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New class awaits FTSE 100
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March 7, 2000: 11:21 a.m. ET
Techs, telecoms set to usurp tobacco, brewers in blue chip index review
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LONDON (CNNfn) - Communication and technology companies such as Internet-access pioneer Freeserve and palm-top computer maker Psion are poised for promotion to London's benchmark FTSE 100 Wednesday, as the index's quarterly review looks certain to reflect the rising value of companies forging the so-called "new economy".
The index, designed to reflect the fortunes of the U.K.'s biggest 100 businesses by market value, is regularly revised to remove companies that have fallen out of the top ranks and replace them with those that have grown to overtake them. Most of the changes expected this week have been spurred by investors' spiraling demand for technology shares that has inflated such companies' valuations.
The changes will accelerate the transformation of an index that had just two technology components at the start of 1999, rising to seven by the end of the year with the inclusion of companies such as microchip designer ARM Holdings.
FTSE International, the company that manages the FTSE indexes, removes a stock from the FTSE 100 if its ranking among U.K. companies in terms of market value has fallen below 110th. Stocks that have risen higher than 90th in the same list qualify to be added to the index, provided there is sufficient liquidity in the market for their shares.
"It looks as though we'll have the biggest number of index changes at one go in recent memory," said a spokesman for FTSE International.
The following non-FTSE 100 stocks ranked higher than 90th by market value as at the close of market trading on Monday:
Rank Company Business
18 Cable & Wireless Communications (CWZ) Cable operator
39 Freeserve (FRE) Web access
59 Thus (THUS) Telecommunication
67 Psion (PON) Hand-held computers
68 Baltimore Technologies (BLM) Internet security
72 Celltech (CCH) Biotechnology
79 Nycomed Amersham (NAM) Diagnostic imaging
86 Capita (CPI) Business outsourcing
89 EMAP (EMA) Magazine publishing
Stocks now in the FTSE that ranked lower than 110th by market value at Monday's close:
143 Wolseley (WLY) Building products
121 Imperial Tobacco (IMT) Tobacco
118 Thames Water (TW) Water
114 Hanson (HNS) Building materials
112 Scottish & Newcastle (SCTN) Brewing
111 Whitbread (WTB) Brewing, hotels, leisure
The review will be based on companies' market valuations at the end of trading Tuesday. FTSE International; will announce changes to the index after the close Wednesday, and the new index make-up will take effect from Mar. 20.
Stocks that join the leading index typically benefit from increased demand for shares because funds that seek to track the FTSE 100 will need to add the newcomers to their portfolios.
The three biggest companies on the list of aspiring members have hitherto been excluded from the index because they are subsidiaries of existing FTSE 100 companies: C&W Communications is controlled by telecom company Cable & Wireless (CW-), Freeserve is a unit of electronics retailer Dixons (DXNS) and Thus belongs to Scottish Power (SPW). The index managers relaxed the rule excluding subsidiaries with effect from this week's review.
Fund managers have expressed concern that the FTSE 100 could become more volatile with the expansion in its tech members to more than a dozen components.
Analysts have noted that the prospective new entrants have annual sales of just 5 billion pounds compared with 40 billion for those expected to leave the index.
Separately, London's stock market index manager, FTSE International, confirmed Monday that telecom company Kingston Communications would replace outgoing National Westminster Bank (NWB) on the blue chip index following NatWest's buyout by FTSE 100 component Royal Bank of Scotland (RBOS). 
--from staff and wire reports
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FTSE International
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