What’s going on?

• The FTSE 100 (Britain’s biggest index of biggest public companies by value) is undergoing its quarterly reshuffle, and the injection of some big names could give it a new life.

What does this mean?

• The FTSE 100 performance helps investors gauge the health of both British corporations and economy. The FTSE is regularly updated to reflect stocks whose total market values have risen and remove those whose values have dropped.
• Having their stocks skyrocketed after takeover news, Morrisons (supermarket chain) and Meggitt (aerospace component-maker) are expected to join the team. Dechra Pharmaceuticals (veterinary drug company) shares are also up more than 50% so far this year – a proof of the lockdown pup-splosion.
• They’ll be taking spots from ITV (broadcasting giant) and Weir (engineering group), which underperformed the FTSE 100 by nearly 10% in Q2. Just Eat Takeaway.com was also kicked out, but because of FTSE’s new rule that JET is Dutch rather than British.

Why should I care?

The bigger picture: Health is what we care

• Tech firms already represent a much smaller proportion of the FTSE 100 than they do of the equivalent American and German indexes, and Just Eat Takeaway.com’s elimination will make it even smaller.
• Meanwhile, healthcare is FTSE’s biggest, and it’s set to get bigger when Dechra joins the squad.

Zooming out: Now face the war

• Billions of dollars are invested in funds that passively invest following the FTSE 100, and they would buy up new stocks to reflect the updated index.
• This is why some keen-eyed investors might’ve bought certain high-performing UK companies ahead of the rebalancing news, hoping they’d profit from the timing difference.

Content source: Finimize (2021) Fresh Blood. Available at: https://www.finimize.com/wp/news/fresh-blood/ [Accessed on Sep 2, 2021]