Interactive Investor

FTSE 100 reshuffle: the favourites for promotion and relegation

26th May 2022 12:55

Graeme Evans from interactive investor

With the quarterly reshuffle almost up on us, we look at the two stocks which could be heading for the exit and those that could replace them.

FTSE 100 yo-yo stocks Royal Mail (LSE:RMG) and ITV (LSE:ITV) are facing another relegation as the deadline looms for a reshuffle that should see Centrica (LSE:CNA) win back its place in the blue-chip index after a two-year absence.

The latest quarterly review of FTSE indices, which takes effect from 20 June, is based on next Tuesday’s closing prices and requires ratification by FTSE Russell the following day.

British Gas owner Centrica is the frontrunner for promotion to the FTSE 100 index after its valuation was boosted by higher energy prices and a turnaround under boss Chris O’Shea.

Royal Mail and ITV are the two stocks most likely to make way, having both only returned to the top flight last summer. The letters and parcels delivery firm is on the brink as investors worry about rising costs, particularly with pay talks ongoing with unions.

ITV shares are also showing strain because of its plans for a new streaming service, which is being rolled out at a time when the advertising outlook appears increasingly uncertain.

Both companies were worth just under £3 billion this morning. Royal Mail first joined the FTSE 100 index in 2013 and has been relegated twice before in September 2017 and December 2018 before its last promotion in May 2021.

ITV was previously relegated in 2008 and September 2020, but won its place back in the reshuffle held this time last year.

With a value of £5 billion this morning, Centrica looks set to reclaim the FTSE 100 status it lost in June 2020. Johnson Matthey (LSE:JMAT) had been in the frame to end its six-month exile, but that was before today’s 5% results-driven fall for shares in the specialty chemicals firm.

Other FTSE 250-listed stocks worth more than £4 billion include student housing firm UNITE Group (LSE:UTG) and medical products business ConvaTec (LSE:CTEC).

Next week’s reshuffle is also expected to confirm the FTSE 250 status of ASOS (LSE:ASC) after the fast fashion business recently moved from an AIM listing to the main market.

Other potential FTSE 250 entrants might include Bank of Georgia Group (LSE:BGEO), Foresight Solar (LSE:FSFL), Merchants Trust (LSE:MRCH) Supermarket Income REIT (LSE:SUPR) and Target Healthcare REIT (LSE:THRL). JLEN Environmental Assets (LSE:JLEN) joined the FTSE 250 on Tuesday, replacing Clipper Logistics (LSE:CLG) after its recent takeover.

Stocks in danger of dropping out of the FTSE 250 include Baillie Gifford US Growth (LSE:USA), Oxford BioMedica (LSE:OXB), PureTech Health (LSE:PRTC), Rank Group (LSE:RNK), Trustpilot Group (LSE:TRST)and Tyman (LSE:TYMN).

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