International stock markets uncovered: The ins and outs of the FTSE 100

Julie Brownlee, Fsp Invest, 05 May. 2015

Tags: ftse 100, what is the ftse 100, london stock exchange, companies on the ftse 100, top uk companies, stock market, stock market index,

If you ever watch the financial news on TV, you’ll no doubt have heard about the performance of the FTSE 100.

So what is the FTSE 100? What sort of companies are part of the FTSE 100? And what does the performance of the FTSE 100 tell you?

Read on to find out…

What is the FTSE 100?

The FTSE 100 is an index of the top 100 companies listed on the London Stock Exchange.

The London Stock Exchange’s main board lists over 1,300 companies. The 100 largest by market capitalisation make up the FTSE 100.

As a whole, the market cap of the FTSE 100 amounts to a staggering £1.904 trillion, according to Wikipedia. That’s over R34.71 trillion!

What types of companies does the FTSE 100 contain?

Have a look at the chart below…

Chart of sectors in the FTSE 100

The FTSE 100 is quite heavy in commodity companies.

Oil and gas companies account for 13.88% of the index. And basic materials contribute another 7.34%. That means commodities make up over 20% of the FTSE 100.

This heavy weighting of commodity companies explains why the index has struggled to perform over the past few years as commodity prices have been under severe pressure.

Other major sectors
The largest sector is financials, which accounts for 22.63%. Following the financial crisis, this sector has also struggled to perform.

Around 36% of the overall FTSE 100 are defensive stocks. This includes consumer goods (16.82%) and healthcare (10.29%).

This is quite a high proportion of defensive stocks in comparison to many of the other major global blue-chip indexes.

How to interpret the performance of the FTSE 100

Of the sales from companies on the FTSE 100, around 70% of these are abroad. So the FTSE 100 is more of a representation of what’s going on globally rather than in the UK.

Many of the components of the Johannesburg Stock Exchange’s blue chip index, the Top 40, have their primary listings in London. This includes Anglo American, British American Tobacco and SABMiller.

So there you have it, the ins and outs of the FTSE 100.

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