S&P Dow Jones Indices will add four stocks to the S&P/TSX Composite Index, the broadest measure of the Canadian market.
S&P said it will add construction company Aecon Group Inc. ; energy-services companies Enerflex Ltd. and TerraVest Industries Inc. and NGEx Minerals Ltd., a Vancouver-based miner of precious metals in South America.Analyst Jean-Michel Gauthier at Scotiabank correctly predicted the four additions to the Composite, but also forecast Algonquin could be dropped. The Oakville, Ont.
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.