Afterpay, Xero head for ASX 50

What are some key changes predicted by Morgan Stanley in the next quarterly rebalance of S&P Dow Jones Indices?

Afterpay’s shares more than doubled in the six-month reference period.

Afterpay, Xero and Northern Star Resources moving into the S&P/ASX 50 index at the expense of Oil Search, Vicinity Centres and Computershare is among the key changes predicted by Morgan Stanley in the next quarterly rebalance of S&P Dow Jones Indices, due to be announced early next month.

After incorporating the latest market movements for the six-month reference period used by the index provider, Afterpay rose six places on Morgan Stanley’s six-month float-adjusted market capitalisation rank to $18.6bn, giving it a “high probability” of forcing its way into the top 50.

Savvy hedge funds typically put a lot of effort into predicting and trading to profit from changes in index constituents before they occur, as the effects on passive money flows can be substantial.

Afterpay’s shares more than doubled in the six-month reference period and have surged a further 17 per cent to a record high of $92.48 in the past two days.

While not expecting any changes to the ASX 20 index, Mr Conte said Fortescue Metals and Coles were the best placed to be considered as potential inclusion candidates, while Scentre and Suncorp were most likely to be dropped if a change were to occur.

In the ASX 100, Fisher & Paykel Healthcare remains the clear frontrunner to replace Virgin Money, while Flight Centre’s position in the index has deteriorated further, with Mineral Resources circling as the likely replacement.

For the ASX 200 Index, Mr Conte has swapped out Tyro Payments for Codan.

Kogan.com saw the biggest improvement of stocks outside the ASX 200, leaving it “well positioned to be a potential inclusion candidate in futures reviews”.

S&P Dow Jones Indices is due to announce the results of the September quarterly index review on Friday, September 4. All changes are effective at close of trade on Friday, September 18.