FTSE 100 Index Explained

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q&A: The FTSE 100 index explained

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FTSE 100 Index explained

FTSE 100 Index
Foundation: 1984 [1]
Operator: FTSE Group
Exchanges: London Stock Exchange
Constituents: 100
Cap Level: Large cap
Mcap: £2.054 trillion
(as of January 2020)
Weighting: Capitalisation-weighted

The Financial Times Stock Exchange 100 Index, also called the FTSE 100 Index, FTSE 100, FTSE, or, informally, the “Footsie”, is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalisation. It is seen as a gauge of prosperity for businesses regulated by UK company law. The index is maintained by the FTSE Group, a subsidiary of the London Stock Exchange Group.

Overview

The index is maintained by the FTSE Group, a now wholly owned subsidiary of the London Stock Exchange which originated as a joint venture between the Financial Times and the London Stock Exchange. It is calculated in real time and published every second when the market is open.

The FTSE 100 broadly consists of the largest 100 qualifying UK companies by full market value. [2] The total market value of a company is calculated by multiplying the share price of the company by the total number of shares they have issued. [3] Many of these are internationally focused companies, however, so the index’s movements are a fairly weak indicator of how the UK economy is faring and are significantly affected by the exchange rates of the Pound. [4] A better indication of the UK economy is the FTSE 250 Index, as it contains a smaller proportion of international companies. [5]

FTSE 100 companies represent about 81% of the entire market capitalisation of the London Stock Exchange. Even though the FTSE All-Share Index is more comprehensive, the FTSE 100 is by far the most widely used UK stock market indicator. Other related indices are the FTSE 250 Index (which includes the next largest 250 companies after the FTSE 100), the FTSE 350 Index (which is the aggregation of the FTSE 100 and 250), FTSE SmallCap Index and the FTSE Fledgling Index. The FTSE All-Share aggregates the FTSE 100, FTSE 250 and FTSE SmallCap.

Component companies must meet a number of requirements set out by the FTSE Group, including having a full listing on the London Stock Exchange with a Sterling or Euro denominated price on the Stock Exchange Electronic Trading Service, and meeting certain tests on nationality, free float, and liquidity.

Continuous trading on the London Stock Exchange starts at 08:00 and ends at 16:30 (when the closing auction starts), and closing values are taken at 16:35.

Weighting

In the FTSE indices, share prices are weighted by free-float capitalisation, so that the larger companies, with more of their stock “floating”, make more of a difference to the index than smaller companies. The basic formula for these indices is:

Indexlevel = \sumi Priceofstock i x Numberofshares i x Freefloatadjustmentfactor i
Indexdivisor

The free float adjustment factor represents the percentage of all issued shares that are readily available for trading, rounded up to the nearest multiple of 5%. The free-float capitalisation of a company is its market capitalisation multiplied by its free float adjustment factor. It therefore does not include restricted stocks, such as those held by company insiders.

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Record values

The index reached the following record values:

Category All-time highs
Closing 7,877.45 22 May 2020
Intraday 7,903.50 22 May 2020

The index began on 3 January 1984 at the base level of 1000. The highest closing value of 7,877.45 was reached on 22 May 2020. [6] The highest intra-day value of 7,903.50 was reached on 22 May 2020. [7]

Annual Returns

The following table shows the annual development of the FTSE 100 Index, which was calculated back to 1969. [8] [9] [10]

Year Closing level Change in Index
in Points
Change in Index
in %
1969 313.16
1970 289.61 −23.55 −7.52
1971 411.03 121.42 41.93
1972 463.72 52.69 12.82
1973 318.30 −145.42 −31.36
1974 142.17 −176.13 −55.33
1975 335.98 193.81 136.32
1976 322.98 −13.00 −3.87
1977 455.96 132.98 41.17
1978 468.06 12.10 2.65
1979 488.40 20.34 4.35
1980 620.60 132.20 27.07
1981 665.50 44.90 7.23
1982 812.37 146.87 22.07
1983 1,000.00 187.63 23.10
1984 1,232.20 232.20 23.22
1985 1,412.60 180.40 14.64
1986 1,679.00 266.40 18.86
1987 1,712.70 33.70 2.01
1988 1,793.10 80.40 4.69
1989 2,422.70 629.60 35.11
1990 2,143.50 −279.20 −11.52
1991 2,493.10 349.60 16.31
1992 2,846.50 353.40 14.18
1993 3,418.40 571.90 20.09
1994 3,065.50 −352.90 −10.32
1995 3,689.30 623.80 20.35
1996 4,118.50 429.20 11.63
1997 5,135.50 1,017.00 24.69
1998 5,882.60 747.10 14.55
1999 6,930.20 1,047.60 17.81
2000 6,222.46 −707.74 −10.21
2001 5,217.35 −1,005.11 −16.15
2002 3,940.36 −1,276.99 −24.48
2003 4,476.87 536.49 13.62
2004 4,814.30 337.57 7.54
2005 5,618.76 804.46 16.71
2006 6,220.81 602.05 10.71
2007 6,456.91 236.10 3.80
2008 4,434.17 −2,022.74 −31.33
2009 5,412.88 978.71 22.07
2020 5,899.94 487.06 9.00
2020 5,572.28 −327.66 −5.55
2020 5,897.81 325.53 5.84
2020 6,749.09 851.29 14.43
2020 6,566.09 −183.00 −2.71
2020 6,274.05 −292.04 −4.45
2020 7,142.83 868.78 13.85
2020 7,687.77 544.94 7.63
2020 6,728.13 −959.64 −12.48
2020 7,542.44 814.31 12.10

