ASX200 - BHP Unification

[Tinga]

Just wondering what will happen to the ASX200 if/when BHP unifies its corporate structure by bringing LSE shares onto the ASX at the end of the month. About $125B worth of shares which is an 8% increase in the market cap of the ASX200. Will the ASX200 jump accordingly? (ie increase by 8% in a day). Interested in thoughts

 

[Dona Ferentes]

Just wondering what will happen to the ASX200 if/when BHP unifies its corporate structure by bringing LSE shares onto the ASX at the end of the month. About $125B worth of shares which is an 8% increase in the market cap of the ASX200. Will the ASX200 jump accordingly? (ie increase by 8% in a day). Interested in thoughts

try the BHP thread

 

[Garpal Gumnut]

Just wondering what will happen to the ASX200 if/when BHP unifies its corporate structure by bringing LSE shares onto the ASX at the end of the month. About $125B worth of shares which is an 8% increase in the market cap of the ASX200. Will the ASX200 jump accordingly? (ie increase by 8% in a day). Interested in thoughts

The ASX 200 will become more tilted towards mining stocks. In the top 10 of the 200 which are as big in capital value as the lowest 190 of the bunch, are the larger banks and mining/materials companies e.g MQG, CBA, BHP, RIO and FMG as well as some diversified conglomerates such as WES and Pharma e.g CSL.

The index per se will become more weighted to materials than financial entities.

Who knows what the effect will be on prices of the individual shares.

Many funds are already stocking up on BHP as shown by the rise in the share price since the announcement, as they need to have a percentage of their holdings in direct relationship to the 200.

Below is a line graph of the weekly over 6 months of BHP and the SP ASX 200.

China may adversely affect BHP's price in the near future and people selling houses in a recession or raised interest rate environment for and less than mortgage value for houses may affect the banks.




gg

 

[Tinga]

Thanks for for response. I understand your response but it still doesn't answer my question. BHP (ASX) is going to grow by $125B overnight and if everything else stays equal then we should see a significant spike in the ASX200 give $125B represents about 8% of ASX200 market capitalisation. 8% of ASX200 at 7300 = 580 point increase ..... thoughts?

 

[divs4ever]

shareholders in South Africa and UK will still hold BHP shares just not the JSE or LSE and THAT is where it all gets complicated ( you are talking about a top 5 market cap on both exchanges )

 

[KevinBB]

Thanks for for response. I understand your response but it still doesn't answer my question. BHP (ASX) is going to grow by $125B overnight and if everything else stays equal then we should see a significant spike in the ASX200 give $125B represents about 8% of ASX200 market capitalisation. 8% of ASX200 at 7300 = 580 point increase ..... thoughts?

Hello @Tinga

Not quite correct.

All that is going to happen is, if the shareholders vote for unification, there will be a fair sized rebalance of the S&P ASX 200 index, and also other indices that BHP is a part of. This will all happen in one "big bang" before the start of trading on 31 January, again, if the vote is for unification.

There won't be any change in the value of any of the indices between the close of trade on 30 January and the open of trade on 31 January. All that is going to happen is BHP's participation in each of the indices will increase. In the case of the S&P ASX 200 index, the percentage increase will be from (approximately) 6.2% to 10.0%. All other constituents of the index will have their percentage participation in the index reduced accordingly.

The AFR had a good story about this a few days ago. You can read it here.

KH

 

[Tinga]

Thank you

 

[InsvestoBoy]

It's actually the opposite.

If all else was equal, every fund manager who did nothing would be underweight BHP by a large amount. So they have already been buying up BHP shares on the LSE to make sure when the flip happens their portfolios will be tracking correctly.

 

[frugal.rock]

if everything else stays equal then we should see a significant spike in the ASX200 give $125B represents about 8% of ASX200 market capitalisation. 8% of ASX200 at 7300 = 580 point increase ..... thoughts?

I don't think you understand what a re balance does.

Yes, the ASX200 companies total market cap value increases, however their individual weighting will drop.
The index value itself won't change.

EG; say for example CBA Commonwealth Bank market capital is currently 5% of the total market capital in the index, then after a float adjustment, it may only represent 4% of the index (weight), assuming it's share price stays the same.
Note; assumed figures used and probably not even close to real thing!

Between BHP and BLOCK, they will have a daily effect on the ASX200 after all is said and done, but that is only the daily effect of them either being up or down and by how much inline with other stocks etc
We may see some larger average daily ranges of high and low of the ASX200 index as a result.

That's my understanding anyway, if I'm wrong I hope someone says something!

 

[divs4ever]

i guess we shall see what happens , but just remember not so far in the future BHP shrink again under the WPL deal, ( i would be surprised if BHP didn't drop more than $10 )

so the BHP market weight might not stay around 10% of the ASX 200 , i am guessing the better LICs have figured this out ( and how many WPL they want to hold longer term ) but what about the ETF guys who need to be more flexible and liquid especially those 'climate-sensitive guys .

all we need is a black swan during this period to really mess this up

 

[KevinBB]

The AFR had a good story about this a few days ago. You can read it here.

And another one today, which can be read here.

KH