Iseq set for fourth-biggest annual drop in 25 years

The Iseq index of Irish shares is set for its fourth-worst annual performance in 25 years, with baked goods maker Aryzta, homebuilders and banks among the main local decliners, as global equity markets head for their biggest slump since the financial crash a decade ago.

A 2.5 per cent rally by the Iseq on Friday curbed the index's 2018 drop to 22.4 per cent, with only a half day of trading on Monday before the markets close for the year. Wall Street drove a spike in volatility in a shortened trading week across international markets, as investors weighed risks including Brexit, US-China trade talks, and an ongoing standoff between US president Donald Trump and Congress over the federal budget.

Debt

Swiss-Irish group Aryzta was the worst performer on the Iseq this year, plummeting by 87 per cent, after management raised more than €740 million through a share sale to help lower the embattled group’s debt levels and fund a restructuring programme.

Housebuilders Cairn Homes and Glenveagh Properties each lost 44 per cent and 42.3 per cent of their values, respectively during the year, as followers of the sector marked the two companies down in line with British peers, which have been hit by Brexit concerns. Both have also been affected fears of rising construction costs across the industry and slowing Irish house price inflation.

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Glenveagh’s stock hit an all-time low of 66c on Friday, some 34 per cent below its October 2017 initial public offering (IPO) price.

Banking stocks also weighed heavily on the Iseq 20 index of large-cap stock in 2018, with AIB falling by more than 33 per cent and Bank of Ireland losing 30 per cent of its value, in line with the wider sector across Europe as investors fretted about a variety of issues, including Brexit, the election of an anti-establishment government in Italy, and prospect of official euro-zone interest rate rises being pushed out to late 2019, or 2020.

Margins

Banks typically boost their lending margins, and profitability, as central bank rates increase.

Total Produce posted the second-worst showing on the Iseq 20, falling 45.3 per cent, with its losses accelerating in November as the fresh produce group guided down analysts' earnings estimates as adverse weather in 2018 affected supply and demand for its products and led to lower pricing.

Only two Iseq 20 stocks advanced in 2018, with nutrition group Glanbia jumping almost 10 per cent as investors bought into chief executive Siobhan Talbot's medium-term growth targets that were outlined in May and as its earnings were boosted by a strengthening US dollar. Kingspan eked out a 1.7 per cent gain.