A giant step for Iseq - with more to follow, say traders

'Let the good times roll" seems to be an appropriate expression to sum up the performance of the Irish market of late. Claire Shoesmith examines the reasons for the Irish stock market's lively start to the year.

However, if you speak to some of those involved, they would have you believe the more appropriate phraseology is, in fact, "wherever the big boys go, the Iseq will follow".

While champagne corks were popping when the Dow Jones broke the 10,000 barrier back in April 1999, traders and analysts were quick to downplay the Iseq's foray into the same territory earlier this week.

"Any moves upwards are obviously welcome, but whether the breakthrough will encourage more trades, I doubt it," said one Dublin dealer. He wasn't alone in his thinking.

After a rather hesitant start to the year - the index slipped 2 per cent in January - the Iseq on Tuesday poked its head above the 10,000 level for the first time. The stay was a short one as it slipped back to close at 9,981 after rising as high as 10,040. Still, even it if was brief, the step had been made.

According to one trader, the recent strong performance of the Iseq - it is up 6 per cent from where it started the year - can mainly be attributed to gains in US markets. "The Iseq was already doing well (it rose 28 per cent last year) and gains in the US have only helped this sentiment," he said.

So why the lack of jubilation here at home? According to one trader, the Irish market is a market of individual stocks that do their own thing, meaning that less trading is done at an index level than in some other European and US markets.

Moreover, in larger markets a certain proportion of trading is done electronically based on technical factors, meaning that shares are bought and sold on the back of indices or particular stocks rising above or falling below certain levels. Such activity is limited in the Irish market, and as a result the overall level of the index has less of an impact on investor sentiment. If technical trading does take place, it is more likely on a stock by stock basis rather than related to the overall index.

Still, gains are gains, however they come about, and it would be unfair not to lay any of the praise for the recent increases on the Iseq's own shoulders.

"It may just be a number, but it is one with a certain number of noughts, and these are always a landmark," said one trader, likening it to a race with mile markers along the route tracking the participants' progress. "It can be seen as something to aim for."

And aiming upwards is certainly something the Iseq has been doing recently.

This week's breakthrough came just two months after the index passed the 9,000 mark and on top of what was a very strong year last year.

Still, if you again listen to those involved in the market, things aren't going to stop here because if there is one thing about which traders, analysts and market commentators agree, it's that the Iseq is set to rise further.

Providing fodder for this argument are several particularly Irish issues, namely the strong sentiment surrounding the Irish banking sector, the expected earnings upgrades for the index's major companies and the release of the remaining SSIA (Special Savings Incentive Account) cash.

"The end is certainly not in sight," said one trader, adding that the banks in particular are in for a strong performance this year and given the fact that they account for almost half of the overall index, this is a good sign for the Iseq as a whole.

So while few traders were jumping up and down as the Iseq passed through the 10,000 barrier on Tuesday, there is no denying that the move shows the good times are indeed rolling in the Irish market.

With analysts forecasting gains of between 15 and 20 per cent in the Iseq this year based on current valuations and with the possibility of a significant upside to both earnings figures and price targets, there is no saying how long it may take the Iseq to climb the next 1,000 points.

As a result it is anyone's guess whether the 47 working days it took the index to make its most recent historical push will remain newsworthy or whether by mid-April we will have seen the Iseq push through another landmark that isn't really a landmark after all.