The rebalancing to the ASX 200 (ASX: XJO) has been announced this morning.
Why is this happening?
Every quarter the S&P Dow Jones changes which businesses will be added and removed from the various indices.
The idea is that the growing companies will enter the ASX 200, the ASX 100 and so on. The businesses that are struggling and shrinking will be kicked out.
So what shares are entering the ASX 200?
The businesses that have grown enough to enter the ASX 200 are: property business Centuria Industrial REIT (ASX: CIP), cloud business Megaport (ASX: MP1), biotech business Mesoblast (ASX: MSB), litigation financing business Omni Bridgeway (ASX: OBL) and gold miner Perseus Mining (ASX: PRU).
Being removed from the ASX 200 is Estia Health (ASX: EHE), Hub24 (ASX: HUB), Jumbo Interactive (ASX: JIN), Mayne Pharma (ASX: MYX), Pilbara (ASX: PLS) and Pinnacle (ASX: PIN).
There is also an additional removal from the ASX 200 because of the demerger of GrainCorp (ASX: GNC) and United Malt Group (ASX: UMG).
Were there any other changes?
A large number of businesses were added and removed from the ASX 300. Some additions include Pointsbet (ASX: PBH), Tyro (ASX: TYR), Australian Ethical (ASX: AEF) and Elmo Software (ASX: ELO). One notable removal was iSignthis (ASX: ISX).
There was also a number of additions to the ASX All Ordinaries like Splitit (ASX: SPT), Sezzle (ASX: SZL) and Bigtincan (ASX: BTH).
There were also some changes in the larger indices. In the ASX 20, Amcor (ASX: AMC) is out and Aristocrat Leisure (ASX: ALL) enters. In the ASX 50, A2 Milk (ASX: A2M) has been added and AMP (ASX: AMP) has been removed. In the ASX 100, Nextdc (ASX: NXT) and Saracen (ASX: SAR) are in and Whitehaven (ASX: WHC) and Unibail-Rodamco-Westfield (ASX: URW) are out.
Why does this matter?
The ASX 200 and the other indices are important measures of which companies are growing or shrinking. One of the most important things is that some exchange traded funds (ETFs) are based on an index like the ASX 200 or the ASX 300. I’m thinking of ETFs like Vanguard Australian Shares Index ETF (ASX: VAS) and BetaShares Australia 200 ETF (ASX: A200).
Some fund managers also have different investment mandates. Perhaps they are only allowed to invest in ASX 200 shares, or ASX shares outside of the ASX 50.