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My colleagues and I been discussing the FTSE reshuffle several times over the last couple of weeks, looking at potential outcomes of the latest quarterly changes to London’s blue-chip index. The dust seemingly settled on 4 Dec when the insurer Hiscox and engineering company Spirax-Sarco were promoted. At the same time, beleaguered postal service Royal Mail and takeaway platform Just Eat were relegated to FTSE250.
Hiscox and Spirax-Sarco may have left their peers in the rear-view mirror 2 weeks ago. As the saying goes, however, “It ain’t over till it’s over”. Today (20 Dec), FTSE Russell announced that generic drugmaker Hikma will also join the FTSE100 on 24 Dec. Shire’s acquisition by Japan’s Takeda means that Hikma will replace it. A generous index-rebalancing Christmas present from Santa.
Curiously, if the FTSE reshuffle had taken place today, Hikma would have qualified for FTSE100 promotion on merit: #90 by market cap on the FTSE350, an auto-promotion threshold. Here’s how share prices moved since the 4 Dec reshuffle cut off date:
Hiscox and Spirax-Sarco were promoted based on market cap, while Hikma will replace Shire as the next best FTSE250 name. If the reshuffle had taken place today, Hiscox and Hikma would be auto-promoted, while Spirax-Sarco would replace Shire as next biggest. Lots of fluctuations; exactly the same result.
Six of one, half-dozen of the other, you might say? Not for one stock we haven’t mentioned so far.
The biggest underachiever of the whole situation is actually insurance firm Phoenix. It was ahead of Hikma by market cap on 4 Dec (Phoenix: £4.34bn; Hikma: £4.26bn), but while Hikma rallied +4% in two weeks, Phoenix actually fell 6.8%, extending its 22% downtrend since late August.
Shares go up and down all the time and trading opportunities appear on the FTSE every day. Come the next FTSE reshuffle in March, will Hikma solidify its position in the blue-chip index? Will Phoenix Group shares maintain their downtrend (shares now just 4.5% away from 2018 lows), or will they reverse and challenge Hikma’s, Hiscox’s or Spirax-Sarco’s position in FTSE 100?
The battle to be a part of the FTSE can often produce attractive share price volatility. We regularly highlight these swings to our clients as part of daily trading opportunities. To get full access to all our market ideas, click here to subscribe to our Gold Pass trading opportunity package.
Artjom Hatsaturjants, Research Analyst, 20 December 2018
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