Interactive Investor

FTSE 100 reshuffle: Ukraine conflict will likely cause these changes

1st March 2022 10:47

Richard Hunter from interactive investor

There are going to be some significant changes in the latest quarterly reshuffle, largely down to the impact of Russia's invasion of Ukraine. Our head of markets Richard Hunter discusses what investors should expect.

 The first FTSE100 reshuffle of 2022 is due shortly and is likely to be reflective of the current market turmoil resulting from geopolitical tensions.

Still subject to change, the amendments will be announced after the close of play on Wednesday 2 March, based on the closing prices from this evening. The changes will then take effect on Monday 21 March.

The precipitous falls in the share prices of miners with Russian exposure has guaranteed that both EVRAZ (LSE:EVR) and Polymetal International (LSE:POLY) will lose their FTSE100 status. Share price declines in the year to date of 76% and 79% have left both companies languishing well below the 110th spot which would be required in order to remain in the top flight.

In terms of their replacements, kitchen supplier Howden Joinery Group (LSE:HWDN) is poised to be promoted despite the share price having declined by 7.3% in the year to date. Recent pre-tax profits were comfortably ahead of consensus, with an improvement in margins which lifted the shares on the day of the announcement.

Gold producer Endeavour Mining (LSE:EDV) is also likely to move up to the premier index, despite being outside the usual criterion of finishing 90th or above in terms of market capitalisation. The shares have risen by almost 25% in the year to date, boosted by a move towards haven investments following on from the escalating situation between Russia and the Ukraine, with the gold price having spiked by around 5% so far this year.

Currently teetering on the edge of relegation, Royal Mail’s (LSE:RMG) 22% share price decline is 2022 may send the shares tumbling out of the index once more. The shares have had a volatile start to the year, with progress on its transformation and parcel volumes which have held up well being offset by inflationary cost pressures, tougher comparatives and, of course, steeply declining letter volumes. The company regained its place in the FTSE100 in June 2021, having previously been relegated in December 2018.

Should Royal Mail find itself ousted from the FTSE100, there is barely a glimmer of light between the two companies in line to replace it, namely either Centrica (LSE:CNA) or easyJet (LSE:EZJ). Having risen so far this year by 9% and 8% respectively, Centrica is currently shading it, having been boosted by a recent return to a healthy profit having dealt with a sizeable pension deficit and the possibility of a return to dividend payments emerging into view.

Meanwhile, a promotion for easyJet would be the latest in a rollercoaster ride, which has seen the shares relegated from the FTSE100 in June 2019, promoted again in December 2019, only to be relegated once more (along with Centrica) in June 2020, having suffered the effects of the height of the pandemic.

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