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Companies are limbering up for the FTSE’s quarterly game of musical chairs. The final rankings will be formally revealed on 1 June but it looks like a three up/three down scenario across the indexes.
The FTSE 100 appears set to bid adieu to Royal Mail, ITV and Harbour Energy, to be replaced by British Gas owner Centrica, student accommodation group Unite, and the F&C Investment Trust, which is the world’s oldest.
Meanwhile the FTSE 250 looks set to also welcome ASOS, Foresight Solar Fund and Supermarket Income Reit. As a result, the companies likely shuffling down the index will be Rank Group, Trustpilot and PureTech Health.
The changes will come into effect on 20 June.
Post-pandemic driven changes feed into the FTSE
Hargreaves Lansdown senior investment and markets analyst Susannah Streeter (pictured) said: “The latest quarterly review comes amid an evaporation of investor confidence as worries ratchet up about the impact of soaring inflation and rising interest rates on growth at a time when the global economy is still adjusting to changes brought about by the pandemic.
“A change from the lockdown behaviour with e-commerce sales falling and streaming services struggling is partly behind the arrival of Royal Mail and ITV in the FTSE 100 drop zone.”
She said F&C has become a “contender for entry into the FTSE 100 after a stronger performance in May”.
Like most of the market, 2022 has been a tough year for the trust, which boasted assets of £5.4bn as of 29 April.
Portfolio Adviser reported in March that the company had hiked its dividend for the 51st time in a row. Despite this, manager Paul Niven sounded the alarm that markets will be even trickier to navigate this year.
Year-to-date, it is down 5.8%, which is on par with its benchmark, the FTSE All World. Over one full year it is marginally ahead (4.6% vs 4.3%), while its three and five-year returns closely mirror its benchmark.
Necessities trump luxuries
Another contender for the FTSE 250 is Supermarket Income Reit, which Streeter described as a “beneficiary of investors looking for potentially more stable income prospects amid the market volatility”.
While rising inflation and wage pressure have been tough for consumers, the same cannot necessarily be said of supermarkets, which is where the £1.6bn real estate investment trust has been a beneficiary.
Last month, Portfolio Adviser reported that its board nearly doubled the size of its latest fundraise to £300m from an initial target of £175m after it received “extremely strong” support from investors.
By Kirsten Hastings, 30 May 22
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