Saturday 19 August 2017

Irish shares index sliding to worst run since bailout in 2010

President-elect Donald Trump. Photo: AP
President-elect Donald Trump. Photo: AP
Charlie Weston

Charlie Weston

The Irish stock market is heading for its worse performance since the year the country was bailed out. The Iseq index of Irish shares has slumped due to fears over Brexit, the ongoing banking problems in Italy and the slowdown in China.

Despite a surge in share values of CRH and the rise in Fyffes due to its takeover, the overall index is in line to end the year down from where it started.

This is the first time this has happened since the country was bailed out by the Troika in 2010.

The index had rallied by close to 23pc earlier in the year after the Brexit shock sent shares on the Dublin market into a tailspin. However, it is still down more than 4pc from the point it was at when 2015 ended.

The Iseq index of Irish Stock Market fell by as much as 0.5pc in early trading yesterday.

The poor performance of the Irish index reflects the compensation of it, as it has a small number of companies, according to equity researcher and economist at specialist bank Investec Philip O'Sullivan.

He said banks such as Bank of Ireland and Permanent Tsb have performed badly in common with others across Europe.

"There are just 44 members of the Irish Stock Exchange. Not many of them are plays on the economy here. We are at the mercy of what happens internationally in the case of a lot of companies," Mr O'Sullivan said.

The Brexit vote hit the likes of Dalata, while recruitment company CPL is down 21pc in the year despite a pick-up in overall employment.

The victory for Donald Trump in the US elections helped the State's largest publicly-quoted company CRH rise by 20pc. Its American operations are expected to benefit hugely from motorway and other infrastructure spending.

Fyffes surged 48pc this year. The €751m takeover of the company will see its shareholders receive a 37pc premium on what had been the company's all-time high until the takeover was announced earlier this month.

Japanese group Sumitomo Corporation plans to take over the Irish fruit distributor.

Despite strong demand for office space in Dublin from multinational companies, real estate investment trusts (Reits) Hibernia and Green fell 15pc this year, and are trading at a discount to their net asset values.

The Reits became a proxy for bonds, but the rise in bond yields since Trump's election has seen investors move back to bonds and out of the Irish Reits.

However, there are rising expectations that Mr Trump will push through a massive stimulus plan next year. This has prompted hopes of economic growth and inflation and lifted stocks globally.

The fact that Irish share prices ran out of steam is in contrast to London's FTSE 100 index which has risen by 13.5pc on the year and yesterday hit a new all-time closing high.

Export-oriented companies that dominate the index, such as British American Tobacco, GlaxoSmithKline and Diageo, have gained from the drop in sterling's value.

A rise in oil prices in the latter part of the year has buoyed index heavyweights, Royal Dutch Shell and British Petroleum.

The pan-European Stoxx 600 index is on track to end the year in negative territory, currently down 1.4pc from its position at the end of 2015. Italy's FTSE MIB index stands out as a weak spot, falling 6.5pc, amid concerns over its ailing banking sector and wider economy.

The Dow Jones Industrial Average has been recording record highs since Mr Trump's election in November, though the stock index has failed, so far, to hit the key psychological 20,000-point level.

Irish Independent

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