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FTSE fears as new ousts old
The FTSE committee unveils its new index
Although it has kicked out cigarettes and alcohol in favour of fitter, leaner hi-tech industries, there is concern that the new look FTSE 100 index could be highlighting an unhealthy trend in the British economy.
The index, which lists the most valued share held companies in the UK, has ousted several long-established firms, including brewers Scottish & Newcastle and cigarette makers Imperial Tobacco.
They have been replaced with internet and telecommunications businesses.
The move has struck a note of caution among market analysts, who say traditional industries are being bled dry by start-up firms whose current success relies heavily on perceived values rather than market performance.
The index, which lists the most valued share held companies in the UK, has ousted several long-established firms, including brewers Scottish & Newcastle and cigarette makers Imperial Tobacco.
They have been replaced with internet and telecommunications businesses.
The move has struck a note of caution among market analysts, who say traditional industries are being bled dry by start-up firms whose current success relies heavily on perceived values rather than market performance.
The big investors are tending to buy them all which is rather like every horse in the race - its a sure way to lose  |
Tony Jackson, market expert
|
Some nine new technology firms have appeared on the Index, yet their combined profits still fall short of those reaped by Allied Domecq - one of those removed from the list.
Meanwhile, new arrival Baltimore employs 450 staff while recently departed Scottish and Newcastle employs more than 60,000.
Freeserve, the internet service provider set up by Dixons reveals another quirk.
It is valued at £7.25bn, while Dixons registers at £6bn, even thought the electronic goods retailer owns 80% of its creation.
Andrew Swift, joint manager of Price Jameson Recruitment, says there is growing evidence to show that traditional industries are suffering structurally as their younger rivals ransack their workforce.
"The dotcoms are sucking-in capital and clearly there is a brain drain causing traditional bricks-and-mortar companies a problem when they are starting their own online ventures," he said.
And market expert Tony Jackson of Charterhouse Securities sayd that even after plundering the assets of their peers, these firms may not achieve the stability of the industries they are trying to usurp.
"There is a risk with the hi-tech stocks because not all of them are going to make a success of it," he told BBC Two's Newsnight.
"Because some of them will do fantastically well and some of them will collapse and nobody is terribly sure which is which.
'Sure way to lose'
"The big investors are tending to buy them all which is rather like backing every horse in the race - its a sure way to lose."
However, according to Nicola Horlick, joint managing director of SG Asset Management, such factors are not enough to undermine the authority of the FTSE list.
"As an investment manager I have to beat the index so I have to look at these things," she said.
"I can decide I am not going to invest in these stocks but we have investments in technology, we have a very large technology fund and, needless to say, lots of people are buying it."
She added that there needs to be room in the market place for both new and old.
But analysts in the US say market forces operating on the other side of the Atlantic have allowed the newer industries to find their feet as the stock market settles.
John Ryding, a senior economist with US firm Bear Stearns and Co said: "We have this tremendous creative destruction of capitalism going on.
"What's been happening in the UK has been mirrored over here before, and the economy has benefited enormously from these developments."
Meanwhile, new arrival Baltimore employs 450 staff while recently departed Scottish and Newcastle employs more than 60,000.
Freeserve, the internet service provider set up by Dixons reveals another quirk.
It is valued at £7.25bn, while Dixons registers at £6bn, even thought the electronic goods retailer owns 80% of its creation.
Andrew Swift, joint manager of Price Jameson Recruitment, says there is growing evidence to show that traditional industries are suffering structurally as their younger rivals ransack their workforce.
"The dotcoms are sucking-in capital and clearly there is a brain drain causing traditional bricks-and-mortar companies a problem when they are starting their own online ventures," he said.
And market expert Tony Jackson of Charterhouse Securities sayd that even after plundering the assets of their peers, these firms may not achieve the stability of the industries they are trying to usurp.
"There is a risk with the hi-tech stocks because not all of them are going to make a success of it," he told BBC Two's Newsnight.
"Because some of them will do fantastically well and some of them will collapse and nobody is terribly sure which is which.
'Sure way to lose'
"The big investors are tending to buy them all which is rather like backing every horse in the race - its a sure way to lose."
However, according to Nicola Horlick, joint managing director of SG Asset Management, such factors are not enough to undermine the authority of the FTSE list.
"As an investment manager I have to beat the index so I have to look at these things," she said.
 Nicola Horlick: Heavy investment in technology
|
She added that there needs to be room in the market place for both new and old.
But analysts in the US say market forces operating on the other side of the Atlantic have allowed the newer industries to find their feet as the stock market settles.
John Ryding, a senior economist with US firm Bear Stearns and Co said: "We have this tremendous creative destruction of capitalism going on.
"What's been happening in the UK has been mirrored over here before, and the economy has benefited enormously from these developments."
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