Market Report: A sunny year for the market newcomers

  • @LauraHChesters

Christmas week is upon us and how much we are spending on the high street will be closely watched by punters exposed to retail stocks. Investors with shares in shops will be hoping consumer sink every last penny today on the last shopping day before Christmas.

With a dearth of trading updates and company announcements, it won't be until next week that the markets will get any feeling of how Christmas trading will have gone. The retailer Next will give a trading update next Thursday, but this week is perhaps a time for reflection.

As the nation starts planning holidays to get it through the depths of winter, the FTSE 100 today welcomes the travel agent group Tui Travel for its first day on the index. Its upgrade sees the water utility and waste-management group Pennon relegated to the mid-cap index.

Tui has had a good year – better than rival Thomas Cook – and managed to sail through the ups and downs of fuel rises and a mixed summer of bad weather and the Olympics.

The travel group joins a collection of five other companies which make up the FTSE 100 2012 intake.

Cast your mind back to the spring when the chemicals group Croda International and investment manager Aberdeen Asset Management joined the party. But the promotions meant two energy firms were pushed out – Cairn and Essar Energy ended up on the FTSE 250 after the shake-up.

By the summer engineers were in favour, and Babcock International got a spot on the top-flight index.

Engineers were still gaining by the autumn when Melrose was promoted alongside the Aberdeen-based oil services group Wood Group.

But while the engineers were high achievers, it was fund managers and City dealers who lost out. The summer and autumn relegations included the interdealer broker Icap, the emerging markets investment manager Ashmore Group, and the hedge fund Man Group.

Shares have tumbled in Man since March following updates that it is consistently seeing outflows of funds. Takeover rumours have surrounded the group this year with traders speculating that it will eventually be taken private. In October, Crispin Odey's Odey Asset Management revealed he had bought a 5 per cent stake, and earlier this month news came that boss Peter Clarke will leave.

Small-cap companies who got a chance in the limelight of the mid-cap index this year included the newly floated Direct Line – which listed at 175p in October. The insurance group, spun out of Royal Bank of Scotland, has had mixed reviews from analysts. Berenberg's stock watchers initiated coverage last week with a "sell" and warned that the company was "on the road to nowhere", giving it 174p share target price. But in contrast UBS analysts were a fan of the motor insurance flogger and rated it a "buy", as they think it looks cheap because of potential changes to the number and size of whiplash claims in the sector. UBS upped its share-price target last week to 225p, up from 215p.

According to the London Stock Exchange a total of 104 companies came to market, raising £7.9bn. This is below the previous year's £12.9bn, although the figure was skewed as nearly half of it was due to the listing of the world's largest commodities trader, Glencore. But despite the boost from Glencore in 2011, 2012's IPOs were also down on 2010's figure of £9.2bn, but above 2009's measly £1.5bn.

Last month London welcomed Russia's second-largest mobile-phone operator. Megafon listed 20 per cent of its shares on the London Stock Exchange. The deal highlighted the rise in the number of foreign IPOs which rock up in London to raise money.

But the absence of large offerings across Europe contributed towards a 64.3 per cent drop in proceeds raised in IPOs across the continent, according to Renaissance Capital.

IPOs may have been down, but the year witnessed the mega-merger of the commodity trader Glencore and Xstrata, the world's fourth-largest diversified miner.

Their $68bn (£42bn) merger got the go-ahead from European Union anti-trust regulators last month, and the long-awaited deal finally concluded after 10 months of shareholder wrangling.

Next year the City is hoping for a boost from a rise in mergers and acquisitions across the stock market.