Thursday 12 December 2019

Irish investments are best in world, says leading bank

Donal O'Donovan

Donal O'Donovan

IRISH investments are handing the best returns in the world to global money managers, according to new research from Bank of America Merrill Lynch.

In a report that is sure to delight the Government, analysts at the US banking giant say Irish government bonds have been the best-performing asset in the world over the past 12 months, overtaken only by Irish shares that have handed outsized returns to investors over the past six months.

The value of Irish government IOUs has increased by 19pc over the past 12 months, according to Bank of America.

The Irish bonds had traded at damagingly low levels in July last year, before the cut in the interest rate charged by the EU/IMF under the bailout.

Following the interest rate reduction, US investors in particular piled into the Irish bonds because they increasingly believe the national finances are sustainable.

"Bond yields" -- the return investors demand for owning the Irish bonds -- have crept up in recent weeks as the Greek crisis re-intensifies, but 10-year "yields" of 7pc are no higher than in January.

The big profits on Irish bonds have already been recouped though, with almost all of the 19pc return made between July and November 2011.

Since then, however, Irish shares have surged ahead, according to the research from the US bank.

Irish shares have replaced bonds as the best-performing assets in the world over the past six months.


Investing €100 in a mix of Irish shares would have netted a €15.30 return over the past six months -- a similar bet on Greek shares would have seen a €49.40 loss.

The biggest mover over the period has been Providence Resources, up a hefty 188pc after striking oil off the Cork coast.

The likes of Kerry Group, Kenmare, Smurfit Kappa and Paddy Power are also all up significantly since the start of the year.

Bank of America said Irish assets were booming because of the political response to the economic crisis.

"The Irish restructured debt, recapitalised banks and voted for regime change (austerity)," the bank said. "Indebted countries that fail to implement fiscal contraction will see markets do the job for them."

Despite the strong showing, Bank of America believes investors should steer clear of all euro area shares until there is a clear plan in place to manage the Greek crisis.

"Without common-sense fiscal policy that allows the periphery to refinance debt at reasonable rates, European equities should not be owned."

Irish Independent

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