||-3.76m||200.37k||Promoted to FTSE 100|
The full list is available at the ORTEX platform, for a free trial click the button below.