Afterpay share price surges as ASX 20 inclusion approaches

Afterpay is on the verge of closing out another strong year, with the stock up 259% since January.

Afterpay shares rise as index inclusion looms

Investors continue to bid up the price of the buy now pay later juggernaut – with the stock up 15% in the last five sessions.

This comes after it was last week revealed that Afterpay (ASX: APT) would be entering the prestigious S&P/ASX 20 index. Afterpay would replace insurance giant Insurance Australia Group Limited (ASX: IAG) – effective prior to December 21.

2020: Just afterpay it

Afterpay has put in another stunning performance in CY20, rising 259% since January. While others in the space have performed strongly, they have underperformed APT – Zip has risen 47%, while Sezzle has gained a more comparable and equally impressive 224%.

With Afterpay notching up such impressive returns in the short-term, one is left wondering what exactly is driving these share price gains: Are traders and investors – big and small – buying the stock in anticipation of its inclusion in the ASX 20 index?

Michael Kemp asked, in relation to the impact of a stock’s inclusion in an index, in a piece titled Index Funds and Index Rebalancing:

‘Can you profit from buying this stock in the hope it does eventually make the grade and because the index fund managers are then forced to buy it? After all, you know what happens to a company’s share price when there’s plenty of dollars chasing a limited amount of stock.’

There is no easy money in this situation, mind you. Mr Kemp concluded that the inclusion process is a dynamic one, saying:

‘Before you get too excited it is worth remembering that making the grade for one index might mean the stock is getting cut from another. For example when it’s finally big enough to become part of a major index no longer will it be included in a small or mid cap index.’

In addition to being added to the ASX 20, Afterpay will also find itself included in the S&P/ASX 50 Index, prior to the open on December 21.

Xero, which has also rallied over the short term (up 4% in the last five sessions) and up 84% YTD – will also find itself included in the S&P/ASX 50 Index as part of the upcoming quarterly rebalance.

At its last traded price of $147.47 per share, the cloud accounting company had an implied market capitalisation of $21.63 billion.

Oil Search and Vicinity Centres are set to be removed from the ASX 50 on December 21.

ASX indices are rebalanced every quarter, in March, June, September, and December.

Want to take a position in ASX-listed BNPL stocks – long or short?

Create an IG trading account or log in to your existing account to get started now.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.