Domestic bliss on the Irish market

By any standards, 1997 has been an extraordinary year for the Irish stock market, with the value of the Irish market soaring over 40 per cent and overseas and domestic investors ploughing huge amounts of money into Irish shares. And all the indications are that the roaring bull market is set to continue, with analysts thinking in terms of a further 20 per cent growth in the Irish market.

But last year was an extraordinary one for Irish fund managers and stockbrokers for reasons other than the remarkable rise in the value of the domestic market. For the first time, those involved in the market had to acquaint themselves with markets they previously had paid little attention to, and currencies they previously could ignore.

The Bovespa index in Brazil, the Korean won, the Sraits Times Index, all become additions to the lexicon of international investors, as one-by-one currencies and stock markets in the Far East tiger economies collasped. Throughout October and November, currencies in Thailand, Indonesia, Singapore and Korea all fell prey to the speculators - only the Hong Kong dollar remained immune albeit at the cost of a collapse in the stock market and fears that the bloated property market in the former colony would also collapse.

Initially, there were fears that the death by a thousand cuts on oriental stock and currency markets might lead to a severe downturn on North American and European markets. But the damage done to western markets proved to be short-lived, as investors eventually took the view that events in the Far East were largely self-contained and unlikely to impact unduly on the western economies. Whether that view is justified in the longer-term will be of major importance in how stock markets behave in the coming year.

On the domestic market, the rise in share prices was extraordinary, and the biggest gains were notched up by companies with the greatest exposure to the booming domestic economy. Second-line companies like Heiton, Readymix and Grafton - with their exposure to the construction industry - more than doubled in value, while banking shares benefitted from the buoyant lending market.

The financial shares, in particular, also benefitted from what was generally seen as a market-friendly budget, with the cuts in corporation tax and capital gains tax more than compensating from the decision to phase out tax credits on dividend payments. It was that market-friendly budget that finally drove the ISEQ Overall Index through the 4000 barrier, a level that many analysts thought was inconceivable at the beginning of 1997 when an end-1997 ISEQ of 3400 was the average forecast.

And for the first time in many years, there has been a resurgence on corporate activity on the Irish market, with a major merger in the food industry, two acquisitions of major financial services groups, and no less than 10 new companies coming to the market.

The Avonmore/Waterford merger to create Avonmore Waterford Foods was the undoubted highlight and means that two middle-sized foods groups have combined to create a £750 million market capitalisation company which will be the fourth biggest dairy company.

For many in the market, the takeover of Woodchester by GE Capital is a sad development. But, given Credit Lyonnais's needs, Woodchester's departure from the market was only a matter of time. Bank of Ireland's takeover of New Ireland and Unilever's buyout of the Lyons Irish Holdings minorities are in a different category. New Ireland and Lyons were public companies in little more than name and their departure does not result in any glaring gaps in the market.

Ten companies taking a listing in Dublin in a single year must be something of a record, and it is noticeable that not all of these are small, developing companies, but established, substantial and profitable companies like Ryanair, Galen Holdings and Iona Technologies. That is not to underplay the importance of smaller arrivals on the market such as BCO, Qualceram, Rapid Technology, Donegal Creameries and Marloborough International.

The expected arrival of possibly a dozen high-tech companies on the Irish market over the next couple of years also marks a sea-change in the attitudes of Irish fund managers who have tended to shun a sector that they did not fully understand. Now, stockbrokers are gearing themselves up for the influx of high-tech plc's and institutional investors are showing a distinct appetite for these stocks.

All in all, an exceptional year for the market - and one that has no doubt been reflected in the bonuses paid to the brokers and fund managers that populate the Dublin market.