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Last Updated: Friday, 17 June 2005, 08:49 GMT 09:49 UK
BBC Global 30 soars a year after launch
Analysis
By Jamie Robertson
BBC World business presenter

The BBC Global 30 share index is one year old, and it is time for its first annual review.

The reshuffle comes as investors are rediscovering stockmarkets as a place to put their money.

Next Monday five new companies will join the index, replacing five stocks that did ok, but not well enough.

The annual review of the Global 30 was done by FTSE International, who compiles the index for the BBC.

Amongst the drop-outs, all - except Mitsubishi Tokyo Financial - did make gains.

Their problem is that they failed to keep up with the others.

Late spurt

IN
Seven-Eleven Japan
Mizuho Financial Group
Samsung Electronics
E.On
GlaxoSmithKline

OUT
Canon
Enel
Mitsubishi Tokyo Financial
NewsCorp
Novartis

effective from 20 June 2005

As a whole the BBC Global 30 gained 12%, outpacing both the Dow Jones and the Nikkei indexes.

Only European indexes managed to do better, with London's FTSE 100 up 13%, Germany's Dax up 14% and the French CAC 40 up 13%.

Bob Parker, vice chairman at Credit Suisse Asset Management said: "A lot of European large cap companies have done particularly well in restructuring, in particular moving their cost bases into central and eastern Europe. That's why they are doing well when the European economy as a whole is doing so badly."

But the significance of the rise in the world's 30 biggest stocks is that they have really only put on a spurt in the past two months.

For nine months the BBC Global 30 wobbled uncertainly between 4,900 and 5,200, only breaking through 5,200 in late May.

"What has changed is a perception that interest rates will not be tightened significantly; inflation expectations have lowered; oil prices, though high, are expected to stay stable and there are very low bond yields which make shares very attractive," says Mr Parker.

Europe's buoyant stocks

Among the 10 European stocks in the BBC Global 30 index, Italian energy group Enel and Swiss drug maker Novartis are dropping out.

Over the past year Enel's share price gained more than 10%, while Novartis was up 6%, but that was not good enough to keep them in the index.

BBC GLOBAL 30 INDUSTRIES
Oil and gas
Basic materials
Industrials
Consumer goods
Health care
Consumer services
Telecommunications
Utilities
Financials
Technology

German energy giant E.On (up 22%) replaces Enel.

Some of that gain for E.On has come from hopes that it will be able to keep its nuclear power stations running longer if Germany's Christian Democrats win the next elections, which could happen as early as 18 September this year.

E.On is also working with BP to build the UK's biggest wind farm, big enough to provide 25% of London's energy needs.

The company also has a 6.5% stake in the Russian energy group Gazprom and chief executive Burkhard Bergman is on Gazprom's board.

GlaxoSmithKline, up 18%, replaces Novartis.

It is the biggest maker of vaccines in the world, and the fourth biggest company on the FTSE.

Chief executive Jen Pierre Garnier is deliberately steering the group towards vaccine development, as many of its best selling treatments come up against competition from generic "copy-cat" drugs.

Korean newcomer, Japanese banking trouble

In Asia the Nikkei is at almost exactly at the same point it was a year ago.

Canon (up 2%) and Mitsubishi Tokyo (down 1.5%) have been replaced by two other Asian companies.

For the first time a South Korean group arrives in the index.

Samsung Electronics is up 14% on last year. It is now the world's biggest maker of memory chips, the third largest mobile phone maker after Nokia and Motorola, and it stole a march on Nokia with its "clamshell" phone designs two years ago.

Its performance is all the more impressive considering the problems in the Korean economy.

As Credit Suisse's Bob Parker explains: "First, the government is struggling to hold down the strength of the Won currency which is really hurting exports, and second the country got in a complete mess over credit cards last year and banks have really had to cut down on credit - that has hurt consumer spending."

In Japan Mizhuo Financial is now in the Index, having gained 13% over the past year. For the third time in the past twelve months the bank had its credit rating upgraded by S&P, thanks to its reduced bad debt portfolio.

Japan's Financial Services Agency said in May the bad loan ratio at the country's 11 biggest banks had fallen from 5.18% a year ago to just 2.93% today.

UFJ, about to be taken over by Mitsubishi Tokyo, has been one of the slowest to show improvement - one reason why its future owner's share price lagged so badly, pushing it out of the BBC Global 30 index.

Jonathan Allum, Japan Strategist at KBC Financial Products said: "The big story in Japan has been the turnaround in bad debt management. However UFJ has been perhaps the slowest to come to terms with this. The merger with Mitsubishi is really a strong bank taking over a weak one."

Sejeiro Takeshita, a director at Mizuho International sees Mitsubishi's languishing share price as having different causes: "It is more to do with its support for Mitsubishi Motors within the Mitsubishi Group. The debt problem at the motor group is as bad if not worse than it was with Nissan before it was turned around by Carlos Ghosn. And there's no sign of anyone like Ghosn coming to the rescue."

Sluggish Dow

In the United States, Wall Street's Dow Jones Industrial Average gained a mere 1.6% over the past year.

There have been no changes among the 10 American firms in the BBC Global 30 - although there is one drop-out: Rupert Murdoch's NewsCorp.

All this year it's been hampered by an unwelcome shareholder, John Malone of Liberty Media, who bought 18% of the group.

No solution has yet been found and despite successes, such as the launch of Fox Studio's "Revenge of the Sith" its shares are almost exactly where they were a year ago.

But NewsCorp is not being replaced by a US company, as it entered the index as an Asian firm.

But the move of its headquarters from Australia to the US at the end of last year pushed it to the sidelines of our index.

NewsCorp place among the top ten Asian stocks will be taken by Seven-Eleven Japan, now the biggest convenience store chain in the world.

Ito-Yokado owns 51% of the company, but that stake is worth a massive $11.3 bn, or three quarters of Ito-Yokado's market value - effectively the minnow owns the whale, meaning any takeover of Ito-Yokado would bring with it control of the bigger Seven-Eleven Japan.

So in April Ito-Yokado said it would sell its shares, at a 10.8% discount, to its subsidiary.

However, Ito-Yokado shareholders are not happy and are complaining that they are being short-changed.

The move is being seen by some as a tidying up exercise, by others as a defence against a take-over. Mizuho Internationals Sejeiro Takeshita says "there is a huge climate of nervousness about take-overs in Japan, especially about take-overs by foreign companies and this is just another example of it."




BBC Global 30 intraday chart
value
change
%
5707.15
20.65
up
0.36

MARKET DATA - 11:37 UK

FTSE 100
5428.78up
22.84 0.42%
Dax
5732.06up
18.55 0.32%
Cac 40
3783.91up
14.37 0.38%
Dow Jones
10403.79up
78.53 0.76%
Nasdaq
2273.57up
35.31 1.58%
Data delayed by at least 15 minutes


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