Several changes are expected before Christmas to the companies included in the NZX-50 index which is traditionally tracked by many index funds.
Yesterday, Kathmandu re- placed Methven Ltd in the NZX-50.
With Allied Farmers expected to take over Hanover Finance and United Finance and DNZ Property Fund expected to list before Christmas, both will move into the NZX-50, probably at the expense of Skellerup and Pan Pacific Petroleum.
If another company moves into the NZX-50, Farming Systems Uruguay will be the next casualty, although Craigs Investment Partners broker Chris Timms said the NZX-50 was "something of a movable feast".
Pyne Gould Corporation was likely to move into the top 50 at the next review.
As companies increased or decreased their market capitalisation, or value, they moved in and out of the index.
But they also had to have minimum turnover as a percentage of their capitalisation.
For index-tracking funds, they would move their holdings from one company to another as the companies moved in and out of the index, he said.
Moving out of the NZX-50 could sometimes mean less research being done on a company as funds did not want to pay for research on a company outside of the top index.
It could also mean the share price going down, even if the company was performing well.
However, the changes to the NZX-50 were not immediate with there being a lead-in period, Mr Timms said.
There were five funds which had a hard-and-fast rule of tracking the 50 and they had already done their buying and selling on Kathmandu and Methven.
It was unlikely the announcement yesterday would cause any further buying and selling by those funds.
There were other funds who "loosely" followed the top 50 but they had discretion about whether they liked the stock or not, he said.
