Investment analysts in Asia bullish on Irish equity market

Tue, Aug 20, 2013, 01:00

Ireland is very far away for most investors in Asia, and most of the headlines have been negative in recent months, but there are signs of a growing confidence about Ireland’s prospects among some of the region’s opinion makers.

Sean Darby, chief global equity strategist at Jefferies in Hong Kong, is bullish on Ireland. While he believes Ireland has been largely forgotten by investors, he points out the Irish equity market has been quietly outperforming over the last quarter, while house prices have been rising over the past year for the first time since early 2008.

“We initiated with a bullish view on the Irish equity market on February 19th. Ireland has seen its competitive position improve with the country running both current account and trade surpluses while the surplus of Dublin homes for sale appears to have shrunk,” he wrote in a research note.

He tells his clients the decline in residential property prices by 50 per cent from their peak has meant the overhang of properties has been cleared, and the number of new homes in the second quarter also rose modestly, the first time the quarterly figures have increased on an annual basis since December 2006.

The rise in house prices, which coincided with the announcement by Green Reit Plc it was seeking to become Ireland’s first Reit (real estate investment trust) through an IPO targeting commercial real estate in the Dublin area, was a cause for optimism.

He also mentions that the KBC Ireland/ESRI consumer sentiment index rose in June to its highest level since late 2007.

“Thirdly, in a sign that some of the worst of the lending problems are behind them, Bank of Ireland signalled it wanted to buy back €1.8 billion in preference shares in the bank. The news followed the announcement that pre-tax losses in the first half of 2013 have more than halved and net interest margins have also improved as Ireland’s biggest lender nears profitability,” he wrote.

And finally, international milk prices climbed to a record high in April following the worst drought in 30 years in New Zealand, the world’s top producer, which is good news for Ireland as we export 80 per cent of all dairy production.

He is bullish on the Irish stock market because companies are still experiencing upward revisions to earnings and target prices, while balance sheets and credit quality have dramatically improved in the last two years.