LONDON, Jan 10 (Reuters) – Mining (LSE: MIR.L – news) companies’ influence on Britain’s FTSE is fading after a tough year for the sector, although it still has a greater bearing on the UK blue chip index than on any other in Europe.
UK-listed miners have operations from Kazakhstan to Chile and meet demand for commodities in China and the United States, contributing to the FTSE’s large international exposure.
While investors often use the FTSE 100 to bet on prospects for global rather than UK growth, the basic resources sector now has just the fifth biggest weighting in the FTSE 100 , down from third at the start of 2013.
UK listed miners fell 16.4 percent last year, more than any other sector, and were overtaken by telecoms and health care in terms of weighting on the FTSE 100.
Miners Vedanta, Polymetal, Kazakhmys (Frankfurt: A0HFWR – news) and ENRC, as well as steelmaker Evraz (Other OTC: EVRZF – news) , were all relegated from the FTSE 100 into the mid-cap FTSE 250 last year as their market capitalisation fell.
Basic resources (Frankfurt: W8Z.F – news) stocks’ weighting on the FTSE 100 is 8.1 percent, down from more than 10 percent in February 2013.
However, this give miners a much bigger weighting on the FTSE than on other European indices, either national or pan-continental. Basic resources stocks make up just 3.33 percent of the weighting on the STOXX 600 index.
“The weakness in miners last year both contributed to relative underperformance in the FTSE as well as making its weighting fall,” said Jeremy Batstone-Carr, analyst at Charles Stanley (Shenzhen: 002588.SZ – news) .
But he added: “It’s still going to be quite a significant swing factor (for the FTSE) even though its weighting has fallen.”
While four FTSE sectors are bigger than basic resources, other European indexes offer bigger exposure to each of those.
Investors wishing to invest in telecoms would get higher exposure by buying Spain’s IBEX, while Italy’s FTSE MIB has marginally more exposure to oil and gas.
The IBEX and FTSE MIB are more heavily weighted than the FTSE in banks, and despite London’s heavyweight pharma listings such as GlaxoSmithKline (Other OTC: GLAXF – news) , the French CAC offers more exposure to health care through firms such as Sanofi (NasdaqGM: GCVRZ – news) .