The British FTSE 100
Introduced in 1984, the FTSE 100 or informally the "Footsie" is an index of the 100 largest companies listed on the London Stock Exchange (LSE).
Highlights
The FTSE 100 comprises the largest 100 qualifying British companies by market capitalization.
- FTSE 100 is Britain’s flagship stock market index
- The five-year average P/E of the FTSE 100 is x14.5
- The average dividend yield of FTSE for the past 25 years is 3.52% (the 25-year high is 7.01% in 2020 and the 25-year low is 1.94% in 2000)
- The total UK's stock market cap over GDP is approximately 102% (the 20-year high is 139.4% and the 20-year low is 69.5%)
History
The FTSE 100 began to be calculated in 1984 and it is managed by the FTSE Group. In 1995, FTSE International was formed as a joint venture of FT and LSE. In 2015, the FTSE Group was merged with Russell Indexes and formed FTSE Russell, which manages US stock market indices such as the Russell 2000.
- The index is maintained by the FTSE Group which is a subsidiary of the LSE
- FTSE stands for 'Financial Times Stock Exchange'
- The starting level of the index in 1984 was 1000 points
- Over the years, there were some crucial changes to the index, for example, the adjustment of individual stocks’ weight to reflect the free market float
- Trading on the London Stock Exchange starts at 08:00 and ends at 16:30 (when the closing auction starts)
Price/Earnings Ratio
The five-year average P/E of the FTSE 100 is x14.5
Concerning the UK's FTSE All-Share, these are the historical recorded high/low P/E ratios:
- The P/E ratio reached an all-time high of 34.2 (September 2016)
- The P/E ratio reached an all-time low of 7.4 (March 2009)
Calculating FTSE 100
In all FTSE indices, the prices of listed shares are weighted by free-float capitalization. This means that larger companies with more free float make more of a difference to the index compared to small companies.
- The index is calculated in real-time and published every second (initially, it was calculated every 1 minute)
- The FTSE constituents are reviewed every single quarter
- The weighting method of the index is the Capitalisation-weighted
- The largest weighed companies of FTSE 100 are AstraZeneca, Shell, Unilever, and HSBC
- The five (5) largest individual stocks represent approximately one-third of the FTSE 100 index
- UK-incorporated securities in the FTSE must have a minimum free float of 10%. For non-UK incorporated securities the minimum free float is 25%
Chart: The historic (3-month) chart of the FTSE 100
FTSE 100 Sector Weightings
Consumer Staples is the largest sector in FTSE 100 (weighting of 19.38%), Financial Industry is the second largest (weighting of 17.67%), and Energy is the third (weighting of 13.02%).
Table: FTSE 100 Sector Weightings
Sector | Weight | Sector | Weight |
Consumer Staples | 19.38% | Consumer Discretionary | 6.12% |
Financials | 17.67% | Communications | 3.27% |
Energy | 13.02% | Utilities | 3.85% |
Health Care | 12.32% | Real Estate | 1.06% |
Materials | 12.29% | Information Technology | 0.98% |
Industrials | 10.04% |
Other FTSE 100 Indexes
- FTSE 250 Index, which is a better indication of the UK economy as it contains a smaller proportion of international companies
- FTSE 350 Index, which is the aggregation of the FTSE 100 and 250
- FTSE SmallCap Index
- FTSE Fledgling Index
- FTSE All-Share, which aggregates the FTSE 100, FTSE 250, and FTSE SmallCap
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Resources:
- https://www.londonstockexchange.com/indices/ftse-100/constituents/table
- https://en.wikipedia.org/wiki/FTSE_100_Index
■ The FTSE 100
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