Friday 23 June 2017

CRH up by €2bn as Trump cements US victory

President-elect Donald Trump plans to make a number of changes to America's tax regime
President-elect Donald Trump plans to make a number of changes to America's tax regime
John Mulligan

John Mulligan

Ireland's stock market bucked declines among European peers yesterday after Donald Trump's landmark election win, with an 8pc-plus surge in CRH shares boosting the Iseq Overall Index by over 2pc as US markets opened.

The rocketing CRH share price added about €2bn to the company's market capitalisation, valuing it at €26.8bn.

CRH is Ireland's biggest company. Its shares soared to a more than nine-year high after Mr Trump confirmed in his acceptance speech that he intends pumping money into US infrastructure projects, including roads, airports and hospitals.

Mr Trump's most notorious infrastructure plan is to build a wall with Mexico to stop immigration. CRH sold its stake in Isreal's Mashav earlier this year, a company whose cement was used to build that country's controversial wall with Palestine.

"The numbers are significant should they come to pass," said Davy Stockbrokers analyst Robert Gardiner. "Trump has talked in terms of spending trillions on US highways and bridges. This compares to the five-year, $305bn (€278bn) FAST Act (Fixing America's Surface Transportation) passed last November, and Clinton's $500bn (€457bn) stimulus plan."

"While talk is cheap and funding is a major question mark, we believe that post-election talk of an infrastructure stimulus will now gain more traction," Mr Gardiner said.

"It may be early days to be weighing the pros and cons for the stock, but CRH seems like an obvious beneficiary." The company declined to comment.

CRH is the largest producer of asphalt and the third-largest producer of construction aggregates in the United States. Last year, the company generated revenue of €23.6bn and a pre-tax profit of €1bn. Stock markets around the world nosedived as yesterday's election outcome became apparent overnight. Bourses in Asia were pummelled first, with the declines spreading to Europe.

Soon after markets opened yesterday, Germany's DAX was 1.7pc lower, while France's CAC-40 was down 1.6pc. The Euro Stoxx 50 was nearly 2pc lower in early trading.

The UK's FTSE-100 fell 1pc, but had reversed losses later in the day to trade 0.2pc higher.

Other European exchanges also clawed back declines as investors bet that Mr Trump's pro-business stance could be a fillip for companies.

"The equity markets have rebounded quite a long way so my view is that we have a couple of forces in play," said JP Morgan Asset Management's head of multi asset strategy, John Bilton.

"One is that markets are trying to figure out what this might mean and another force which is, if we do get this type of infrastructure spending and tax cuts that have been mooted, maybe that gives the economy a bit of a boost."

Investors took fright at Mr Trump's victory, initially piling into safe havens including gold and the Japanese yen. US stocks opened lower, with the Dow Jones Industrial Average down 0.14pc, and the S&P 500 0.51pc lower. The Nasdaq fell 0.8pc.

The Mexican peso fell as much as 13pc overnight against the dollar, on fears that Mr Trump will see through his promise to build the Mexico wall and renegotiate trade deals between the two nations.

The euro and sterling gained against the dollar, while sterling weakened against the euro.

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