How BHP (ASX:BHP) has become ‘The Bigger Australian’ and why this might not be good news for the ASX 200

BHP Group Ltd (ASX: BHP) has long been a staple blue-chip share of the S&P/ASX 200 Index (ASX: XJO). Not too surprising when you consider that ‘The Big Australian’ was founded way back in 1851. And it has kept itself in the forefront of the minds of many an ASX investor in recent years, thanks to some strong share price gains and record dividend payments. 

But BHP has certainly moved from ‘The Big Australian’ to ‘The Bigger Australian’ on the ASX boards in recent months. And it has massive ramifications for almost all Australians. Let’s dig into why. 

So BHP has always had a significant presence on the Australian share market, reflected in its weighting on both the S&P/ASX 200 Index (ASX: XJO) and the S&P/ASX 300 Index (ASX: XKO). For example, back in December, BHP had a weighting of 5.57% in the portfolio of the Vanguard Australian Shares Index ETF (ASX: VAS), the most popular index fund on the market.

But something has changed for BHP since then. The mining giant sensationally ended its decades-long dual listing structure last month. This saw its primary London Stock Exchange listing dissolved, meaning that BHP is now only primarily listed on its spiritual home, the ASX.

BHP shares now dominate the ASX 200, what does this mean?

This saw more than $100 billion worth of BHP shares make its way back from London to the ASX boards. Its ASX-listed market capitalisation is now roughly $243.5 billion. That’s around $80 billion more than Commonwealth Bank of Australia (ASX: CBA), which was the ASX’s largest share by market cap before BHP’s ‘unification’. 

And this is what has such a profound impact on ASX investors. Remember BHP’s 5.57% weighting in the ASX 300 index fund? As of today, BHP now takes up a far higher 10.88% of VAS’s portfolio (as of 31 January). For a pure ASX 200 index fund like the iShares Core S&P/ASX 200 ETF (ASX: IOZ), it’s currently even higher at 11.23%. That means that more than one dollar in ten invested in an ASX 200 index fund goes to BHP shares. That might not be the kind of diversification investors might expect from an index fund.

So this has a big impact on investors that have their money tied up with an ASX 200 or ASX 300 index fund. Those investors now have far more exposure to BHP than only a few months ago. But it goes beyond just index fund investors. A huge swathe of Australian superannuation funds invest in index-tracking investments too. So that means a huge proportion of Aussies with super funds now have a far higher exposure to BHP shares. 

So our collective financial fortunes are now tied up with the Big Australian more than they perhaps ever have been. Americans used to say in times of yore that what was good for General Motors was good for the country. Perhaps we now have to say the same for Australia and the BHP share price. 

The post How BHP (ASX:BHP) has become ‘The Bigger Australian’ and why this might not be good news for the ASX 200 appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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