Bonds and funds fuel rebound at Irish Stock Exchange
Published 23/01/2016 | 02:30
IT has been a banner year for the Irish Stock Exchange (ISE), which gleefully announced this week that it was now the number one exchange in the world for listing bonds and investment funds.
The surge in activity at Anglesey Street has been welcomed by the Irish financial industry, given the struggles the market had endured in the immediate aftermath of the 2008 crash.
While most people have heard of the stock exchange and companies that are quoted on it, the real business for the ISE comes in the debt and fund listing sector.
Essentially, a debt instrument, such as a bond, needs to be listed on a public exchange so that price information and other details can be freely available. Part of that is to allow for transparency and part of it is to make them easier to trade.
Some of the top companies use the ISE to list their debt offerings. A quick perusal of the market shows the likes of Citigroup, Fiat, General Motors and Verizon among many other bluechip clients that use the stock exchange.
There are numerous companies that are far less recognisable, of course.
Among the funds active yesterday were Threadneedle Asset Holdings, a bond called the CSOP FTSE China A50$ and HHT Plc. Not exactly household names.
So why do companies use the Dublin market? They could list anywhere in the world but they choose here. The Dublin market has debt instruments from 82 countries - an extraordinarily high number for a country that in truth is something of a financial backwater.
Why is it different from elsewhere? For a start, the fact that the ISE is a small exchange works in its favour.
As ISE chief executive Deirdre Somers puts it: "Ireland has become the European location of choice for listing debt and funds because we have developed the processes and expertise to meet the requirements of issuers who are seeking to list on an EU market and reach European investors.
"The ISE has invested heavily in developing the skills and familiarity with issuers necessary to become the leading exchange for listing debt and funds.
"We have earned this reputation over many years by providing issuers with a service that meets their needs for efficiency, price competitiveness and guaranteed turnaround times," Ms Somers adds. In essence, the ISE is a small, nimble market that can turn around requests quickly and get a bond listed in as little as three days. It has a flexibility that few larger exchanges can match.
But is there another aspect to Dublin's attractiveness as a centre for listings - perceived light touch regulation?
It is almost a decade since 'The New York Times' branded Ireland the 'Wild West of European finance'.
Much has changed since, but that reputation has stuck. The Government makes a big deal of the fact that it is a "pro-business environment" in Ireland, but sometimes the perception can be taken a step further to Ireland being seen as some kind of soft touch. It is something Ms Somers flatly rejects however.
"The same regulations apply in Ireland as in every other EU country," she points out.
"We work closely with the Central Bank, which has responsibility for regulation, to ensure that Ireland remains attractive as a location for listing," she adds.
The crash resulted in some of the biggest companies listed on the main securities market either being wiped out, like Anglo Irish Bank or McInerney Group, or seeing their value slashed almost overnight, like the banks.
As interest in the Irish market from overseas began to wane, serious questions began to be asked of the ISE's long-term future. Companies such as medical trials business ICON, food giant Greencore, and the conglomerate DCC shifted their listing away from the Irish Stock Exchange in search of more analyst coverage and more investment.
By 2012, it seemed odds on that the ISE was heading towards demise. That hasn't happened. Today the debt listings are what pays the ISE bills, accounting for more than 70pc of the exchange's revenue.
While the public see the equity market on a day-to-day basis, in most respects the real business is being done on the debt listings in the background.
Buoyed by 13 new listings in the last three years, the market has begun growing again.
While the companies that have listed have not been as large as the likes of DCC, the volume of listings has proven that the exchange can survive as a standalone entity for some time to come yet.