The Week In The Markets

For Irish institutional investors, the past few days' turmoil on the markets could hardly have come at a worse time.

With the single currency looming in little more than four months time, Irish institutions are natural sellers of the local market as they move to bring their portfolios into line with the cross-border sectoral approach that will dictate investment policies post-EMU.

The theory is that Irish institutions will no longer need to hold a high weighting of Irish equities and the logic dictates that Irish weightings should be reduced and continental weightings increased to reflect the new order.

The problem for the Irish institutions is that, irrespective of the Celtic Tiger argument, few overseas investors are currently willing to increase their exposure to any market, even one like Dublin where events of the past week have sent some Irish stocks down to levels where they are, by any standards of valuation, looking cheap.

When CRH was sold down to a low of 700p in yesterday morning's panicky (and panic was all it was) dealing, it put Ireland's leading blue-chip industrial on a forward earnings multiple of less than 13 while there was also some chunky selling of other blue-chips.

Nervous private investors also got in on the act while some institutional investors, still sitting on some fat profits from what remains of the bull market, were getting out of equities before they fell even further.

And for those who might smugly believe that the Irish economy is somehow insulated from international events, one dealer pointed to the Fruit of the Loom rationalisation as an indication of how international events could begin impacting on Ireland's industrial base and the overall economy.

The current volatility of markets makes it a perfect environment for traders who have the nerve and the money to take a chance. But for other investors - both the institutional and private variety - it is not a market for anybody of a nervous disposition.

One thing seems pretty certain, those forecasts from some analysts of the ISEQ hitting 6000 by yearend will need to be drastically revised, and even the 5500 ISEQ forecast from some of the more cautious analysts seems pretty ambitious. If the Irish market was able to operate in a vacuum, those forecasts might seem reasonable, but in the current state of fragility...?

And for some of Ireland's corporates thinking of capitalising on the high p/e that prevailed until this week to go public, some serious decisions will need to be taken. Certainly, the forecast flood of Irish high-tech companies onto NASDAQ over the next year or two might now turn into more of a trickle, as aspiring floaters look at the battering the likes of Iona, Esat and CBT took on the New York market this week.

And for the likes of C&C where parent Allied Domecq will decide in the next few months between a trade sale or a flotation, the weaker the market goes the more likely it is that C&C - or its component parts - might be sold to trade buyers. A couple of weeks ago, it looked certain that C&C would be floated early next year. Now, the market is not so sure.