FTSE 100 to become more international
More overseas companies are set to join London's leading index when the results of the latest FTSE reshuffle are announced today.
This saw it sell 23.2 per cent of the company at 420p a share in London's biggest flotation of the last two years.
Tanzania-focussed gold producer African Barrick Gold is also set for a spot in the top pack.
Its promotion could spell relegation for the London Stock Exchange and travel operator Thomas Cook.
Companies can join the FTSE 100 if they are among the top 90 UK-listed companies based on market capitalisation.
However, they can be pushed down to the FTSE 250 if they fall to position 111 or below.
Experts say the reshuffle, which will depend on share prices and liquidity levels at the close of play today (Wednesday), highlights the increasing internationalisation of the UK stock market.
Many FTSE 100-listed companies already have just a nominal presence in the UK.
These include South African brewer SABMiller, banking group Standard Chartered and mining giants Rio Tinto, BHP Billiton, Xstrata, Vedanta and Kazakhmys.
James Ferguson, capital markets partner at Deloitte, says: "There is clearly a trend developing, and we expect the pace of internationalisation to increase over the coming years.
"Having already seen two new companies come to market in the first six months of the year, we would not be surprised to see more coming over the next six months.
"There is a reputational kudos to having a primary listing in London and being part of a blue chip index. Similarly, there are certain sectors such as natural resources where London is the pre-eminent market.
"Companies are therefore attracted here, not just because of the perception that the UK has a less onerous regulatory environment, particularly in comparison with the US and the Sarbanes-Oxley Act, but also to be measured against their global peers, who also choose London."
While the top tier of the London Stock Exchange is increasingly becoming the preserve of the oil and gas titans, some of the smaller minnows are also set for promotion.
JD Sports fashion retailer could make the move up to the FTSE 250 after growing from a single store to a 500-strong chain in the last 30 years.
Its market cap currently stands at around £400 million which could be enough to lift it out of the FTSE Small Cap.
A way of valuing a company by the total value of its issued shares and calculated by multiplying the number of shares in issues by the market price. This means the market capitalisation fluctuates continually as the value of the shares change in the market. For example, HSBC has 17.82bn shares in issue at a price of 646.2p making a market capitalisation of £115.15bn.
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
An Initial Public Offering is the US equivalent of flotation, and is the first sale of equity in a private company in the form of shares (know as stocks in the US) to the public in order to raise capital to finance growth.
Flotation involves a company selling a percentage of itself in the form of shares on a regulated exchange, such as the London Stock Exchange. Prior to flotation, the company is independently audited and valued and shares offered for sale at a price determined by the company’s value. After flotation, the shares are traded on the exchange for what the market deems they are worth. Shares are bought by other financial institutions and private investors.
A property chain is a line of buyers and sellers (the “links”) who are all simultaneously involved in linked property transactions. When one transaction falls through – for instance, someone can’t get a mortgage or simply withdraws their property from sale, the entire chain breaks and all the transactions are held up or even fail entirely.
Named after a high value gambling chip, the term is used for an investment seen as solid and whose share price is not volatile. Blue chip companies are normally household names and have consistent records of growth, dividend payments, stable management and substantial assets and are the bedrock of a pension fund’s portfolio.
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.