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Russian stocks Evraz and Polymetal set to lose FTSE 100 status

Evraz and Polymetal
Russian stocks Evraz and Polymetal both now have smaller market capitalisations than Dechra Pharmaceutical, the initial frontrunner for removal from the index. Photo: Rafael Henrique/SOPA Images/LightRocket via Getty

Russian steelmaker Evraz (EVR.L) and Anglo-Russian gold miner Polymetal (POLY.L) are set to lose their FTSE 100 (^FTSE) status after nosediving on the back of the current conflict.

On Tuesday, Evraz fell 19% on the day, meaning the company has lost more than 77% of its value in the last month alone. It is 29% owned by Russian billionaire businessman Roman Abramovich, who also owns Chelsea FC.

Meanwhile, Polymetal, which operates eight mines and a state of the art processing plant across Russia and Kazakhstan, slumped a further 25% on Tuesday, also resulting in its market cap losing around 75% over the last month.

Norway’s sovereign wealth fund, one of Polymetal’s top 10 shareholders, has already said it will dump all of its Russian investments as part of a wider package of support for Ukraine.

Polymetal said it had started contingency planning to keep its business running including selecting equipment suppliers, securing sales channels and liquidity management.

Both firms now have smaller market capitalisations than Dechra Pharmaceutical (DPH.L), the initial frontrunner for removal from the index.

Evraz has lost around 77% of its value in the last month. Chart: Yahoo Finance
Evraz has lost around 77% of its value in the last month. Chart: Yahoo Finance

It comes as part of the first FTSE reshuffle of 2022, which is highly reflective of the current market turmoil resulting from geopolitical tensions.

The changes are based on Tuesday’s closing prices, and will take effect on 21 March. Tuesday’s closing prices have left both companies languishing well below the 110th spot which would be required in order to remain.

“The precipitous falls in the share prices of miners with Russian exposure has guaranteed that both Evraz and Polymetal will lose their FTSE 100 status,” Richard Hunter, head of markets at Interactive Investor, said.

“In terms of their replacements, kitchen supplier Howden Joinery (HWDN.L) is poised to be promoted despite the share price having declined by 7.3% in the year to date. Recent pre-tax profits were comfortably ahead of consensus, with an improvement in margins which lifted the shares on the day of the announcement."

He added: “Gold producer Endeavour Mining (EDV.L) is also likely to move up to the premier index, despite being outside the usual criterion of finishing 90th or above in terms of market capitalisation.

“The shares have risen by almost 25% in the year to date, boosted by a move towards haven investments following on from the escalating situation between Russia and the Ukraine, with the gold price having spiked by around 5% so far this year.”

Read more: How Russia's war on Ukraine is impacting stock prices

Royal Mail’s (RMG.L) 22% share price decline so far this year has also seen the shares tumbling out of the index. The company regained its place in the FTSE 100 last June, having previously been relegated in December 2018.

Ben Laidler, global markets strategist at eToro, said: “There are nearly $10tn of funds directly tracking indices like the FTSE 100 through exchange traded funds (ETF).

“This number has more than doubled in the past five years, making these index rebalancing events increasingly important.

“The FTSE 100 will remain one of the world's cheapest major markets, with a focus on attractive faster-growing cyclical sectors like financials and commodities.”

Read more: The Russian banks and billionaires targeted by UK sanctions

Separately, HM Treasury has announced plans to amend unnecessary stock market rules in a move which will make the City of London "a more attractive place to invest and to do business, supporting jobs and generating investment in the UK".

The move aims to give firms greater choice about where they can trade, while a new, simpler and more agile regime for companies listing and raising capital will encourage more innovative firms to list in the UK, and facilitate wider participation in the ownership of public companies.

The economic secretary to the Treasury, John Glen said: “We are using our post-Brexit freedoms to create the right legislation to support an even stronger financial services sector — one that is open, green, competitive and technologically advanced.

“Our plans to improve our wholesale markets regulation will liberate businesses from unwieldy and stifling rules that hold back their ability to grow and innovate, while our reforms to the prospectus rules will replace the current system with a new, simpler, and more agile regime.”

Last year over 120 companies went public in the UK, raising £17bn — the most raised in any year since 2007.

Watch: Market volatility during the Russia & Ukraine conflict