Major shakeup on the ASX: 2024’s largest rebalance is underway

Uranium and technology stocks are moving up within the ASX ranks, according to the upcoming S&P/ASX March quarterly review. The changes should not come as a surprise given the recent spike in uranium prices and AI proliferation theme.

The March S&P/ASX rebalances are the most significant of the year, and 2024's is no different, with seven indices and 128 companies impacted. The changes were declared on 1 March 2024 and effective prior to the open of trading on Monday, 18 March 2024.

Here's everything you need to know.

2024 March Rebalance at a Glance

Rebalance significance

Inclusion into a major benchmark such as the ASX 200 or All Ordinaries yields numerous benefits, including:

• Greater investor interest which leads to more liquidity and higher volume

• Analyst coverage as ex-ASX 200 stocks tend to receive broker coverage

• Inclusion into ETFs and funds (e.g. Betashares Australia 200 ETF, iShares ASX 200 ETF as well as funds that track the ASX 200)

The rise in passive investing and benchmarking has increased the magnitude of how stocks trade before index inclusions and deletions, according to UBS. The data is pretty self-explanatory – Stocks that have run up hard move up the ranks while the ones that have underperformed are phased out.

Stocks being added to major benchmarks have the tendency to run up ahead of the rebalance. Then, they underperform into the implementation.

Median total return for stocks going into the ASX 200 60 days before and after their index exclusion dates against the weighted total return of the ASX 50 from January 2000 to August 2017 (Source: UBS)

For deletions, the stocks have already been underperforming for many months and tend to drift lower post inclusion. However, the data does suggest that some may experience a rebound.

Median total return for stocks going out of the ASX 200 60 days before and after their index exclusion dates against the weighted total return of the ASX 50 from January 2000 to August 2017 (Source: UBS)

Taking a closer look

ASX 20 Changes

ASX 50 Changes

ASX 200 Changes

The four stocks set to exit the ASX 200 also happen to be some of the most heavily shorted stocks on the market. Here's how they rank plus the percentage of outstanding shares being shorted (data as at 8 March 2024):

• Core Lithium – #8 at 7.65%

• Sayona – #11 at 7.44%

• Weebit Nano – #12 at 7.23%

• Chalice Mining: #14 at 7.11%

You can check out the full March 2024 rebalance announcement here.

Informal re-weights

While major index rebalances are announced weeks in advance and widely publicised, there may be smaller adjustments to index and portfolio weightings that are not formally announced. These adjustments could be made by index providers or portfolio managers in response to market cap changes, market conditions, corporate actions or other factors.

Occasionally, a fund might delay a re-weight to the very last minute. In such cases, they often rush to fill orders in the closing auction, regardless of price, leading to a significant push in share price either upwards or downwards.

Washington H Soul Pattinson (ASX: SOL) displayed this price action during the September 2023 quarterly rebalance. On Friday, 15 September, the stock was trading 3.7% to $34.78 at 4:00 pm but abruptly spiked in the closing auction, finishing the session 6.6% higher at $35.82.