Start of war has helped Irish stock market recover

The outbreak of war in Iraq has been good for the Irish stock market, just as it has helped other equity markets around the globe in recent days.

Over the course of the week, the ISEQ index has gained close to 5 per cent as it joined in the relief rally that greeted the ending of the uncertainty over whether the US would go to war.

While the gains are not as large as those logged elsewhere, the generally defensive nature of the Irish market, with financial, food and pharmaceutical stocks constituting a large chunk of the index, means it has not suffered as much as other markets, such as London, in recent weeks. As a result, the rebound has also been more muted.

"It's been solid rather than spectacular," says Mr Stuart Draper, head of equity research at Dolmen Butler Briscoe.

The Irish market has also been helped by including very few stocks that are directly vulnerable to the effects of the war.

Among the handful that may be affected are Jurys Doyle Hotel Group and Gresham Hotel Group, both of which will feel the effects of the downturn in business and tourist travel.

But both stocks are already trading at low levels, suggesting investors may already be factoring in much of the bad news.

Ryanair has also suffered from poor sentiment toward the airline sector. However, analysts note that the war is likely to prove far more damaging to the flag carriers who ply the transatlantic routes and could even throw up opportunities for low-cost carriers like the Irish airline.

There has also been some concern among investors about the impact on Irish Continental Group (ICG) of higher oil prices although the drop in the price of crude in recent days had helped steady the shares.

Otherwise, the Irish market's main exposure to the war is indirect through its impact on the global economy. Its performance will be the key factor for the Irish market in the months ahead.

In the meantime, analysts have been reassured by the recent results season for Irish corporates, which they describe as robust with no real disappointments and the odd positive surprise to date.

Merrion Stockbrokers expects corporate earnings growth of around 12 per cent this year, down from previous forecasts of around 15 per cent, as companies face a less favourable exchange rate environment and the pensions deficit issue starts to filter through. "I'm still confident that the Irish market is a good place to be," says Merrion analyst, Mr Rory Gillen.