UK's FTSE 100 set for 'far-reaching' reshuffle due to coronavirus crisis
- Budget airline easyJet and cruise operator Carnival were among the biggest names relegated from the FTSE 100 in a quarterly review by the global index provider FTSE Russell.
- Philip Lawlor, managing director of global markets research at FTSE Russell, told CNBC Thursday that the moves were based purely on recent market data analytics, rather than analyst forecasts or subjectivity.
A reshuffle of Britain's FTSE 100 index will see some of its biggest names drop out after having their market value ravaged by the coronavirus crisis.
Budget airline easyJet and cruise operator Carnival, which have seen their share prices fall by around 45% and 67% this year up to Wednesday's close, were among the biggest names relegated in a quarterly review by the global index provider FTSE Russell.
Airlines and travel operators have seen business activity plummet due to worldwide lockdowns brought about by the Covid-19 pandemic. EasyJet last week announced that it would cut almost a third of its staff while warning that demand would likely not return to 2019 levels until 2023.
British Gas owner Centrica and engineering firm Meggitt will also drop into the FTSE 250. The four vacant spots will be taken by gambling company GVC Holdings, computer software firm Avast, emergency repairs provider Homeserve and multinational retailer Kingfisher.
The changes will take effect at the start of trading on Monday June 22.
Philip Lawlor, managing director of global markets research at FTSE Russell, told CNBC Thursday that the moves were based purely on recent market data analytics, rather than analyst forecasts or subjectivity.
Lawlor also addressed concerns about the impact on investors in index tracker funds, in particular the fairness of FTSE 100 trackers picking up the losses the relegated companies had suffered on the way down, only for FTSE 250 funds to capitalize on potential rebounds from the reopening of economies.
"If things were to subsequently improve and they were to come and bounce back, then yes, the pain trade for some of the passives in the FTSE 100 clearly would be manifest, but this is just the circumstances of when you have any index, you have companies that move up into the top quintile and those that drop into the bottom quintile," he told CNBC's "Squawk Box Europe."
"That is just the Darwinian process of indices."
Adrian Lowcock, head of personal investing at U.K. investment platform Willis Owen, said investors needed to be aware that it could take some time for the likes of easyJet and Carnival to return to the blue-chip index.
"The reshuffle is one of the most far-reaching in the index's history and will impact many tracker funds," Lowcock said in a statement Thursday.
"The crisis looks to have accelerated the shift to digital solutions for consumers. Whilst some of today's reshuffle may be reversed in due course, the disruption caused to businesses has really highlighted the need for companies to have both robust demand and strong business models."