John Robertson

S&P has cut a swathe through the resources stocks making up the S&P/ASX 300 share price index. Twenty three stocks out of the 110 currently in the index are being dropped as part of the index provider's quarterly review, due to take effect on 20 September. The primary reason for the cutback has been relative share price performance. The resources sector is near the trough of a cyclical downturn which has dragged prices back to 2005 levels. By treating an inherently cyclical sector comprising hundreds of smaller companies as though it was just like any other sector in the US (from where the methodology arises), S&P adds to the cyclicality of the local market as its decisions encourage investors to sell on weakness and buy after share prices have risen, at times the exact opposite of what anyone should be doing.


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