FTSE 100 index is listed on the Stock Exchange and is a worldwide tradable asset. This article will help you to understand what FTSE 100 index is, what it indicates, what companies are included in LSE, how to invest in footsie and many other aspects regarding such a popular asset.
This index is stemming from the London Stock Exchange. FTSE or footsie, in the simplest terms, is one of the most influential stock indicators in Europe. The index is built upon the stock prices of the 100 companies with the largest capitalization, which are listed on the London Stock Exchange(LSE). Companies whose shares are registered on the calculation of the FTSE 100 index should meet the requirements by the FTSE Group set:
be listed on the London Stock Exchange;
the value of the FTSE 100 index shares must be shown in pounds or euros;
companies' shares must be public and liquid.
FTSE 100 is generally accepted as the marker of the UK economy condition.
The index value is calculated founding on the total market capitalization of the listed companies. The growth in the index means that the total value of the companies in the index is rising (but it might concern not all the companies). The price recession of the indices means that the total value of the companies in the index is falling (but it might concern not all the companies).
To understand the market value of a company, you need to calculate its capitalization. But how does one make it, and make it right? Why should that be necessary? Market capitalization indicates the price of the company’s stocks on the exchange in the current time. For its calculation, you need to multiply the current price of shares by their quantity. When a company trades preference and equity shares, firstly the total capitalization for each type of securities is calculated, and then the results are summed up. In case, the shares are traded on several exchanges, capitalization is figured upon the price of shares on one exchange.
Why do investors keep a close watch on market capitalization, market value, or market valuation? Because this is the most objective evaluation based on the seller's desire to sell and the buyer's desire to buy a particular company in the free market.
If a company's business gets worse, then the share price falls and the market capitalization of the business falls. And vice versa, if a company's business gets better, its revenue is steadily growing, then the market, private investors, investment funds, and banks, evaluate it positively, they want to buy more securities of the company and the share price starts to rise, it grows as well as the market capitalization of the business.
As was said above, footsie reflects the economic situation of the United Kingdom. The rate of the index can say a lot about the state of the economy.
According to the rules of the FTSE Group, in order for a company to be included in the London Stock Exchange top 100 companies, British enterprises need only 25% free circulation of shares (free-float), while foreign companies need 50% free circulation of shares.
What companies are included in LSE?
The FTSE 100 is an index of the 100 largest companies by the calculation of the market capitalization listed on the London Stock Exchange.
It was created jointly by the Financial Times and the London Stock Exchange and is evaluated by the FTSE Group. The index is composed of ranking companies by market capitalization based upon stock, which many individuals quoted. The company with a market capitalization lower than that of the No. 111 company is replaced. A non-indexed company will be listed in the case of its market capitalization being higher than that of the company holding.
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FTSE 100 and its biggest companies
Financial Times Stock Exchange is a London Exchange index, which is a fundamental rate of the British economy, as well as the leading index to trade on many Exchanges. Basically, the footsie is the reflection of the state of the UK affairs stock market. Nevertheless, some of the companies that make up the index are not British. FTSE contains 100 quite successful companies, but the most leading ones are described below.
List of the 10 largest companies listed on the London Stock Exchange by market capitalization:
1) AstraZeneca plc works in a pharmaceutical field. The company registered in the UK, however, Anglo Swedish founders established it. The company is part of the top 10 ratings in the world from sales of prescription drugs. AstraZeneca obtains, manufactures, and puts up for sale pharmaceuticals and biotechnology products for therapeutic fields. It is one of the five largest global pharmaceutical companies engaged in research, production, and promotion of medicines, as well as medical support. The AstraZeneca product portfolio includes drugs from therapeutic areas such as oncology, cardiology, pulmonology, gastroenterology, psychiatry, neurology, infectious diseases. The company sells its drugs in more than 100 countries around the world, 31 drug production plants are located in different countries.
2) GlaxoSmithKline plc is the multinational company, which is engaged in the pharmaceutical industry. It is the second-largest pharmaceutical company in the world after Pfizer in terms of turnover. Additionally, to pharmaceuticals, the firm deals with microbiology and body care products. The key production facilities are concentrated in Great Britain, Spain, Ireland, USA, and Singapore. The main sales are compiled by drugs in therapeutic areas: respiratory diseases, oncology, mental disorders, HIV/AIDS, diabetes, prevention of infectious diseases (vaccines for different age groups), drugs sold in pharmacies on the recommendation of a doctor (Augmentin, Bekotid, Zinacef, Zinnat, Fortum, Energy, etc.) and symptomatic drugs sold in pharmacies without a prescription (Panadol, Coldrex, Solpadein, etc.).
3) HSBC Holdings plc is regarded as the leading financial conglomerate in the world. It is also the biggest and most powered UK bank according to its assets and market capitalization. HSBC's retail system includes nearly 3,900 branches in 67 countries together with Europe, Asia, North and South America, and Africa and serves about 39 million customers, with the main regions in the United Kingdom and Hong Kong. The offices, which are in Hongkong and Shanghai Banking Corporation have become the largest bank in Hong Kong. Accounting for a quarter of the assets of all banks in Hong Kong. HSBC is one of the globally systemically important banks since 2011. The Bank put in execution all processes of banking activities, including settlement operations, project financing, issuing banknotes, issuing credit cards (HSBC Credit card), and others, as well as insurance services and asset management.
