Despite missing out on much of the recent post-war equity market rally, Ireland's economic outlook a...
Despite missing out on much of the recent post-war equity market rally, Ireland's economic outlook appears robust in comparison to its eurozone neighbours.
Over the three years to 30 June, in euro terms, the Irish Overall index returned -6.96%, significantly outperforming the Euro-Stoxx 50, which returned -49.27% over the period. In the 12 months to 30 June, the Irish Index delivered -7.28% against -20.34% for the EuroStoxx 50.
The Irish market has also outperformed since the start of the year, returning 9.02% over the six months to the end of June, against a 4.04% rise in the EuroStoxx 50.
Gervais Williams, manager of the Gartmore Irish Growth investment trust, says the Irish market has not been overly buoyant in recent months. Nonetheless he remains positive on Ireland going forward due to its low interest rates and progressive tax policy and says he is currently buying more there than he is selling.
'It had a reasonable first quarter but the second was a little disappointing compared to general global activity. Big Irish stocks such as Allied Irish Banks and Bank of Ireland have quite a defensive bias compared to other European financials.
'Investors have been buying the high alpha stocks and this has left Ireland behind slightly. However, there are good economic growth rates and companies are coming through with good figures and cash flow in the country,' he added.
Investment manager for Britannic Asset Management, Andy Killean, agrees the Irish economy is relatively strong and notes it has enjoyed a substantial financial boost because of the single currency. He says: 'Relative to the rest of Europe, it is doing well. The demographics there are positive as it has a young adaptable working population in comparison to other European nations. It did have a high interest rate environment but rates have come down in line with Europe. The country also has a very favourable tax regime and as a result many multinationals have moved there.'
The low corporate tax rate of 12.5% has been a massive boost for corporate activity in Ireland and has attracted companies such as Dell and Intel, notes Williams. He says: 'Investors will make money there in 2003. Inward investment has been substantial, with inflows coming from areas such as technology and pharmaceuticals. It has also become a large base for the offshore fund business.'
Killean says the Irish consumer is holding up relatively well compared to the rest of Europe but he would not describe sentiment as buoyant. The main threat to Ireland is a global slowdown but domestically it is well positioned, he adds.
Williams believes if there is any slowdown, Ireland is in a solid enough position to bear the brunt of it. He adds other eurozone nations such as Germany would suffer more from such an impact.
Killean notes there is a lot of share buyback activity going on with Bank of Ireland and Allied Irish Banks, which shows they are quite well financed.
Although inflation is high at 5% compared to the rest of Europe, Williams expects about 3% GDP growth there in 2003.
Benign tax rules in Ireland.
Interest rates at a low level.
3% GDP growth expected.
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