Every quarter, global index provider FTSE Russell announces a reshuffle of various UK stock-market indexes. This leads to three-monthly promotions to and relegations from the FTSE 100 and FTSE 250.
In line for FTSE 100 relegation?
Based on data from the market close on Friday, 17 November, FTSE Russell warns that online investment supermarket Hargreaves Lansdown could be sent down from the blue-chip FTSE 100 index to the mid-cap FTSE 250.
That said, the actual review of the FTSE UK Index Series will be conducted using prices at the market close on Tuesday, 28 November. So this could lead to a last-minute reprieve for the financial services firm.
By the way, I have a dog in this race, as my wife and I bought Hargreaves Lansdown shares in August for 801.5p a share. Given that the HL share price closed at 706.8p on Wednesday, 22 November, we’re sitting on a paper loss of 11.8% to date (excluding cash dividends).
FTSE Russell also reported that FTSE 250 firm Intermediate Capital Group is in line for elevation to the FTSE 100, based on its current market value of £4.5bn (up 18% in one month).
Up to the FTSE 250 we go?
Of course, being demoted from the elite Footsie to the second-tier index may feel like a team being relegated from the Premier League to the Championship division in football.
However, as in footie, improving companies can be restored to the Footsie at a later date. Hence, relegation is not always negative for UK shares.
Meanwhile, FTSE Russell has also revealed that these small-cap shares are heading for the mid-cap index, again based on preliminary data from 17 November (in A-Z order):
Asia Dragon Trust
Halfords Group
Hochschild Mining
Tullow Oil
And to balance these, we have four likely demotions and a promotion from the FTSE 250 (again, in A-Z order):
888 Holdings
CAB Payments Holdings
CLS Holdings
Intermediate Capital Group (bound for the FTSE 100)
Liontrust Asset Management
To repeat my earlier caveat, these indicative ups and downs are by no means certain. Any or all of the downward movers could enjoy a last-minute reprieve, should their market values surge far enough.
Likewise, potentially promoted stocks could miss the cut, were their share prices to decline sufficiently before 28 October.
Footie and Footsie
Having followed the London stock market and the FTSE 100 since 1986 (37 years and counting), I know that some stocks do yo-yo between divisions — as do some top football teams.
For example, south London football club Crystal Palace holds the record as the club relegated from and then promoted back to the Premier League most times.
In summary, Hargreaves Lansdown may be set to leave the FTSE 100, but could well return at a later date. And new FTSE 250 entrants could also slide back down if their shares fail to perform. After all, in the stock market, as in football and life, nothing is guaranteed!
