18th April 2023 could be a big day for Neuren.From the AFR:As...

18th April 2023 could be a big day for Neuren.
From the AFR:

As the $9.4 billion copper miner OZ Minerals preps to decamp to BHP after the April 13 scheme meeting, Morgan Stanley’s equity strategists reckon Seven Group Holdings will have the best crack at joining the ASX 100 ranks and Neuren Pharmaceuticals the ASX 200 -- though the latter spot would be tightly contested. Neuren Pharma and Seven Group should enter S&P’s ASX 200 and 100 after OZ Minerals decamps to BHP, according to Morgan Stanley’s market boffins.

The strategists are tipping April 18 (and the week before) to be a decent sized trading day for the new index entrants, as passive funds and low tracking-error active ones rebalance portfolios to account for the index changes triggered by OZ’s departure.

They said OZ’s ASX 100 replacement was clear-cut. Seven Group Holdings was the highest ranked stock meeting the eligibility criteria, and also the largest with a float-adjusted market capitalisation of $3.5 billion. Dual listed Kiwi telco infrastructure provider Chorus came a close second, but its relative liquidity was below 50 per cent, the strategists led by Antony Conte said in a note sent to clients on Tuesday and based off Monday’s share prices.

Picking the new index arrivals for the ASX 200 wasn’t as straightforward, with the Morgan Stanley market hats weighing Bellevue Gold, Ventia Services and (their eventual pick) Neuren Pharmaceuticals as OZ’s potential replacement in the index.

They said Neuren had the biggest float-adjusted market cap of the three candidates at $1.6 billion after meeting the liquidity criteria. “On a 6-month daily average float-adjusted market cap rank (“rank”), Bellevue Gold (BGL) is currently the highest ranked at 179, followed by Ventia Services Group (VNT) at 182, whilst NEU is 196. However, the spread based on the 6-month daily average float-adjusted market cap between BGL and NEU is circa A$140m and on current float-adjusted market cap it is circa A$250m with NEU having a considerable size advantage over the higher ranked stocks,” Conte et al said in a note, based off March 20 share prices.

However, the markets hats were careful to caution variables that could affect their pick, including S&P index committee’s discretion and share price performance of Neuren, Ventia, and Bellevue between now and OZ’s scheme meeting.

Should their calls be right, Neuren would represent 7.9bps of the ASX 200 with $72.5 million value to trade by index trackers, while Seven would be 18.9bps of the ASX 100 with $51.3 million to be traded – both much smaller constituents of bottom end of the indices than OZ was at 40bps plus weight in both indices.