could cer be welcomed back in club200 on fri

Hey all,

Ive been looking into the methodology of how companies are included and excluded in the s&p asx200and I reckon tomorrow morning could very well be the day cer is welcomed back in the 200 with open arms....

A few interesting points to note:

- First Friday in the final month of each quarter is when the rebalancing announcement is made
- 3rd Friday of the final month of quarter is when the rebalancing take effect (we all know what happened on the 3rd Friday of March 2009)
- The six month average market cap is taken into account when deciding if the security should be promoted/demoted
- Any substantial holdings are not taken into account when calculating the market cap
- Volume is taken into account also


Below are some relevant extracts from the s&p methodology report:

http://www.standardandpoors.com/indices/sp-asx-200-risk-control-indices/en/us/?indexId=asx200-risk-control-indices

The S&P/ASX 200 measures the performance of the 200 largest index-eligible stocks listed on the ASX by float adjusted market capitalization. Representative, liquid and tradable, it is widely considered Australia?s preeminent benchmark index. The index is float-adjusted, covering approximately 80% of Australian equity market capitalization. Listed companies place immense significance on their membership in the S&P/ASX 200 index. Inclusion in the index generates significant institutional interest for constituents, and proliferates widespread media and buy/sell side analytical coverage.



Market Capitalization. The S&P/ASX indices only include securities that are considered to be institutionally investable, and market capitalization is a key criterion for stock selection. Stocks are included if they are large enough to meet the minimum ranking requirements for the representative indices within the Australian market. The market capitalization criterion for stock inclusion is based upon the daily average market capitalization of a security over the last six months. The stock price history (last six months), latest available shares on issue and the Investable Weight Factor (IWF) are the relevant variables for the calculation. The IWF is a variable that is primarily used to determine the available float of a security for ASX listed securities.


Quoted Shares Issued. When considering the index eligibility of securities for inclusion or promotion into S&P/ASX indices, the number of index securities under consideration is based upon the latest available ASX quoted securities. For domestic securities this figure is purely based upon the latest available data from the ASX.

Shares owned by founders, directors of the company, trusts, venture capitalists and other companies are also excluded. These are also deemed strategic holders, and are considered long-term holders of a stock?s equity. Any strategic shareholdings that are greater than 5% of total issued shares are excluded from the relevant float.

Shares owned by founders, directors of the company, trusts, venture capitalists and other companies are also excluded. These are also deemed strategic holders, and are considered long-term holders of a stock?s equity. Any strategic shareholdings that are greater than 5% of total issued shares are excluded from the relevant float.



Anyway how is this relevant to CER:

- Well it was interesting that it was announced CER would be removed from the ASX200 in MArch 2009 but was elected to be retained in December 2008.

- It would actually be contradictory in nature if CER doesnt get readmitted tomorrow yet was retained back in Dec 08.

- If you look at how CER's unit price performed from June 08 to Nov 08 compared to Nov 10 to May 2011, you will note that CER's avg unit price back then was much lower than the last 6 months. From the 12th of Sep 08 to 30 Nov 08, CER never traded above 15c. For much of Nov 08, it traded below 10c. The avg price was 22.5c. In the last 6 months (from 6 Nov 11) CER has never traded below 20c. The avg price since 1 Nov 10 has been 29.7c

- Also Orbis had a 15% holding in CER by the end of Nov 08. CER's current largest holder apart from CNP (prior to pending restructuring) is UBS with a holding of around 5%. The shares that would have been excluded from the relevant float back in Dec 08 would have been greater than the shares that would need to be excluded today. This would weigh favourably in CER's favour today.


- Avg daily volume in last 6 months has been 4.9m. Avg daily volume from July to Nov 08 was 7m.

However the total value of shares traded in last 6 months has been $225m as opposed to $186m worth traded from June 08 to Nov 08. (I downloaded data drom comsec to calc averages abd total value of shares traded)


Anyway lets see what Friday brings. Maybe it will be back, maybe not. Although there is a complelling argument that it should be back in! It will get there eventually whether it be this qtr or this qtr next year.

We all remember the disastrous effect the CER removal from the index had on the unit price that day with funds jumping over each other to get out. Itd be nice if the reversed happened this time around. THis time instead of drowning our sorrows with a dozen pints of beer, we'll be enjoying a pina colada or two, watching it all unfold from Hawaii.

Cheers