Constituents in December 2020

The following table lists the FTSE 100 companies after the changes on 23 December 2020. [11] The index consists of 100 companies, but there are 101 listings, as Royal Dutch Shell has both A and B class shares listed. Schroders Non Voting shares were also listed until 1 June 2020 when the FTSE’s stricter rules came into force.

Company Ticker FTSE Industry Classification Benchmark sector [12]
3i III Financial Services
Admiral Group ADM Nonlife Insurance
Anglo American plc AAL Mining
Antofagasta ANTO Mining
Ashtead Group AHT Support Services
Associated British Foods ABF Food Producers
AstraZeneca AZN Pharmaceuticals & Biotechnology
Auto Trader Group AUTO Media
Aveva AVV Software & Computer Services
Aviva AV. Life Insurance
BAE Systems BA. Aerospace & Defence
Barclays BARC Banks
Barratt Developments BDEV Household Goods & Home Construction
Berkeley Group Holdings BKG Household Goods & Home Construction
BHP BHP Mining
BP BP. Oil & Gas Producers
British American Tobacco BATS Tobacco
British Land BLND Real Estate Investment Trusts
BT Group BT.A Fixed Line Telecommunications
Bunzl BNZL Support Services
Burberry BRBY Personal Goods
Carnival Corporation & plc CCL Travel & Leisure
Centrica CNA Gas, Water & Multi-utilities
Coca-Cola HBC CCH Beverages
Compass Group CPG Support Services
CRH plc CRH Construction & Materials
Croda International CRDA Chemicals
DCC plc DCC Support Services
Diageo DGE Beverages
EasyJet EZJ Travel & Leisure
EVR Industrial Metals & Mining
Experian EXPN Support Services
Ferguson plc FERG Support Services
Flutter Entertainment FLTR Travel & Leisure
GlaxoSmithKline GSK Pharmaceuticals & Biotechnology
Glencore GLEN Mining
Halma HLMA Electronic & Electrical Equipment
Hargreaves Lansdown HL. Financial Services
HSBC HSBA Banks
HIK Pharmaceuticals & Biotechnology
Imperial Brands IMB Tobacco
Informa INF Media
InterContinental Hotels Group IHG Travel & Leisure
International Airlines Group IAG Travel & Leisure
Intertek ITRK Support Services
ITV plc ITV Media
JD Sports JD. General Retailers
Johnson Matthey JMAT Chemicals
Just Eat JE. Consumer Services
Kingfisher plc KGF General Retailers
Land Securities LAND Real Estate Investment Trusts
Legal & General LGEN Life Insurance
Lloyds Banking Group LLOY Banks
London Stock Exchange Group LSE Financial Services
M&G MNG Asset Managers
MGGT Aerospace & Defence
Melrose Industries MRO Automobiles & Parts
Mondi MNDI Forestry & Paper
Morrisons MRW Food & Drug Retailers
National Grid plc NG. Gas, Water & Multi-utilities
Next plc NXT General Retailers
NMC Health NMC Health Care Equipment & Services
Ocado OCDO Food & Drug Retailers
Pearson plc PSON Media
Persimmon plc PSN Household Goods & Home Construction
Phoenix Group PHNX Life Insurance
POLY Precious Metals and Mining
Prudential plc PRU Life Insurance
Reckitt Benckiser RB. Household Goods & Home Construction
RELX REL Media
Rentokil Initial RTO Support Services
Rio Tinto Group RIO Mining
Rightmove RMV Media
Rolls-Royce Holdings RR. Aerospace & Defence
Royal Bank of Scotland Group RBS Banks
Royal Dutch Shell RDSA Oil & Gas Producers
RSA Insurance Group RSA Nonlife Insurance
Sage Group SGE Software & Computer Services
Sainsbury’s SBRY Food & Drug Retailers
Schroders SDR Financial Services
Scottish Mortgage Investment Trust SMT Equity Investment Instruments
Segro SGRO Real Estate Investment Trusts
Severn Trent SVT Gas, Water & Multi-utilities
Smith & Nephew SN. Health Care Equipment & Services
DS Smith SMDS General Industrials
Smiths Group SMIN General Industrials
Smurfit Kappa SKG General Industrials
Spirax-Sarco Engineering SPX Industrial Engineering
SSE plc SSE Electricity
Standard Chartered STAN Banks
Standard Life Aberdeen SLA Financial Services
St. James’s Place plc STJ Life Insurance
Taylor Wimpey TW. Household Goods & Home Construction
Tesco TSCO Food & Drug Retailers
TUI Group TUI Travel & Leisure
Unilever ULVR Personal Goods
United Utilities UU. Gas, Water & Multi-utilities
Vodafone Group VOD Mobile Telecommunications
WTB Retail hospitality
WPP plc WPP Media

Past constituents

All changes are due to market capitalisation unless stated otherwise.

