Financials lose to resources in S&P rebalance

Babcock & Brown will be removed from the S&P/ASX 50 Index, Challenger Financial Services will leave the S&P/ASX 100 Index and Allco Finance will be replaced in the S&P/ASX 200 Index.

In many cases, they will be supplanted by resources companies, such as Newcrest Mining, Incitec Pivot and Lihir Gold.

"We've had a bit of a spring clean," said Standard & Poor's associate director of index services Simon Karaban. "Resources stocks have outperformed versus financials."

The investment management company Octaviar remains suspended from trade at a fraction of its former value. The company, which was formerly known as MFS, will be removed from the S&P/ASX 200 Index.

Allco Finance is selling for just 27.5 a share, Challenger Financial Services has lost about half of its value in the past year, and Babcock & Brown's share price has plunged from about $16.50 to just $2.36.

However, ABN Amro analyst John Heagerty said the investment bank's demotion from the S&P/ASX 50 Index would have little effect.

Some funds may invest in only the top 200 companies, or those included in the benchmark S&P/ASX 200 Index. However, few funds were restricted to the top 50 companies, Mr Heagerty said.

Listed property trusts also feature in the rebalance. Diversified property group Stockland will no longer be included in Australia's top 20 companies and Mirvac will be removed from the S&P/ASX 50 Index.

Centro Properties Group and the APN/UKA European Retail Property Group are to be ped from the S&P/ASX 200 Index because of their fragility over the past six months.

"It's just reflective of how the listed property trust sector has been smacked," said Tolhurst strategist and chief economist Tony Farnham.

He said companies such as Centro Properties and Octaviar had been "almost on death row" and it was just a matter of time before they were removed from the major indices.

ABC Learning Centres, which has lost more than 92% of its value in the past year and remains suspended from trading, will leave the top 100 index.

One of the only resources companies to leave the leading indices will be zinc miner Perilya, which is to leave the S&P/ASX 200.

Additions to the major S&P indices include Primary Health Care, Arrow Energy, Linc Energy, OM Holdings, Gloucester Coal, Australian Agricultural Company, Avoca Resources and Kingsgate Consolidated. The changes will take effect on September 19, after close of trade.