Housebuilding companies are expected to be kicked out of the main UK index when the London Stock Exchange reshuffles the FTSE 100 later today (31 August).
With the first reshuffle since the referendum vote looming on the horizon, speculation hangs over which firms will be the FTSE casualties when the stock exchange makes its announcement.
Helal Miah, investment research analyst at the Share Centre, said it looks like housebuilding companies, and those associated with the sector, could be forced out of the FTSE 100 index.
The commercial real estate sector has been a victim of the Brexit vote, as investors panicked and quickly cashed-in their shares, forcing several fund groups to suspend trading in their commercial property funds.
Mr Miah said residential housebuilding company Berkeley Group could also be in trouble, pointing to the firm’s drop in pre-tax profits.
Berkeley shares dropped 30 per cent after the referendum due to concerns the housebuilding sector would suffer a fall in demand, said Mr Miah, who also pointed to the declining selling prices and greater difficulty in finding enough skilled labour.
“Investors should also appreciate that the London market, where Berkeley has most of its developments, is seen as especially vulnerable given the large number of foreign buyers and the strong growth in recent years.”
Travis Perkins, which supplies building materials to builder’s merchants and home improvement markets, was also pinpointed by Mr Miah as a company potentially in the firing line after its share price was hit hard by the Brexit vote.
Other companies that could be relegated include the likes of Intu Properties, Provident Financial and possibly Dixons Carphone, he said.
When it comes to new entrants, however, the Share Centre analyst said FTSE 250 listed Aberdeen Asset Management could join the main index.
Also precious metals producer Polymetal International could bounce back to the FTSE 100 after a number of years outside of the index.
“The overseas company is likely to have benefited from the fall in sterling post Brexit and in addition, the recovery in gold and silver prices will have helped raised the value of the company.”
IT software producer Micro Focus International is also in a good position to get the boost, he said, pointing to the company’s recent acquisitions, which have given the group access to more markets around the world, boosted earnings, and provided a stream of recurring revenues.
Croda International and Smurfit Kappa were also firms Mr Miah said could be new entrants.
katherine.denham@ft.com
