ASX 200 Rebalance: Who's in, who's out and what does the data tell us?

The S&P December quarter rebalance will see three additions and three deletions for the ASX 200, effective prior to the open on 18 December 2023.

The three additions include:

• Emerging uranium producer Boss Energy (ASX: BOE)

• Lenders mortgage insurance provider Helia Group (ASX: HLI)

• Salary packaging company SmartGroup (ASX: SIQ).

While thee three removals include:

• Diversified real estate manager Cromwell Property Group (ASX: CMW),

• Industrial and office property manager Growthpoint (ASX: GOZ)

• Australian superannuation administration company Link Group (ASX: LNK)

Index Rebalancing: What the Data Tells Us

UBS analysts tested the performance of inclusions and deletions from regular quarterly rebalances between 2000 and 2017 for the ASX 100 and ASX 200 indices.

"We note there is a significant discount to stocks being deleted. As passive investing and benchmarking becomes more prevalent, the 'deletion discount' will likely increase in magnitude," the analysts said.

Here are a few things to note before we dive into the charts around inclusion and exclusion performance:

• There are currently 8 full trading days before the effective date (as of Tuesday, 5 December)

• As obvious as this sounds, the inclusions join the ASX 200 due to their outperformance or the inferior performance of those about to be excluded

• Stocks must meet certain eligibility criteria to be considered for inclusion in the index. This criteria may include factors such as liquidity, market capitalization, and listing requirements.

The below chart shows the median and mean total return of stocks going out of the ASX 200 60 trading days before and after their index exclusion dates against the equal weighted total return of the ASX 50 between January 2000 and August 2017. The relative returns are cumulative and set to 0% on the effective date.

Source: UBS

This chart shows the median and mean total return of stocks going into the ASX 200, 60 trading days before and after their index inclusion dates. The relative returns are cumulative and set to 0 on the effective date.

Source: UBS

The September Quarter Rebalance

A review of how additions and removals from the previous rebalance might also help understand the potential effects of rebalancing.

The additions:

Data as at Monday, 4 December close (Source: Market Index)

The removals:

Data as at Monday, 4 December close (Source: Market Index)