FTSE shuffle time, Russian miners out, builders to get promoted?

It is perhaps a sign of the times that the quarterly FTSE100 reshuffle due to be announced this week could see a couple of under performing miners drop out, replaced by companies from the bullish construction sector.

Both Evraz, the steelmaker and iron ore producer in which Chelsea FC-owner Roman Abramovich has a major stake, and precious metals miner Polymetal International are expected to be relegated from the main board at this week's FTSE Group quarterly index review.

Buoyed by signs of a recovery in the housing market, which has stoked demand for their shares, analysts say Travis and Persimmon are in line to take their places.

http://www.telegraph.co.uk/finance/markets/10108670/Persimmon-and-Travis-Perkins-head-for-the-FTSE-100.html

Travis shares are up 40%, Persimmon 50% this year, in part driven by the Help to Buy intervention of the UK Government, widely seen as a potentially dangerous prop to the housing market, but the type of policy typically undertaken by the politicians when house prices stop going up.

"The wider construction market obviously remains under pressure but housebuilding is an important component of what Travis does," said Andrew Nussey, an analyst at Peel Hunt. He said the Government's Help to Buy scheme had aided homebuilders, Travis' "principal customer base". and "more activity from the housebuilders translates into more business for Travis".

http://www.telegraph.co.uk/finance/markets/10108670/Persimmon-and-Travis-Perkins-head-for-the-FTSE-100.html

Persimmon currently trades on a P/E of over 20, Travis 16.1, so both have generous valuations, but are clearly in a sector that should benefit for the next 2 to 3 years from Government intervention.

Meanwhile, despite the bullish stock market move since the new year, Evraz is down almost 50% in that time, Polymetal around 35%.

Government completes first Help to Buy deal, Taylor Wimpey benefits

So, after the Government announcement in the last budget of their intention to prop up house prices with the Help to Buy scheme, the first beneficiaries are moving into their taxpayer backed home.

The first property deal under the Government’s Help to Buy has just been finalised on a Taylor Wimpey home in Liverpool.

A young couple relocating to the North West from Northern Ireland have bought the three bedroom home at Taylor Wimpey’s Speakman Gardens development in Prescot.

The housebuilder said it has seen a rise in visitor levels and new home reservations this year, as a result of improvements in consumer confidence.

Taylor Wimpey go on to say;

Peter Redfern, chief executive of Taylor Wimpey, commented: “The new Help to Buy housing measures have been welcome news for home hunters.

“We have seen significant increases in customer interest following its announcement and the scheme has already proven popular for those looking to get onto or move up the housing ladder.

“In fact, since its launch on 1 April, we have helped customers purchase, reserve or register their interest in an additional 300 homes.

“The measures announced by the Chancellor will help home builders get Britain building and add a welcome vibrancy to both the new and second hand market over the next three years.

http://bdaily.co.uk/industrials/30-04-2013/first-help-to-buy-deal-completes-in-liverpool/

Persimmon reported, as mentioned here, that they were seeing an increase in interest after the budget and now Taylor Wimpey  join them.  As suggested here, the UK housing market is too big to be allowed to fail, and it would seem the latest scheme could well be quite popular, especially with the housebuilders.

Persimmon reports, another house builder seeing the benefits of Government intervention

One of the themes developing here is that it will be interesting to follow going forward the continued effect of Government and Central Bank intervention on the UK housing market and the benefit of this to UK quoted companies. I state the bullish case here and here and while I personally believe that UK house prices are too high and should fall if only a traditional free market response was in play, the reality is very different. With this in mind, this intervention can be monitored in part by keeping an eye on what the construction companies themselves are reporting.

This is what FTSE250 Persimmon had to say today.

We are encouraged by the announcements made in the Budget with respect to the Government's support both for customers wishing to enter the housing market and for those existing homeowners who aspire to move home. These "Help to Buy" measures include the provision of a Government backed 20% shared equity scheme commencing on 1 April 2013 to support customers who wish to buy a new build home. In addition, we look forward to working with the Government to develop the Government Mortgage Guarantee Scheme which is to be launched from 1 January 2014. We anticipate that this new Scheme will help mortgage lenders provide greater access to mortgage credit with smaller customer deposits at affordable interest rates.

As a result of these "Help to Buy" announcements customer enquiries registered on our Persimmon Homes and Charles Church web sites increased. Up until mid March enquiry levels had been running c.24% ahead of the prior year but following the announcement of the "Help to Buy" measures this improvement increased further to c.30%. We have experienced encouraging improvements in both visitor numbers and reservations at our developments over the last two weeks. Whilst it remains too early to measure any increase in legal completions as a result of the "Help to Buy" Scheme, we remain confident of the strength of underlying demand for new homes in the UK and that these measures will support an increase in the number of new homes delivered by the industry over the medium term.

http://www.digitallook.com/news/rns/20835756-10277/PSN-Interim_Management_Statement_html?ac=,&username=,

Whether we like it or not it would be foolish to overlook the likely impact of the intervention to come, there are few reasons to be bearish when it comes to housing stocks. One would have thought that only the badly managed ones will miss out.