Outlook: FTSE indices

TRICKY THINGS, these stock market indices. You might have thought that your Sky, Orange, Anglo American, Daily Mail and General Trust, Schroders and Colt Telecom shares were worth so much; turns out they are worth a lot less, or by the time FTSE International gets round to "reweighting" its indices - which admittedly won't be until June 2001 - they will be anyway.

Mind you, if you'd had that lot in your portfolio for the last couple of years, you'd already be laughing all the way to the bank, so no one is going to feel too sorry for you. One of the reasons these stocks have so dramatically outperformed is because the market in their shares is so limited.

At the same time, however, they've been afforded a weighting in the FTSE 100 which equates to their total market capitalisation. This in turn has meant that tracker funds and others ruled by the tyranny of the benchmarks have had to pay through the nose to achieve a corresponding weighting in their portfolios, and boy have they chased up those prices in doing so.

From June the year after next, so as to allow everyone time to absorb the changes, weightings will be decided according to how much of the stock is genuinely free to trade. This is obviously the right thing to do, but it's a bit like slamming the door after the horse has bolted. An awful lot of damage has already been done as a result of the investment distortion caused by the present system.