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How does ASX200 Quarterly rebalance impact stocks?

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How does ASX200 Quarterly rebalance impact stocks?

Just how much affect does the Rebalance have on the effected companies shares? For example Lovisa (LOV), going up because they are entering the ASX200? Or being pushed up by people looking to sell to big funds once added. You have said previously there are fund managers that can only deal in asx200 companies. Hence those shares leaving the ASX200 get dumped and incoming are bought, but can they buy them before officially added to the list?

Answer

Hi Peter,

In terms of investing for the long haul I would say its irrelevant but week to week it does have an impact:

  • By definition for a stock to move from say the ASX300 to ASX200 its doing something right and is being bought by fund managers along the way, & of course vice versa.
  • The market is often the best “weighing machine” of a companies individual performance.
  • Short-term in todays new investment landscape the biggest impact is arguably with ETF’s who often have specific weightings eg top 50, 100, 200 etc.
  • These ETF’s then have to buy strong stocks which will push them higher but their future medium / longer term direction will be determined by the companies revenue & profitability.

 

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Lovisa Holdings (LOV)
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