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FTSE-100 Index changes - who are the new kids in school?

Every quarter, the FTSE-100 index is rebalanced to ensure its constituents reflect the 100 most highly capitalised UK companies listed on the London Stock Exchange.  The most recent rebalance has just taken place, coming into effect from 20 September 2010 and coinciding with the index crossing the 5,600 points level for the first time in over four months.

So who are ‘the new kids in school’ and how have they settled in during their first few days? Who has slipped out of the top set as a result?

First to get the call up to the top class is Resolution (RSL), the insurance investment vehicle.  With a market capitalisation of £3.3 billion, Resolution recently built on the 2009 acquisition of life insurer Friends Provident by adding French insurer AXA’s UK life insurance business to the stable.  Despite the share price being on a declining trend since listing, the company’s growth through acquisition has seen it meet the market cap criteria for FTSE-100 inclusion.  Resolution’s first few days in the FTSE-100 have been less than spectacular, with the share price falling 9%.

Joining Resolution in the FTSE-100 index is Scottish based pumps manufacturer Weir Group (WEIR).  The company has a strong international presence, and this month progressed with acquisitions of South African and Indian companies to bolster that international footprint.  With a market cap of £2.88 billion Weir’s share price has been on the up since November 2008, seeing a four fold increase since then.  Indeed Weir’s entry to the FTSE-100 saw its share price hit an all time high of 1440p at the beginning of the week, only to subsequently fall back by 8%.

Both Resolution and Weir Group have found that the first few days in a new school can be a little tough!

Last of the new kids is engineering group Tomkins (TOMK), currently valued at £2.87 billion.  However the company’s stay in the top class will be short lived as the board has recommended a 325p cash offer to shareholders that many analysts believe undervalues the firm’s potential.  Like a naughty pupil, Tomkins had its LSE listing temporarily suspended as a result of the offer.  This means that either healthcare firm SSL International (SSL) or specialist publisher Informa (INF), both waiting in the corridor as potential replacements, will come in to take Tomkins place.

Making way in the FTSE-100 class for the new ‘pupils’ were Home Retail Group (HOME), Segro (SGRO) and Cable and Wireless Worldwide (CW.), all of which have seen their share prices decline across the last three months.

Remember that you can login and visit our Research Centre to keep track of FTSE-100 index movements or follow news and prices of the new members of the top class.

Of course, as well researching investment into individual equities, some investors might also be considering broader exposure to the UK market.  If so, Exchange Traded Funds (ETFs) could be the answer.  For example, an investor looking to get exposure to the FTSE-100 index could consider an ETF designed to track the index, such as iShares FTSE 100 (ISF).

You should remember that with investments into equities and ETFs, your capital is at risk, the value of your investments can fall as well as rise, and you may receive back less than you invested.

All change down under

Our far-flung friend Australia has finally emerged from a political deadlock that has extended almost three weeks past their snap elections on 21 August. Much like the period of political machinations experienced in the UK earlier this year, before our hung parliament was announced, candidates have spent the past few weeks vying for the support of independent MPs.

With the backing of a handful of Green and independent MPs, Julia Gillard now has the 76 seats she needs to form a Labour minority government.

There are interesting implications for investors here. It is unlikely that a minority government will be able to push through any radical policies and from an investment perspective, this removes some of the perceived political risk associated with the region.

In particular, there are some markets that will heave a sigh of relief. The previous Prime Minister, Kevin Rudd, had proposed a 40% super tax on the mining sector; a policy move that was met with outrage from investors. In the interests of making a diplomatic gesture, Julia Gillard tried to calm investors with a lower rate of 30%, but remains adamant that she will go no lower.

This government could prove welcome for operators in the Australian mining sector and potential investors. The mining tax was a deterrent for foreign investors and the prevention of such a tax should boost investment in the Australian Stock Exchange.

There have also been bold political and economic promises. Tony Abbott, the leading liberal candidate, has promised to cut debt by a third, were he to take the reins (which looks unlikely); whereas Gillard has sworn that she will return the budget to a surplus in 2012/13.

Recent economic announcements also push Australia in a positive direction on the investment barometer. Australia’s central bank left its key cash rate unchanged at 4.5%; an upbeat drum for investors to beat.

For Barclays Stockbrokers clients, it is well worth keeping an eye on events as they develop, for the political happenings in Australia will have a real impact on the country’s investment potential.

For investors looking to gain investment exposure to Australia then the iShares MSCI Australia, an ETF designed to track the MSCI Australia index, could be worth considering.  Bear in mind that investment into ETFs can fall as well as rise and you may get back less than you invested.

No news is still news…

At today's meeting of the Bank of England's Monetary Policy Committee (MPC), the decision was taken to maintain the base rate at its current level of 0.5%.  The MPC's call to hold rates static was widely anticipated, a case of no news is still news.  Most commentators have indicated that they feel it will still be some time before rates start to move higher again. With the inflation threat ever looming in the present economic climate, the current sentiment seems to be shifting in the opposite direction, even towards thoughts of further quantitative easing measures. As the Bank of England looks likely to hold interest rates at their current low levels until well into 2011, the challenge facing investors in trying to earn an income from their investments is magnified.  In our latest Investment ViewPoint: Analysis, we consider the different strategies available to investors looking to earn a crust from their investments.