FTSE 350 quarterly update: Coronavirus causes shake up

In an attempt to contain the spread of covid-19, increased travel restrictions have had a significant effect on the travel industry. Despite reporting a strong first quarter which initially saw its shares increase 11.5%, TUI AG was not immune to this effect and its share price has since fallen such that it is now exiting the FTSE 100 (see the latest FTSE UK Quarterly Review). Addressing this, TUI AG released a statement on 2 March noting that in light of cases in northern Italy, Tenerife and other regions, the company had suffered ‘weaker bookings in the last week, especially for our remaining, near-term and lower volume winter season’, contrasting with the strong booking trends reported in the first quarter. This comes following a quarantine of a hotel in Tenerife which was part of the company’s hand-picked packages.

The oil industry has also suffered considerably from the knock-on effect of travel restrictions and global disruptions to industrial supply chains. These factors, combined with the structural impact of climate change concerns and disagreement between the major oil producing countries about supply, have seen crude oil prices suffer their biggest falls in three decades. Tullow Oil and Hunting plc both find themselves out of the FTSE 250, notable losers in a battered oil sector.

Hunting PLC have said in their 2019 results:

‘The impact of the coronavirus continues to be assessed by our Asia Pacific businesses, given the continuing restrictions in place in China. The outlook for 2020 remains uncertain, as over half of all operators have yet to publish budget spend guidance due to continued uncertainty over commodity prices.’

Notably, Tullow had been suffering prior to the coronavirus outbreak, with its stocks plummeting to an all-time low of £0.39 in December. This came after an announcement that both the company’s CEO and exploration director were stepping down in the context of a reduction in production.

Whilst the markets continue to take a battering due to the virus, gold has been a safe haven for investors. Fresnillo had previously been demoted to the FTSE 250 in December 2019 after a fall in gold production. However despite reporting a decrease in gold production from 2018 the company has made its way back into the FTSE 100 as investors continue to bet on gold. Gold miner Petropavlovsk has also reaped the benefits of the thriving gold industry with the company debuting in the FTSE 250 this month.

Another notable movement this quarter is the demotion of NMC Health to the FTSE 250 after a troubling end to 2019 which saw hedge fund Muddy Waters accuse the company of misstating its assets and an FCA investigation into the alleged misreporting of interests held in the company. The company has currently suspended its shares. FTSE Russell has stated that if NMC does not resume trading by 18 March, it will remain on the FTSE 100 until it does so. Depending on its market price on the first day after resuming trading, the company could also possibly face exclusion from the FTSE 250 (and the highest ranked company on the FTSE 250 Reserve List will instead be added concurrently with the NMC Health deletion).

The full breakdown of the Q1 2020 FTSE 350 reshuffle can be seen below:

All changes will take effect from 23 March 2020.