Tuesday 22 October 2019

Irish shares plummet as turmoil engulfs markets

Sterling weakened further against both the dollar, and the euro, making Irish businesses selling into the UK market less competitive. REUTERS/Lucas Jackson
Sterling weakened further against both the dollar, and the euro, making Irish businesses selling into the UK market less competitive. REUTERS/Lucas Jackson

John Mulligan and Colm Kelpie

Billions have been wiped from the paper value of the State's bank stakes in the wake of Brexit and Irish shares yesterday were among the worst performers in Europe as turmoil engulfed the markets.

Sterling weakened further against both the dollar, tanking to a 31-year low, and the euro, making Irish businesses selling into the UK market less competitive, as investors were unconvinced by attempts by UK Chancellor George Osborne to soothe nerves.

But Finance Minister Michael Noonan said the "initial shock" to Ireland had been "contained" and he claimed there was "no sense of panic".

"The NTMA (the State's debt management agency) are quite happy that they can fully fund the country for the foreseeable future," Mr Noonan said.

"The stock market took a bit of a hit but within the normal rise and fall of stock markets. Our exporting side continues to be strong and people are going about their business."

Taoiseach Enda Kenny said there should be no impact on the €1bn of extra cash available for new tax cuts or spending increases penned in for Budget 2017, but he warned that the prospect for later years was uncertain.

Ryanair and Kingspan saw their share prices tumble yesterday and were among the Irish companies worst hit.

Almost €640m has been wiped off the paper value of the State's stakes in Bank of Ireland and Permanent TSB since last Thursday as international stock markets continue to reel from the shock decision by UK voters to leave the European Union.

And the notional value of the State's 99.8pc stake in AIB has fallen by about €2bn.

European stock markets went into another tailspin as they were engulfed in a continuing vortex of political and economic uncertainty.

Ireland's ISEQ Overall Index - the main stockmarket index here - took another hammering. It plunged 9.9pc, with €9bn cut from its valuation compared with Friday, when it also lost about €9bn.

And today, markets are likely to face into another bruising session.

Shares in Bank of Ireland, in which the State has a 14pc stake, collapsed by over 20pc yesterday.

Shares in Permanent TSB plunged 17pc. The taxpayer owns 75pc of the bank.

And the value of AIB, of which the State owns 99.8pc, has also fallen, but its current market capitalisation is not reflective of its true underlying value, which is less.

Ryanair saw its shares crash over 15pc. The airline is worth €4.6bn less than it was last Thursday.

At the National Economic Dialogue in Dublin Castle yesterday, Mr Kenny said he was saddened and disappointed by the Brexit decision.

"It is not expected that the UK's decision will have any impact on fiscal space in the upcoming budget for 2017," Mr Kenny said.

"Though clearly the outlook for the medium term is now more uncertain, we will continue to implement policies that prioritise economic stability, growth and job creation. Ireland is now a strong, open and competitive economy and, with the right decisions in the coming months and years, we will stay that way."

Mr Noonan said it was hard to say what the ultimate effect of a British withdrawal from the EU would be at this point, claiming it depended on the arrangement put in place between the UK and EU during negotiations.

"If something like the arrangement in Norway were put in place, there would be very little downside risk. But if it becomes an arrangement of tariffs, and impositions on imports and exports, and interference with free travel and common labour markets, then the effect will be profound," he said.

Cabinet ministers were out in force yesterday for the National Economic Dialogue between the Government and social and business groups.

Brexit was one of the main issues of discussion, with business groups in particular raising concern about the impact on sterling and Irish exporters, the tourism industry, and the broader economy.

Adding to the economic woes for the UK, ratings agency Standard & Poor's stripped Britain of its last remaining top-notch credit rating, slashing it by two notches from AAA and warning more downgrades could follow.

S&P said it was the first time it had chopped an AAA-rated sovereign credit rating by two notches in one go.

"In our opinion, this (referendum) outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the UK," S&P said.

Mr Osborne earlier said the British economy was strong enough to cope with the volatility caused by last Thursday's referendum.

Irish Independent

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