Friday, November 7, 2014

Xero dropped from the MSCI Standard Index, to join the small cap

Suze Metherell for Yahoo Finance writes:  A review of global indices by MSCI has added MightyRiverPower and Meridian Energy to the international investment advisor's main global index, while Xero has exited to a smaller cap index.
The semi-annual review of the MSCI Equity Indexes saw government-controlled energy generators and retailers, MRP and Meridian included in the MSCI Global Standard Index, exiting the MSCI Global Small Cap Index. Meanwhile, Xero, the cloud-based accounting software firm, departed the standard index, to join the small cap, while partially-privatised power company, Genesis Energy also debuted in the small cap index.
Investors who follow the indices are required to hold a certain amount of the stock, with changes causing selling and buying in new or departing stocks.
"Some investors are able to move in advance of these changes, others may need to wait till the changes have been announced, and they don't necessarily have to do it straight away," said Shane Solly, director at Harbour Asset Management.
Shares of Xero, which have dropped some 61 percent from their $45.99 March peak, rose 5.7 percent to $17.90, to be the day's best performer on the NZX 50 Index. The Wellington-based tech firm has come under selling pressure as investors have questioned its growth plans in the US market place.
"Xero is having a bit of a rally as people have been anitcipating this," said Solly. "While it is leaving the main index, it is going into a smaller index. There's been a number of hedge funds short-selling Xero, in anticipation of this, so some of them could be closing out or reducing there, which may explain the recovery in the stock price today."
State-controlled power companies have been popular with yield hunting investors, particularly after the incumbent National-led government returned for a third term at the Sept. 20 general election, shutting down the threat of regulation, which had been a cornerstone policy for opposition parties in trying to drag down power prices for consumers. Recently the companies have been announcing special dividends for shareholders.
Meridian, which has climbed 41 percent in the past three months, gained 1.2 percent in afternoon trading to a record $1.685. MRP, which has increased 22 percent over the past three months, rose 0.7 percent to a record $2.895. Genesis, which has gained 22 percent in the period, climbed 1.9 percent to a record $2.17.
"There a three drivers helping the stocks," Solly said. "The election, the index changes in the MSCI and the increase in special dividends."
The MSCI Global Micro Cap Index was also reviewed with DNZ Property Fund, Marlin Global and New Zealand Refining Co all exiting. There were 14 new New Zealand additions to the micro cap index, which included six out of the nine NZX floats this year, Intueri Education Group, ERoad, Scales Corporation, Vista Group International, Metro Performance Glass and Gentrack Group.
"You have seen some really interesting businesses come to the market and one thing New Zealand had been lacking was a breadth, now we've got it," Solly said. "A lot of these businesses are pretty attractive to global investors as well."
Other additions were Burger Fuel Worldwide, CDL Investments NZ, Foley Family Wines, Marsden Maritime Holdings, Michael Hill International, Millennium & Copthorne and Sanford. New Zealand Oil & Gas also exited the small cap index to join the micro cap index.


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