Who will get turfed from the TSX Composite with Sino-Forest?

When Standard & Poor’s next conducts its quarterly review of the S&P/TSX Composite Index in September, the only certainty is that Sino-Forest Corp. will be yanked from the exchange.

However, whether any other companies will join the embattled forestry company is another question.

Garry Cooper, strategist with UBS, notes that S&P has already announced it will pull Sino-Forest from the Composite Index.

Sino-Forest, of course, is currently embroiled in a developing scandal after the Ontario Securities Commission levelled serious allegations of fraud and non-arms-length transactions at the firm. The OSC also ordered the resignations of senior management, with chief executive Allen Chan doing so on Sunday.

Elsewhere, less controversial candidates for deletion include Eastern Platinum Ltd., Perpetual Energy Inc. and Transat A.T. Inc., in part because they all fall below the minimum index weight requirement of 0.05%, with estimated weights of 0.046%, 0.021% and 0.022% respectively.

A less likely target is Air Canada Inc., which has an estimated index weight of only 0.025%.

Meanwhile companies with a good chance of joining the Composite club are Avion Gold Corp., with a projected weighting of 0.066%, and Banro Corp., at 0.06%.

Other companies on the bubble for inclusion include Northern Property Real Estate Investment Trust (0.06%), Fortuna Silver Mines Inc. (0.049%), Secure Energy Services Inc. (0.049%) and Premier Gold Mines Ltd. (0.048%).

The index committee will also likely consider demoting Yellow Media Inc., the long-time publisher of the once-ubiquitious Yellow Pages business directory, from the S&P/TSX 60 subindex.

“The relative weight of Yellow Media in the S&P/TSX 60 has fallen to just 0.04%, less than one fifth the size of the next smallest constituent,” Mr. Cooper said. “We believe Silver Wheaton Corp. will be selected to replace Yellow Media. Not only is Silver Wheaton the largest eligible stock in our pool, the materials sector is the most underweight in the S&P/TSX 60.”