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Brexit effect could knock Travis Perkins and Intu Properties out of FTSE 100

Published 27/11/2016

Travis Perkins could be demoted from the FTSE 100
Travis Perkins could be demoted from the FTSE 100

The Brexit effect on the UK property market could knock Travis Perkins and Intu Properties out of the FTSE 100 this week in the latest stock market reshuffle.

Building materials company Travis Perkins, shopping centre owner Intu Properties and precious metals producer Polymetal International all stand to be downgraded from the blue chip index when the FTSE Russell EMEA Committee confirms the results of its quarterly review, according to the Share Centre.

Companies listed on the UK stock market are reviewed four times a year and reshuffled among the indexes based on their market capitalisation, a measurement derived from the price of a company's shares.

Helal Miah, an investment research analyst at The Share Centre, said: "The property sector as a whole has been hit hard since Brexit and Travis Perkins' performance has not been helped by the knock on effect of weaker construction and overall sentiment.

"In the aftermath of the vote, we felt it prudent to advise investors to take a step back - at least until the picture becomes a little clearer."

Travis Perkins shares have fallen over 26% since the vote on June 23.

The post-referendum drop in commercial property prices has also impacted Intu Properties, which owns shopping centres across the UK and Spain.

"Most business retail properties have been devalued post Brexit albeit some have regained losses since. Furthermore, there continues to be tough conditions on the high street as the trend of consumers moving to online shopping is hurting physical outlets and as a result rental yields could go down so it really is a mixture of several factors," Mr Miah said.

Shares in Intu properties have fallen more than 14% since the EU referendum.

Polymetal International also stands to be bumped from the blue chip index just months after being upgraded to the FTSE 100 back in September, following a drop in the gold price.

Gold prices have failed to gain momentum despite a small spike at the start of November when US election jitters sent investors running towards safe haven assets. Gold has dropped nearly 12% since its mid-year peak in July.

Polymetal International shares are down over 37% since their mid-August peak.

Other companies that are in the running to be demoted from the index include Dixons Carphone, Hikma Pharmaceuticals, and outsourcing giant Capita.

Relegated stocks are likely to be replaced by the likes of paper-based packaging company Smurfit Kappa, which has benefited from a surge in online shopping, as well as automotive classified advertising business Auto Trader, thanks to an active second hand car market, the Share Centre said.

Scottish Mortgage Investment Trust, which is weighted towards international investments, is also in the running as it stands to benefit from the weaker pound.

"Weir Group, Rentokil Initial and Just Eat are suspended just below the promotion zone so these companies could also be in the race and it will be worth keeping an eye on their prices over the next few days," Mr Miah said.

The next set of stock promotions and relegation will be announced after the market closes on November 30, and are set to take effect on December 19.

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