Who wins and who loses in FTSE 100 reshuffle

In the first quarterly review since the Brexit vote The London Stock Exchange has announced that housebuilder Berkeley Group is to be relegated from the FTSE 100 and will be replaced by precious metals producer Polymetal International.

Companies related to the housebuilding sector have undoubtedly felt the wrath of Brexit and unfortunately, residential housebuilding company Berkeley Group has taken the biggest blow as it is demoted from the FTSE 100 to the FTSE 250.

The company stated that pretax profits and reservations were down even before the vote although forward sales were on the rise. Nevertheless, the shares dropped 30% after the Referendum on concerns that the housebuilding sector would suffer a fall in demand, 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.

Taking its place is precious metals producer Polymetal International. It has been confirmed that the company will bounce back to the FTSE 100 after a number of years outside of the index. In contrast, this 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 is also interesting to note that amongst the candidates who could have been relegated were companies that had a large exposure to the UK, while those who were contenders for promotion are heavily reliant on global sales. The latest reshuffle goes some way towards making the FTSE 100 further biased towards international markets and less of a benchmark of UK Plc. If the status quo remains, then the next quarterly review could see the FTSE 100 further skewed.

Investors should note that these changes will come into effect from Monday 19 September 2016.