4) British American Tobacco Plc as the multidomestic company operates in the area of popular products. It produces cigarettes, tobacco, and other nicotine goods. The company is admitted as the largest cigarette manufacturer in the world by net sales estimate of 2019. The company owns 45 factories producing cigarettes in 43 countries of the world. The company exercises control over 45 factories producing cigarettes in 43 countries of the world.
5) Diageo plc is a new-made corporation that makes premium alcoholic beverages. The company's activity is about developing in the markets worldwide. The company is involved in more than just the production of alcoholic products. It is occupied with the distribution of beer brands such as Guinness, Smirnoff, Gordon’s, and Johnnie Walker. Diageo corporation comes within the FTSE 100 major companies on the London Stock Exchange.
6) A world-famous company named Rio Tinto Group is a transnational cooperative British-Australian mining corporation. It operates in the exploration, development, extraction, and final industrial processing of mining crude materials and mineralized coal, iron ores, aluminum, copper, nickel, molybdenum, titanium, and other non-ferrous metals industry. The company extracts industrial mineral raw materials, including diamonds, as well as silver, gold, platinum, and uranium - which includes the two main operating companies Rio Tinto Limited and Rio Tinto Public Limited. Rio Tinto develops international trade and industrial cooperation with the Russian Federation and other countries actively. The company strengthens relations with corporations, companies, and industrial enterprises all over the world.
7) Today British Petroleum (BP) is considered one of the largest oils and gas companies in the world. For the past 15 years, it has steadily been added to the list of 10 leaders of the planet engaged in oil refining and production, and the position of the concern is only increasing every year. British Petroleum is based on a broad business model that spans the broadest hydrocarbon production and marketing process. The corporation's activities include prospecting and exploration, refining technologies, and the supply of fuel, lubricants, and petrochemical products. BP manages a network of petrol stations, oil companies, shares in 10 large gas pipelines, shares in 5 regasification terminals in the Mediterranean Sea, 50% of the Alaska gas pipeline.
8) Unilever PLC one of the leading suppliers of consumer goods in the world, present in more than 190 countries. The number of consumers of more than 2 billion people. The company's assortment includes many different products from balanced diet food to delicious ice cream, soaps at an affordable price, luxury shampoos and household products for everyday use. The company produces: Breyers and magnum ice cream, Boursin cheese, Lipton tea, dove and lux soaps, close up and pepsodent oral care products. Before the merger of Procter & Gamble and Gillette, the company was the largest consumer goods manufacturer in the world. The company produces household products including laundry detergents and liquids, soaps, and a range of cleaning products. Unilever sells its products by the means of its own sales force and independent resellers, agents, distributors to networks, wholesalers, joint and independent stores, foodservice distributors and institutions.
9) One of the oldest gas producing companies, that is called Royal Dutch Shell plc. The concern works in more than 90 countries all over the world. It gained the world's largest netting of filling stations, holding more than 44 thousand stations. In addition, it owns more than 30 oil refineries, a large number of chemical plants, as well as production of solar panels and other alternative energy sources. Royal Dutch Shell engages in the extraction of natural gas, its transportation, transformation into liquefied gas, maintenance of infrastructure for the delivery of gas to consumers, electricity generation, biofuels and hydrogen fuels, carbon trading rights. The company deals with oil production, including shale oil and deep-sea production. The most important countries as extraction locations are Brazil, USA, Oman, Nigeria, Great Britain, Kazakhstan, Malaysia, Russia, Norway, Denmark, Canada, Gabon, Italy. The production level is 2.777 million barrels per day. Shell conducts geological exploration and production of oil and gas in more than 80 countries around the world.
10) Reckitt Benckiser Group plc takes up investing in research and development to find new ways to improve the well-being and daily life of the customers. The company is one of the leading manufacturers of household chemicals. As a successful company, it set up branches in the USA and a number of European countries. Reckitt Benckiser expanded occupations and produced household chemicals, buying up many companies involved in its production for this. The company also launched the production of different medicines, but the production of household chemicals continues to be a matter of priority. Nowadays, Reckitt Benckiser is the largest supply contractor of detergents and laundry detergents, which are traditionally among the most effective and in-demand on the market.
How is the FTSE 100 price calculated?
Most stock indices use a weighted average formula to determine the value of an index. The value of each share is: share price x number of shares / market cap of all shares. Most indices are rated by companies based on market capitalization. If the market capitalization of a company is £ 1,000,000 and the value of all shares in the index is £ 100,000,000, then the company would represent 1% of the index.
Footsie is the stock index calculated by the Financial Times. It is widely thought of as one of the most influential stock indicators in Europe.
What does common FTSE Group ETFs include?
The group's indices include the most capitalized companies in the UK listed on the London Stock Exchange. FTSE Group also maintains other indices from the FTSE All-Share to so-called ethical indices such as the FTSE4Good Global Index, which focuses on corporate responsibility.
The most common FTSE Group indices are FTSE 100, FTSE 250, FTSE 350, and FTSE All-Share. But these indices can be further split into high yield, low yield, and former IT indices, which are calculated at the end of the day.
How are the Financial Times Stock Exchange index companies measured?
The price per share of each company is multiplied by their total number, then the product is multiplied by the “free float” factor and divided by the “Index Divisor”. It is the last part that is calculated by the analytical agency. The free float multiplier is the number of shares that are in free trade at the time of calculation (within the stock exchange). At the same time, it is always rounded to the nearest multiple of 5% (in rare cases, when rounding should result in 0, they are rounded up).
Important note: This article is for marketing purposes only and it should not be treated as Investment Advice
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