FT 30

See main article: FT 30. The oldest continuous index in the UK is the FT 30, also known as the Financial Times Index or the FT Ordinary Index (FTOI). [186] It was established in 1935 and nowadays is largely obsolete due to its redundancy. It is similar to the Dow Jones Industrial Average, and companies listed are from the industrial and commercial sectors. Financial sector companies and government stocks are excluded.

Of the original constituents, [187] four are currently in the FTSE 100: Guest Keen & Nettlefolds (GKN), Tate & Lyle, Imperial Tobacco and Rolls-Royce, although Rolls-Royce has not been continuously listed and Imperial Tobacco was a subsidiary of Hanson for a number of years. ICI was removed when it was taken over by Akzo Nobel in January 2008. Two of the original FT 30 companies are still in that index: [188] GKN and Tate & Lyle (membership is not strictly based on market capitalisation, so this does not mean they are necessarily among the top thirty companies in the FTSE 100). The best performer from the original lineup has been Imperial Tobacco. [189]

See also

Notes and References

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  2. http://www.ftse.com/Indices/UK_Indices/Downloads/uk_indexrules.pdf Ground Rules for the Management of The UK Series of the FTSE Actuaries Share Indices (section 5)
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This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article “FTSE 100 Index”.

FTSE 100 breaks 7000 explained – what does the new record mean?

Everything you were too scared to ask about the new FTSE 100 record

The FTSE 100 hit a new record today, breaking the 7000 mark that many had come to see as a psychological barrier for lack of growth since the turn of the millennium.

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Not sure why? Here’s what it all means.

What is the FTSE 100?

The FTSE 100 is an index of the 100 UK stocks with the highest market capitalisation – or value of all the stocks added together – also known as blue chip stocks. At the moment that includes companies like Lloyds bank, Marks and Spencer, Royal Mail and Vodafone, but the constituents change like the football teams in the Premier League. Its name comes from joining together the initials of the Financial Times and London Stock Exchange, which used to own 50 per cent of the index each.

What does the 7000 figure mean?

When the index started in 1984 is was given a value of 1000. That number goes up and down based on index constituents’ market capitalisation – or the value of all the shares added together. The more valuable the company, the more influence over the direction of the index the company will have. At the moment, Shell is highest valued company in the index with a market cap of £133 billion, followed by HSBC at £111 billion.

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Alright, but what does that 7000 really mean? Did someone just get richer?

Not exactly. The FTSE 100 is useful as an economic indicator. A peak like the 7000 mark shows that corporate profits are good and optimism is growing, though the effects of that might take a long time to trickle down into the wider economy. You may feel the effects through your pension, as funds are often tied to stock indexes. The index is not directly linked to the British economy, however. Many of the companies in the FTSE 100 are multinational. Even if the UK GDP grows by 2.6 per cent, like it did in 2020, the FTSE 100 can contract – as it did, by 2.7 per cent.

Why did the FTSE 100 break 7000?

There could be a few reasons why the top stocks increased in value today:

  • The Budget: stocks climbed 107 points after the Budget on Wednesday, signalling confidence in George Osborne’s plans to cut taxes for oil-linked companies and in cuts to duty on beer and wine.
  • US Fed: the US Federal Reserve chair, Janet Yellen, took pains to emphasise that the US would not be raising interest rates there any time soon – which would put pressure on the pound.
  • Greek hopes: a softening of tone towards Greece by German chancellor Angela Merkel, plus optimism about a further bail-out package, raised hopes that crisis could be averted
  • Oil: stocks rose on Friday morning after the news that Tullow Oil, which is at risk of being demoted from the index, had secured funding, prompting a jump in stocks of 5.8 per cent.

Why do people care about the new record?

Talk of 7000 as a ‘psychological barrier’ comes from the fact that it has taken 17 years for the FTSE 100 to climb above that level. The FTSE actually fell quite heavily during the financial crisis, bottoming out below 3500 in March 2009 before rising above 6000 in February 2020. It reached a new record high on March 5, at 6961 and then crept above it on March 20.

What happens next?

Sit back and watch. With low inflation, low interest rates and low oil prices, the steady ascent of the index is likely to continue.

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