FTSE Reshuffle Reflects Russia Exodus

Two Russian miners caught up in the Russia sell-off are to leave the FTSE 100

James Gard 3 March, 2022 | 10:14AM
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The Russia-Ukraine conflict has already had a huge impact on markets. Now, it's even hit the quarterly reshuffle of the FTSE indices. Two FTSE 100 miners caught up in the mass exodus from Russian assets are leaving the index, while there are seven changes to the FTSE 250, including a handful of investment trusts.

We’ve written about steelmaker Evraz (EVR) and gold miner Polymetal (POLY) in the context of the stock market collapse of Russian companies listed in London. It’s now been confirmed by FTSE Russell the two companies, which have fallen in value by 90% and 83% this year respectively, will leave the FTSE 100 and join the FTSE 250.

Replacing them are West African gold producer Endeavour Mining (EDV) and kitchen supplier Howdens (HWDN). Airline easyJet (EZJ) had been in line to rejoin the FTSE 100 after a strong share price performance from December to February, but the Ukraine crisis has checked this progress amid fears over yet more restrictions to international travel.

FTSE 250 Changes

Sticking with Russia, FTSE 250 gold miner Petropavlosk (POG) is exiting the mid-cap index after an 87% share price fall in the year to date. Also leaving the FTSE 250 are congestion charge administrator Capita (CPI), Cineworld (CINE), and publisher Reach (RCH). Clipper Logistics (CLG), Tullow Oil (TLW) and Urban Logistics REIT (SHED) are taking the vacant slots on the FTSE 250.

There has been a reshuffle among UK-listed investment trusts too: Baillie Gifford Shin Nippon (BGS), a trust focusing on Japanese smaller companies, is leaving the FTSE 250, but Ruffer Investment Company (RICA) and valued-focused Temple Bar (TMPL) are being promoted to the mid-cap index. Ruffer has a Morningstar Analyst Rating of Bronze and was in the headlines last year for adding Bitcoin to its portfolio before exiting the position. The trust has a total return strategy, aiming to achieve a positive annual return, after expenses, of at least twice the Bank of England base rate (currently 0.50%).

“Fees aside, the fund has a number of positives for investors seeking capital preservation. A clear and consistent investment focus coupled with a well-resourced and collegiate investment team offers investors an aligned and well-executed multi-asset proposition,” says Morningstar fund analyst Rajesh Jadev.

Temple Bar had a change of management after a turbulent 2020, when it was the worst performing investment trust under Morningstar coverage. The trust’s mandate moved from Ninety One to RWC. Its share price is now up 12% over one year.

The changes to the FTSE 100 and FTSE 250 were confirmed after the market closed on Wednesday and will be effective Monday March 21.

Reshuffles Explained

Why does the three-monthly reshuffle matter for investors?

Such changes give an insight into which sectors are in and out of favour, and which companies are on the up or struggling in the big league. In the case of the Russian companies, it's worth pointing out that the exit of Evraz and Polymetal are not qualitative decisions by the FTSE Russell Group, which is owned by the London Stock Exchange. It's purely down to changes in market value, which in recent days have been extreme.

Index provider FTSE Russell changes the constituents of its indices every quarter to reflect changes to Britain’s biggest companies. Which companies move in and out of the FTSE 100 is based on their total market capitalisation at the end of the specified trading day. To avoid the same borderline companies dropping out and back in every reshuffle, a company must be in the top 90 by market cap to be promoted. Likewise, to be demoted, the firm has to be below the 110th biggest company by size.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

James Gard  is senior editor for Morningstar.co.uk