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Sunday 31 August 2014

Irish shares on course for biggest gain in three years

Thomas Molloy

Published 13/12/2012 | 05:00

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The ISEQ is on course for one of the biggest rises of any benchmark index in western Europe, according to calculations by the Irish Independent.

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The total return, which includes capital gains and dividends, has risen more than 23pc in the past 12 months as stocks such as Glanbia and Smurfit Kappa reach new heights and international investors return to the market.

The benchmark index has soared while indices in many other indebted European countries have struggled. Portugal's PSI-20 index has risen just 2.7pc in the past 12 months while Spain's IBEX index is down 4.7pc. Italy's main index has gained just 5.8pc.

The ISEQ was one of the first indices to collapse in the wake of the international crisis because our banks made up such a large part of the value.

Now it is rebounding quicker than most as value investors such as Wilbur Ross, who holds a 9.7pc stake in Bank of Ireland, believe Ireland is over the worst of the crisis.

Stock markets in many parts of the world have rebounded in 2012 as central banks flooded the world with cheap credit.

"Close to the end of the year, markets seem to know only one direction – further upwards," Roger Peeters, chief executive officer at Close Brothers in Frankfurt, said yesterday.

"The technical situation is improving with some encouraging economic figures. It does not look like this trend will stop in the short term."

Eurozone banks benefited disproportionately from a rally that began in July after European Central Bank President Mario Draghi pledged to defend the euro, later unveiling a plan for the ECB to buy the bonds of indebted eurozone states.

Germany

German stocks jumped to their highest levels in almost five years last night, bringing gains over the past 12 months to a whopping 31pc.

The only country in western Europe to post bigger gains was Greece where the ASE advanced 32pc.

While the ISEQ is still some distance from Greece or Germany's performance, it has done far better than most other European countries.

The Paris-based CAC is up 18pc while Belgium's Bel-20 is 20pc higher. Holland's exchange has risen 16pc.

Britain's blue-chip FTSE 100 has underperformed most other exchanges over the past 12 months, rising just 9.5pc. Many analysts expect the FTSE 100 to reverse a year of underperformance and outpace European peers in early 2013 if its heavyweight mining sector receives an anticipated boost from Chinese growth.

The MSCI world equity index has gained over 11pc so far this year helped by big gains in Asian shares outside Japan which have reached 16-month highs.

In Ireland, the best-performing stocks have been exploration company Providence Resources (up 165pc), paper maker Smurfit Kappa (up 122pc), travel software company Datalex (up 121pc), dairy company Glanbia (up 78pc), clinical trials company ICON (72p), insurer FBD (60pc) and Aer Lingus (60pc).

While a swing of 23pc is large by international standards, the ISEQ is more prone to swings than most other exchanges. The benchmark index advanced 0.6pc last year and fell 3pc the previous year.

In 2009, in the midst of our economic collapse, it posted a 27pc gain as bank stocks recovered from record lows.

In 2008, the same index plunged 66pc as investors fled. In 2007, it slid 27pc.

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