The FTSE 100 celebrated its 40th birthday with a quiet trading day, as would be expected on a cold, windy January day after New Year.
However, the omens are not good for the London blue chip index.
While some of the UK’s biggest companies, from Barclays to Sainsbury’s, remain unchanged in the UK’s main stock market index, the FTSE 100 index is struggling to compete with its main rivals, the Dow Jones and Nasdaq of the New York Stock Exchange.
Last May Financial times looked at 111 European companies with market capitalizations of at least $10 billion that trade at a discount to U.S. companies to see which had the best incentive to list in New York.
The argument is that valuations on the NYSE tend to be higher, and that the US is a more aggressive, business-oriented economy where democracy is “realized” through large stock ownership.
The FT found that London-listed groups that would benefit from the move accounted for a fifth of the total, but half of the top 10 and 18 of the top 50.
The case for an IPO in New York has not gone unnoticed by British microchip developer Arm.
Cambridge-based Arm, which was owned by Japan’s SoftBank for seven years, listed in New York last September instead of its home country of London. The move is seen as a “kick in the teeth” and a lack of capacity on the part of the British government. seen as attracting new clients and retaining local talent.
Arm’s decision follows that of London Stock Exchange-listed Irish construction group CRH, which moved its FTSE listing to New York in the same month as Arm in September last year.
Other big names mentioned Financial times Among those who could benefit from moving their listing to New York are British American Tobacco and GSK, as well as medical devices group Philips, mining companies Rio Tinto and Anglo American.
What’s next for the FTSE?
The FTSE 100 index, also known as the Footsie, consists of the 100 largest companies on the London Stock Exchange (LSE).
At the time of incorporation on 3 January 1984, these companies had a combined market capitalization of £165.6 billion.
The health of listed companies is largely seen as an indicator of the health of the UK economy, but in recent years it has become the case that the majority of listed companies are making profits internationally.
As of 3 January 2024, the total value of companies listed in the FTSE 100 index was £1.9 trillion.
There are still 26 companies listed on the FTSE 100. These include banks Barclays and Lloyds, retailers Sainsbury’s and Tesco, and tobacco giants British American Tobacco and Imperial Brands.
Some, such as Marks and Spencer, left the FTSE 100 at some point and were demoted to a lower index before raising their share price and returning later.
Investment experts have scrutinized the performance of the FTSE 100 index over the past four decades, despite criticism over its weakness compared with international peers.
Laith Khalaf, head of investment research at AJ Bell, said: “The benchmark index has made virtually no progress since the start of this century and over the last decade the Footsie has been completely eclipsed by the US stock market index.” Successful business strategy. Stock market listings and financial flows.
“Since 2016, domestic investors have been recklessly selling UK equity funds in favor of more global exposure, no doubt partly due to the superior performance of foreign equities.”
Reach a milestone
The main US stock index, the S&P 500, includes giants such as Apple, which has a market capitalization of almost $3 trillion, larger than the entire FTSE 100 index.
The value of the FTSE 100 index has risen 654 per cent over the past four decades, from 1,000 points at launch to around 7,730 on the last trading day of 2023.
It outperformed gold and British government bonds, which rose 419 percent and 70 percent respectively over the same period, according to FTSE Russell.
The index also reached a milestone in mid-February when it crossed the 8,000 mark for the first time.
But Mr Khalaf noted that most of the FTSE’s growth came in its first two decades, adding: “The idyllic childhood has given way to the rigors of adulthood for the UK index.”
“The FTSE 100 has fluctuated since 2000, while other developed market indices appear to have made progress.
“Since the turn of the century, the FTSE 100 has grown by only an average of 0.4 percent per year, compared with an annual gain of 6.1 percent for the S&P 500.”
The index has delivered a total return of 4.1 percent annually since 2000, primarily taking into account dividends paid and reinvested by companies during that period, according to Morningstar and AJ Bell.
Mr Khalaf said the data painted a “healthier” picture, “although the UK still lags far behind its US and European counterparts”.
However, experts believe there is more hope on the horizon for the FTSE as it could benefit from a sharp fall in inflation this year and the upcoming general election.
Suzanne Streeter, head of finance and markets at Hargreaves Lansdown, said: “The resilience of UK consumers and the underlying economy could outperform expectations again in 2024.”
“Hopes for a soft landing in the US could also help the index, given the multinational composition of companies that depend on the strength of the global economy.”
Source: I News
I am Moises Cosgrove and I work for a news website as an author. I specialize in the market section, writing stories about the latest developments in the world of finance and economics. My articles are read by people from all walks of life, from investors to analysts, to everyday citizens looking for insight into how news will affect their finances.