Index Rebalance in FTSE

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
Diploma 0.21 570.21k 230.77k 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

 

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