Late 2012 listings O2 and Direct Line are expected to secure places in the STOXX Europe 600 benchmark in a reshuffle this quarter, fuelling demand for shares in the British insurer and German-listed telecoms group from index trackers.
With market capitalisations of $8.9 billion and $5.2 billion, respectively, the two companies comfortably rank among the 550 largest stocks in Europe, qualifying for automatic admission into the STOXX Europe 600, StarMine data shows.
Telecoms operators OTE Hellenic Telecoms and TalkTalk, as well as lender Banco Comercial Portugues (BCP) are also set to join the index this quarter.
These three stocks, which have seen their share prices rise between 15 percent and nearly 80 percent over the last three months, feature in a list of Europe's 750 largest shares by market cap.
The new members are poised to replace struggling Spanish lender Bankia , Swiss technology group Logitech, gold miner Petropavlovsk and Dutch mail operator PostNL, which have all fallen below the 750th position required to maintain STOXX Europe 600 status.
British insurance broker Jardine Lloyd Thompson (JLT) is also earmarked for demotion after failing to meet the index's minimum average daily liquidity requirement of 1 million euros, according to analysts at a large European investment bank.
The 550 stocks with the biggest market capitalisation automatically qualify for inclusion at the quarterly review whether they are existing members of the index or not. For the remaining 50 places, if a current member ranks between 551 and 750, it stays in, but if not, the largest stock not currently in the index takes its place.
The analysts at the leading investment bank estimate the reshuffle could fuel demand for between 2 and 2.6 million shares each for Direct Line, TalkTalk, OTE and O2, and for 128 million shares in Banco Comercial from investors who track indexes, such as buyers of some Exchange Traded Funds (ETFs).
Demotion would cause 9.3 million shares in Bankia, 4 million shares in PostNL and between 700,000 and 900,000 shares each in Logitech, JLT and Petropavlosk to be sold, they add.
The reshuffle, based on data to the end of January, will be announced on Feb. 26 and will be implemented on March 15.
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