Australian indices are set for a shake-up as booming gold stocks climb the ranks, impacting both small and large-cap fund managers. Several gold miners, including Westgold Resources, Regis Resources, Vault Minerals and Greatland Gold, are poised to join the S&P/ASX 100. This shift, driven by a surge in gold prices, will increase the benchmark’s gold weighting to 5.5 per cent, the highest in decades. The changes, expected to be announced on March 6th and take effect a fortnight later, will trigger passive flows into the sector.
For small-cap funds, the growing presence of gold miners has already posed challenges. QVG Capital’s Opportunities Fund, which invests mainly in technology and industrial stocks, has seen its portfolio underperform as money flows into gold. QVG Capital is an Australian fund manager investing in a range of companies listed on the ASX. Their Opportunities Fund focuses on small to mid-cap stocks with growth potential.
The promotion of these gold miners from the S&P/ASX Small Ordinaries Index is creating opportunities for critical minerals companies. Arafura Rare Earths, Brazilian Rare Earths, Dateline Resources, Elevra Lithium and Metals X are among 17 companies expected to join the Small Ords, fuelled by US efforts to diversify supply chains. Other newcomers to the small-cap benchmark are likely to include DPM Metals, Turaco Gold, Minerals260, Meeka Metals, Santana Minerals and St Barbara, alongside Gemlife Communities and Cuscal.
Morgan Stanley predicts up to five changes to the ASX 200 at next month’s rebalance, assigning a higher probability to SRG Global and Vulcan Energy joining the premier benchmark. For the ASX 50, the broker is tipping lithium miner PLS will replace Seek. These rebalancing events have become increasingly important for active investors who strategically buy smaller companies on the cusp of joining major indices, as index funds and benchmark-conscious investors start accumulating shares in these companies.
