Investors raise questions about Sinn Féin’s advance

International debt investors have started to raise questions about the advance of Sinn Féin in polls ahead of the next election.

Market participants who spoke with The Irish Times about investors' perception of the Irish investment case said the matter was being raised in the wake of Syriza's election victory last month in Greece.

But this was far from becoming the dominant topic under discussion or the main concern for international investors. Perceptions on the whole were positive in light of the strengthening recovery and the steady reduction in the budget deficits, said participants in London, the US, Zurich and Dublin.

“On the political side things are more interesting for the first time in a while,” said Patrick Campbell, global analyst in London for Boston-based investment manager Eaton Vance. “For the first time, in Ireland specifically, you have to be cognisant of the political issue.”

Of Sinn Féin, he said: “Most of the policies are not very investor friendly, but it’s still early days so we don’t have a coherent platform. From the bond investor point of view, what would be of concern would be any talk of postponing debt repayments.

Talk of restructuring

“The main concern would be any talk of restructuring or renegotiating various bilateral or European bailout loans or any restructuring of current government debt.” Asked how significant an anxiety that was, Mr Campbell said: “It’s not a huge concern now but given the rise of anti-austerity and far-left or far-right parties in other countries, you have to be concerned.”

On the possibility of a political “read-through” from Greece to Spain’s election this year and the Irish election, UBS analyst Thomas Wacker said: “Probably this consideration is the main reason why the EU negotiation is so strict with Greece.”

Asked if the rise in support for Sinn Féin was a concern, Mr Wacker said: “From a credit angle it’s not really a big issue for us. The bottom line we’re focused on is the fiscal correction. For us the important point is to stay on the consolidation path.”

Davy stockbrokers published research yesterday in which the firm said it was not surprising that international interest “has begun to focus on the implications, if any” of the rise in support for Sinn Féin and Independents on Ireland’s recovery.

A report for Davy by political scientist David Farrell pointed to four potential scenarios after the election:

Steady state: some combination of established parties form a coalition;

The “Greek outcome”: newer forces of the left form a coalition;

Middle of the road: a coalition is formed between established parties and some elements from the left; and

Electoral uncertainty: where a minority and unstable government is formed.

“Professor Farrell deems the ‘Greek outcome’ as least likely given a range of factors, including voter conservatism; competition between left-leaning politicians; and the challenge for Sinn Féin and independents of translating strong support into seats won, amongst a demographic that is least likely to vote,” said Davy.

“On this basis Professor Farrell sees the most likely outcomes as being steady state [established party coalition] or middle of the road established party and left leaning (SF/Independents).”