The FTSE 100's evolution since its 1999 peak
It has been nearly a decade since Hikma Pharmaceutical joined the main market of the London Stock Exchange (LSE), but its entry into the FTSE 100 on Monday reflects the shifting fortunes of businesses in the post credit-crisis era and the changing face of the UK's benchmark index.
Jordan-based Hikma joined the LSE in November 2005 with a market value of £483 million, since which time its value has increased ten fold, to £4.5 billion*.
Hikma's ascension to the ranks of the FTSE 100 means the number of drug companies represented on London's top share index has doubled since 1999**, when the index hit its pre-credit crisis high.
The rise of the pharmaceuticals lies in stark contrast to the fortunes of the banks.
Many banks collapsed or were consumed in the wake of the 2007-08 financial crisis, most memorably Northern Rock and Bradford & Bingley. But the number of banks on the FTSE 100 has been falling since the index peaked in 1999: to just five today from eleven 15 years ago.
The technology, media and telecoms (TMT) sector too, which dominated at the index's 1999 peak, has seriously shrunk. From the 22 FTSE 100 companies that existed in 1999, there are just nine in the top flight today.
Sage is one of the survivors. The software specialist's market value was under £30 million at its initial public offering in 1989, but had grown to £1.8 billion at the point it gained a FTSE 100 pass in 1999. It is currently valued at £5.2 billion*.
The other notable TMT survivor from that time is Cambridge-based chip designer ARM.
Building for the future
The floundering fortunes of techs and the banks present an opportunity for other industries such as the housebuilders, the resurgence of which reflects the resilience of the UK housing market, to enter the top flight.
Top of the reserve list for entry into the blue chip index is Berkeley. If Berkley makes it onto the top table it would mark another major step forward for the UK house builders. It would take the sector’s FTSE 100 contingent up to four from one in as many months, after Barratt Developments and Taylor Wimpey joined the index in December.
Will the changing face of the FTSE 100 help the index maintain its recent all-time highs? That remains to be seen, but what is for certain is that the make-up of the index looks set to keep evolving.
*As at close on 18/03/2015. **To create like-for-like comparison, assumes the merger of GlaxoWellcome and SmithKline Beecham to form GlaxoSmithKline had already happened in 1999, whereas deal completed in 2000. Source: Schroders Investment Management, Thomson Reuters Datastream, Regulatory News Service
Important information: The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy. The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors. Issued by Schroder Unit Trusts Limited, 31 Gresham Street, London, EC2V 7QA. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.