Financials fall out of Footsie

10th September 2012

Financials head for the Footsie drop

As Mindful Money reported a fortnight ago, these two companies are the most likely to fall out of the top 100 – the widely reported "footsie" index.

Anything can happen over the next trading hours, but without a major turnaround in these companies fortunes, the indicative positions suggest these two will end up in the FTSE 250 – the mid-cap index.

Turnround firm to turn into Footsie

The most likely replacements are – as predicted –  turnround specialist Melrose, and John Wood Group, the oil and gas power generator.  Again, nothing is written in stone and all these forecast changes are based on closing prices on Friday – the final decision and committee approval have to wait until calculations after the close of markets on Tuesday. If only one of these two are promoted, then Ashmore will survive.  The index is rebalanced every three months.

But assuming there are no major upsets, the FTSE 100 will end up more multi-cultural than ever as John Wood is an international business while both the likely candidates slated for relegation are largely UK based businesses. 

Falling out of Footsie means the shares have to be sold by a wide variety of index-tracking and exchange-traded funds. Equally, the new entrants will have to be bought by these funds. The far smaller number of mid-cap FTSE 250 trackers will do the opposite – sell those promoted and buy the stocks which drop into the lower division.

But managers still have time to sort out sales and purchases – hedging where necessary in case of last minute surprise. And once the announcement is made, funds have until Friday September 21st to act as the changes do not officially happen until start of trading on September 24th.

Miners to leave the mid-cap

It looks at the moment – always subject to change – that four natural resources firms, Aquarius Platinum, Avocet Mining, Cape and Gem Diamonds will lose their FTSE 250 places as will the JP Morgan Asian Investment Trust. This could attract sellers as these firms are demoted to the tiddler section.

Those best placed to replace them are technology specialist Pace, gaming industry group Playtech and Superdry clothing firm SuperGroup – with student accomodation supplier Unite Group and real estate investment trust Workspace Group also in contention.

 

More on Mindful Money:

Is multiculturalism bad for the FTSE?

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