S&P Dow Jones Indices announced late Friday that it is adding two stocks and deleting four from the S&P/TSX Composite Index, the broadest measure of the Canadian market.
No changes are being made to the S&P/TSX 60, a selection of most of the largest companies in the composite.
S&P Dow Jones uses “float” – the value of shares that aren’t held by insiders and that therefore trade frequently and are easily available to the public – to judge whether a company should be included in its indexes. The index provider does not release its proprietary float calculations.
S&P said it will add Endeavour Silver Corp. EDR-T +3.60%increase and gold miner G Mining Ventures Corp. GMIN-T +3.68%increase.
S&P said it will delete forestry company Interfor Corp.IFP-T -0.79%decrease; energy-equipment seller Mattr Corp. MATR-T -2.10%decrease; restaurant owner MTY Food Group Inc MTY-T -2.93%decrease and real estate company Storagevault Canada Inc. SVI-DB-T +0.25%increase.
The changes will be effective at the open of markets on March 24.
The stocks S&P Dow Jones removed aren’t the worst performers of the year – they just have fallen enough since thelast quarterly rebalancing in December, to make them too small to stay in.
Mattr shares have fallen 19.7 per cent since the end of November, according to S&P Global Market Intelligence. Interfor has fallen 16.0 per cent, MTY is down 6.2 per cent, and StorageVault is down 1.0 per cent.
To get into the composite, a company’s float-adjusted market capitalization must be 0.04 per cent, or four-hundredths of a percentage point, of the total value of the index. To stay in the composite, a company’s float must not drop below 0.025 per cent, or 2.5 hundredths of a percentage point, of the total value of the index.
With the growth of index funds and other passive investing strategies, whether a stock is part of a major index can have a meaningful effect on share prices. Fund managers who track an index need to hold shares in the underlying companies. Canadian stocks added to the composite – which has about 220 to 250 members, depending on the quarter – can see price bumps before and after inclusion. Similarly, companies removed from the index lose a source of demand for their shares.
Research by Morningstar Direct for The Globe and Mail found Canadian mutual funds and exchange-traded funds with assets under management amounting to $265-billion had returns that were 95 per cent or more correlated with the S&P/TSX Composite over the 12 months ended Dec. 31, 2024. This included funds that explicitly say they track the index.
This week, S&P Dow Jones said it will consider a significant change that would allow some companies to appear in multiple countries’ indexes, paving the way for companies such as Brookfield Asset Management Ltd. BAM-T -2.50%decrease, Shopify Inc. SHOP-T -3.85%decrease, and the former Ritchie Bros. Auctioneers Inc. to be both Canadian and American.
S&P Dow Jones says it could allow companies “with significant ties to Canada” to stay in a Canadian index even if it normally would consider the company “domiciled” in another country. The company would need to be incorporated in Canada to be eligible.
Until now, S&P Dow Jones has said a company can have just one country of domicile – and that country’s stock indexes are where it needs to be.
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