MSCI Global Small Cap rebalance: Which ASX stocks are in and out?

MSCI announced its Global Small Cap Indexes quarterly rebalance on Thursday, which will mark the inclusion of 4 and removal of 6 ASX companies. The changes will take place as of the close of 31 May 2023. 

When a company is added to an index, the stock can experience an increase in demand as index-tracking funds and investors adjust their portfolios to match the index. Conversely, the opposite can happen when a stock is removed from the index.

The buying and selling as part of the rebalancing typically occurs over a period of time leading up to and following the effective date of the rebalance.

It’s worth noting that the MSCI Global Small Cap tracks smaller companies, which are less well-known and have smaller market capitalisations. It’s also not as widely followed or as heavily traded as larger indexes like the ASX 200, which means the changes to the index are less likely to have an impact on share price performance.

What’s in: Coal and gold

Yancoal (ASX: YAL)

Yancoal operates over 10 mines across NSW, Queensland and WA. It’s been a volatile year for thermal coal prices, with Newcastle Coal futures down almost 60% year-to-date but still more than double pre-Covid levels.

“Thermal coal prices have retreated from the record levels seen in 2022, however, our overall realised price remained robust … we continue to generate strong cash flows that have allowed the repayment of the Group’s remaining external interest-bearing loan,” the company said in its March quarter report.

The stock is down 10.9% year-to-date and up 2.7% over the past twelve months.

Yancoal 12-month price chart (Source: Market Index)

Stanmore Resources (ASX: SMR)

Stanmore acquired an 80% stake in BHP’s Mitsui Coal for US$1.2bn in late 2021 and acquired the remaining 20% interest in August 2022 for US$380m.

The acquisition has helped Stanmore outperform coal peers, with the stock up 2.0% year-to-date and 31.4% in the past twelve months.

Stanmore 12-month price chart (Source: Market Index)

Resolute Mining (ASX: RSG)

2023 has been a massive turnaround for Resolute shares. The stock is up 142% year-to-date but still down almost 80% from its August 2019 high. 

The African gold miner was unprofitable in FY21-22, which reflected operational challenges amid Covid and higher-than-expected all-in sustaining costs. 

Resolute Mining 12-month price chart (Source: Market Index)

Alpha HPA (ASX: A4N)

Alpha HPA is an emerging producer of high-purity alumina – An industrial and battery metal that’s known for its superior hardness, corrosion resistance and purity. The stock has been almost vertical since March, up almost 70% year-to-date and close to cracking the $1bn market cap level.

In an interview with HPA peer Impact Minerals (ASX: IPT), Managing Director Dr Mike Jones says that “one of the reasons why Alpha HPA has taken off [is] because people think “wow this might work and the margins are ridiculous” and that’s why people are trying to get into the HPA space but it's technically very difficult.”

Alpha HPA 12-month price chart (Source: Market Index)

What’s out: Unloved battery metals, unprofitable tech 

Unloved battery metals: Neometals and Jervois Global

Neometals (ASX: NMT) has a lot on its plate. It’s trailing a lithium-ion battery recycling plant (50% owned), a vanadium recovery facility (72.5% owned), advancing testwork and engineering cost studies for a lithium hydroxide operation (50% joint-venture) and development work at its 100% owned Barrambie Project in WA.

The stock is down 21.3% year-to-date and -49% in the past twelve months.

Neometals 12-month price chart (Source: Market Index)

Jervois Global (ASX: JRV) made the tough call to suspend the development of its Idaho Cobalt project on 29 March due to “continuing low cobalt prices and United States inflationary impacts on construction costs.” The stock fell 42% on the day of the announcement and is currently down 85.6% year-to-date. 

Jervois Global 12-month price chart (Source: Market Index)

Unprofitable tech: Zip and PointsBet 

Zip (ASX: ZIP) is doing everything it can to become profitable. Earlier this year, it divested its European (Twisto) and South African (Payflex) businesses, and on-track to wind-down its business in the Middle East. Still, it posted a $241m loss in the first-half of FY23.

The stock is trading flat year-to-date but down 46% in the last twelve months.

Zip 12-month price chart (Source: Market Index)

PointsBet (ASX: PBH) is also trying to moderate its cash burn, but still experienced outflows of $75.7m and $88.7m in the second and third quarters of FY23. It's worth noting that the company had $301m cash at 31 March.

The stock has experienced a powerful bounce in the past month, up 53% but still down 24% in the past twelve months.

PointsBet 12-month price chart (Source: Market Index)

The two other names that are being dropped from the MSCI Global Small Cap are Australian Ethical (ASX: AEF) and Mayne Pharma (ASX: MYX).