Ann: S&P DJI Announces December 2021 Quarterly Rebalance, page-7

KGN was not a surprise at all as it was below the threshold for removal by a clear margin. In general, deletions underperform going into the announcement, unsurprisingly since float adjusted market cap is the first criteria for inclusion. They also tend to underperform between the announcement and implementation, however the performance post implementation is much closer to an even money bet.

There was some research on US deletions from S&P 500 that showed 12 month outperformance by deletions… I’ve not tested that idea for ASX200 deletions, but the idea is that the dropout is oversold and/or implements changes to its business to make it more profitable and more attractive to investors.

One more factoid for ASX200 deletions is that the passive holders tend to be stock lenders… KGN and RBL in particular have high short interest, so they may see a temporary pop as stock loan supply may drop if the new holders don’t lend out their stock. All that is temporary… it’s the fundamentals that matter in the end.