View more on these topics

Brian Tora: FTSE is being held back from a new peak


Events last week were initially dominated by the restructuring of Vodafone. This was no small deal. Vodafone is a huge company and is widely held amongst UK investors.

Immediately ahead of the deal that was to see billions of pounds returned to investors, along with the stake in US telecoms giant Verizon, the company was valued at comfortably over £100bn – down on its size at the peak of market but not to be sniffed at. At the height of the telecoms, media & telecommunications boom (TMT for short) as the new millennium commenced, Vodafone accounted for around 15 per cent of the value of the whole UK share market.

Mind you, Nokia was then an even greater component of the Finnish stock market, leading to a joke current at the time – what do you call a Finnish stock market tracker? Answer – Nokia. It is a shadow of its former self these days.

Being such a size, Vodafone inevitably created problems for some investment managers charged with tracking the UK market as many funds contained restrictions on the percentage that could be held in any one share – typically a maximum of 10 per cent. This is hardly a problem today but it does serve to show how misleading funds that set out to track an index can be.

Just look at the issues that have dogged our benchmark index over the past seven years or so.

Back in 2007, banks were the largest single sector in the index. Come the credit crunch, not only did their collapsing share prices bring about a remarkable reversal of fortune for the Footsie but their need to trim, and even pass, dividends brought to an end a long period when income from equities was expected to rise constantly, regardless of the performance of the capital.

Then demand from China drove mining and oil shares ever higher, reversing the decline in the value of the index. Many mining companies chose to list their shares in London, propelling this sector to the forefront. Resource stocks are now the most important single component of the FTSE 100 Share index. And it has been the recent poor performance of these shares that have held back the Footsie from reaching new high ground.

The question is, might the Vodafone restructuring help lift this index above the peak attained back at the end of 1999?

I’m not simply referring to the lift Vodafone’s shares enjoyed on the first day of trading in its new consolidated form. The argument is that the cash distributed to shareholders, plus the proceeds of any Verizon shares sold, is likely to find its way back into the market. This is likely to amount to several billions of pounds.

At the beginning of last week it was looking possible. The FTSE 100 rose to within 100 points of its previous peak but indifferent company news and geo-political concerns brought out the sellers, allowing the market to slip back again.

Seldom have I found the mood of investors so difficult to read. Divided opinions should be good news but I am mindful of the technical influences on the index, not the least of which will be the quarterly restructuring, due shortly.

The most likely change on this occasion will be the inclusion of two house builders in the Footsie – a clear sign of how their fortunes have improved over the past couple of years. This should help the performance. After all, you can argue that the FTSE 100 is a measure of Britain’s most successful businesses.

But with concerns over the strength of the global economy continuing and banks still finding the ability to disappoint, it seems that many of the index components remain under a cloud. I still hope for that silver lining, though.

Brian Tora is an associate with investment managers JM Finn & Co



Nic Cicutti: Online advice needs joined-up thinking

One of the difficulties of reading Money Marketing, I sometimes find, is that in any issue there are many different stories, all of which aim to inform or examine an individual issue affecting the industry. Inevitably, each story or contribution looks at them without always being able to join the dots and present a holistic […]


Standard Life could ban adviser charging for workplace pensions

Standard Life has warned it could ban the use of adviser charging within workplace pension schemes after the provider moved to restrict use of the charging mechanism for auto-enrolment. In an update published on its website this week, Standard said it will no longer support adviser charging at scheme set-up, where the charge is in […]


FCA raises concerns over networks’ oversight of sales incentives

The FCA has raised concerns that networks do not have sufficient oversight and understanding of the sales incentive schemes being operated by their appointed representatives. In its latest review of sales incentives, published today, the regulator says principal firms are responsible for managing the risk of misselling and need to have sufficient understanding of any […]


LifeSearch returns to profit

LifeSearch has reported a pre-tax profit of £752,124 for the 12 months to 31 August 2013, following a loss of £296,000 in the previous year. Turnover increased 13 per cent to £18.1m during the period, from £16m in 2012. LifeSearch chief executive Tom Baigrie says: “The company has enjoyed a strong year, advising on and […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm