Merrion prefers stocks with limited UK exposure for Q2
Published 12/04/2016 | 02:30
Merrion Capital has listed Cairn Homes and REITS among its top Irish stock picks for the second quarter, saying it is focusing on domestic Irish companies with limited exposure to the UK, amid uncertainty over the Brexit referendum.
Other picks include Smurfit Kappa and Independent News & Media, the publisher of this newspaper.
In its quarterly investment outlook published yesterday, Merrion said it expects domestic demand to be a key driver of economic growth next year, projecting around 5pc GDP growth in 2015.
It said Irish equities have been volatile in the first quarter and that it expects this to continue in the second.
"We continue to recommend buying REITS and are happy to buy Green REIT and I-RES in the current weakness. We are also happy to buy Cairn Homes given its domestic focus and play on an under-supplied Dublin housing market," Merrion said.
"Furthermore, we recommend Smurfit Kappa given their low exposure to the UK and the upcoming catalyst of a potential UK listing in May and Independent News & Media as we see capital deployment catalysts on the horizon.
"Stocks we consider to be top of their trading range and consider a 'trading' sell for short term investors are Kerry Group, Glanbia, Dalata Hotel Group, Irish Continental Group, Total Produce and C&C."
It added: "Provided that the Brexit referendum outcome is a 'No' and that Britain stays in the EU, we see a much better second half for Irish equities and possibly a great opportunity to 'Buy' sterling-listed Irish companies."
The report also comments on the current political situation, saying Ireland can afford a brief spell of political uncertainty.
"In reality Fine Gael and Fianna Fáil differ very little in their overall economic policies/strategies and would be seen in the political spectrum as being in the centre as opposed to being overly tilted to the left or right.
"The economy is growing strongly and the Government's 2016 Budget estimated the national debt-to-GDP ratio fell well below 100pc last year to around 94.5pc," it said.
"Even left-wing republican party Sinn Féin is relatively conservative on economic matters - it is pro-EU and recognises the importance of maintaining the country's controversial 12.5pc corporate tax rate.
"Therefore, it is no great surprise that market reaction to the result has been muted".