Originally Posted by
Intel
Im, sorry but I dont get what you are trying to say?
But for teh sake of teh forum I will explain my thesis, however that chart explains exactly what I was trying to convey.
XRO was announced to enter into MSCI on May 16th, SP approx $30,
XRO enters MSCi on 30 May, increased volume, Sp closes approx $32.
Approx two days after the inclusion date the SP has reverted back down to $30 and then continues on with its downward slide.
Its a simple equation, when the stock goes in you have built up demand, when it goes out you have built up supply. It creates a short term disequilibrium and severely impacts SP's.
This is a trading play and if you are trying to get me to explain why XRO's SP has gone down post index inclusion then thats not what I am conveying. In fact if anyone believes that index inclusion helps a stock in the long run they are a long way from the truth. Sure it will get more analyst coverage etc but it is your classic cause and effect relationship.
History has shown that MSCI inclusion creates significant abnormal returns that can be taken advantage of. And those returns can be significantly enhanced if you can pre determine wether stocks will go in or out before the announcements. There are quant funds who purely focus on this trade. CLSA have a pretty good research team focused exactly on this subject so if you want to trade australasian stocks, setup an account with them and read their research.
For BFG you should go back and look at the SP performance of PEB and LNG, you'll find both of their SP's were helped in the short term by increased demand. I sold my PEB's into the index inclusion so I would now and I own LNG so and saw that spike about 20c in the closing auction the day it went into the ASX200.
Hope that assists.
On an aside, BFG how do you determine something is a bubble? Do you just look at SP performance and call it on that or do you genuinely try to value the business?