Thursday 27 June 2019

2008 is worst year for Irish equities since 1793

Pat Boyle

The Irish stock market has fallen 75pc since its peak in February 2007 and in 2008 has recorded its worst performance since its foundation in 1793, according to a new report.

A report from Bloxham Stockbrokers also said volatility is now at its worst since 1928 and in October there were nine days when US equities moved up or down 4pc.

However, the broker is now hinting that the market may be set for a recovery.

The broker has five keystones that could mark a recovery in equity markets. These include stabilisation in the banking sector; a thaw in credit markets; a reduction in volatility; stability in commodities and a shortening in the difference between yields on government and corporate bonds. "Any or all of these factors occurring would help equities recover, in our view," Bloxham stated.

Other analysts expressed the hopes that the current bounce in the markets will extend at least into the New Year. "The downside risk on equity markets is now quite low and the technical rally we have had over the past few days could extend into January," Bob Parker, vice chairman of Credit Suisse Asset Management said.

"Very low interest rates and expectations of lower interest rates are driving investors, who are cash rich, back into equities," he told Bloomberg Television.

The Bloxham report points out that one of the key features in global markets this year has been the extent of government intervention. Already, the US government has spent $5.7 trillion, equivalent to the combined German and UK GDP, to stabilise its banking system.

There have also been unprecedented interest rate cuts and Bloxham state that global interest rates may touch record lows next year as central banks actively combat the unfolding recession.

It also highlights the collapse in input costs. The global commodity index is down 32pc from the start of 2008 and 49pc from its peak. "Although this is an indicator of economic stress, it also provides relief for consumers and manufacturers across the world. These three factors are inputs that could help stabilise the world economy in the next two years," Bloxham claim.

For the Irish economy in 2009, Bloxham expects economic contraction of 3pc and inflation at 1.8pc while unemployment is expected to rise to 9pc.

It identifies nine Irish companies for investors, businesses which it says have robust balance sheets, well covered dividends and convincing strategies. The companies are CRH, Kerry, DCC, Paddy Power, FBD, Origin, Fyffes, Total Produce and CPL.

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