Excitement is growing ahead of the next scheduled quarterly reshuffle of the totemic FTSE 100 investment index. Predictions are already being made on which companies are likely to find themselves being relegated and which might be celebrating promotion.
The first major UK share index appeared in 1935 when the Financial Times introduced its 30-share index of industrial equities, concentrating on the most actively traded shares irrespective of their market capitalisation.
This became the FT 30-Share Index. In February 1984, the FT 30 was largely superseded by the FTSE 100 Index. This is an average of share prices in the 100 largest, most actively traded companies on the London Stock Exchange.
Literally real time
Designed by the Stock Exchange (according to the Stock Exchange official history), it consisted of an aggregation of the share price movements of the leading 100 companies listed on the exchange. Today it is literally real time.
Popular folklore has it that the FTSE 100 used to be a joint venture between the Financial Times and the London Stock Exchange but today it is wholly owned by the LSE. Its main purpose was to provide a real-time index for the futures and options market.
LIFFE immediately announced plans to trade a financial futures contract based upon it. This was launched on 3 May 1984. At the same time London's first stock index options were traded on the Stock Exchange.
Closing highs and lows
- The record FTSE 100 closing low was 978.7 on 12 July 1984
- The index closed above 7,500 for the first time on 16 May this year, closing at 7,522.03.
- Record one-day fall 12.22% 20 October 1987
Ins and outs
The constitutent parts of the FTSE 100 are not set in stone but reviewed every three months, in March, June, September and December. Companies are promoted and relegated depending upon their share price at the time of review.
Of the original 100 names, only four remain today. Mergers and acquisitions, company liquidations and simple name changes are responsible.
Helal Miah, investment research analyst at The Share Centre, a UK retail stockbroker, has offered his predictions on possible movers in next week’s scheduled FTSE 100 reshuffle.
In the second reshuffle of 2017, it appears highly likely that large shopping centre investor Intu Properties will be the latest candidate to fall victim and consequently drop out of the FTSE 100, he argues.
The Real Estate Investment Trust (REIT) has, like many of its peers, seen its shares underperform in recent months due to concerns about the impact of Brexit on the UK economy and retail sales.
The group did beat market expectations with its full year results in February. Nevertheless, the consensus forecasts for earnings and dividend growth are uninspiring.
Hikma going down?
Hikma Pharmaceuticals is also in the running for demotion. Shares have been dropping off in the group of late after it emerged that the company was unlikely to receive US regulatory approval for a generic drug for asthma this year.
Royal Mail also finds itself in the high risk zone for relegation. Despite recently posting full year results which pleased the markets, it is heavily reliant on the international parcels business as letter volumes continue to act as a drag.
Uncertainty amongst UK businesses in means less direct mail marketing, explains Miah.
Other companies in the mix for relegation include tailored credit products provider Provident Financial and UK retail property developer Hammerson.
Up for promotion
It seems that the world's leading security solutions group G4S is in pole position for promotion, says Miah. The price has staged a significant recovery of late on the back of reassuring results, he adds.
Snapping at its heels is warehouse and industrial properties developer Segro. The group, whose customers are in the UK and Continental Europe, focuses on edge of town flexible business spaces.
The increasing interest for online shopping means the demand for warehouse space is needed more than ever.
Also in contention
Also in contention are: housebuilder Berkeley whose shares have recovered to pre-Brexit levels; NMC Healthcare, one of the largest healthcare providers in the private sector in the UAE; and precious metals miner Polymetal International.