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Stock market reshuffle could see housebuilders kicked out of top flight

Published 25/08/2016

Housebuilders could soon be kicked out of the FTSE 100 Index
Housebuilders could soon be kicked out of the FTSE 100 Index

Housebuilding firms could be shown the door from the FTSE 100 next week in the first stock market reshuffle since the Brexit vote.

Residential house builder Berkeley Group and building materials company Travis Perkins stand to be downgraded from the blue-chip index when the FTSE Russell EMEA Committee confirms the results of its quarterly review, retail broker the Share Centre said.

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.

"At present and unsurprisingly, it looks like housebuilding companies, and those that are associated with the sector, could be shown the door," Helal Miah, investment research analyst at the Share Centre said.

Berkeley Group shares were already down before the referendum after reporting a drop in pre-tax profits. But the Brexit vote sent the stocks plunging around 30% in the weeks following the vote " on concerns that the housebuilding sector would suffer a fall in demand, declining selling prices and greater difficulty in finding enough skilled labour", Mr Miah added.

Most of Berkeley's developments are in London, where the housing market is viewed as being especially vulnerable to post-Brexit woes, and u ncertainty in the capital could drive away a large number of foreign buyers, Mr Miah explained.

Subsequently, Travis Perkins - which is a leading building materials supplier - could be on the chopping block after its shares fell 15.5% on the day following the EU referendum. The shares are now down about 12.5% from pre-Brexit levels.

"Another factor could be that two of its main indicators; consumer confidence and secondary housing transactions, have not been positive," Mr Miah said.

Property management firm and shopping centre owner Intu Properties could also be booted from the premier index, alongside Provident Financial and Dixons Carphone, The Share Centre said.

Meanwhile, Mr Miah said precious metals miner Polymetal International could regain its position in the FTSE 100, in part thanks to a recovery in silver and gold prices.

IT software producer Micro Focus International also stands to climb the ladder following some global acquisitions that could boost earnings.

The next set of stock promotions and downgrades will be announced on August 31 and are set to take effect on September 19.

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