Saturday, May 16, 2020

SOUND BOARD: What to expect because of the MSCI rebalancing

Image courtesy of https://fee.org/articles/the-law-of-supply-and-demand/


Expect the price of $PGOLD to go up and expect the price of $SECB to go down.

This is because fund managers who track the MSCI as its benchmark and mimic MSCI's basket of stocks will have to remove $SECB in their portfolio by selling $SECB, thereby driving the stock price of $SECB down. Supply up + demand down -> Prices down.

On the other hand, fund managers will update their portfolio by buying $PGOLD thereby driving the stock price of $PGOLD up. Demand up + supply down -> Prices up.

The Law of Supply and Demand in play! 

$PGOLD is expected to go up



When the news broke out that $SECB will be removed, its stock price immediately went down. 
You could see a gap.



[Note: This post may need prior knowledge on what happened in MSCI rebalancing. You may read it @ https://business.inquirer.net/297215/psei-loses-0-45-in-thin-trade]


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