Stock exchange must ready itself for harmonisation

Developments in the euro zone over the coming years will present both major opportunities and major threats for the Irish Stock Exchange and the companies quoted on it, the chief executive of the exchange has said.

Mr Tom Healy, addressing the Humbert Millennium Summer School in Ballina, Co Mayo, said it was arguable that much of the often pessimistic speculation about the outlook for the Irish and other small markets in the euro zone was ill-informed.

It was often said that only a few Irish stocks would make the grade and the rest would depend more and more on private, domestic investors, he said. However, the "continued success of the Irish market in an international context was going to depend on appropriate responses from the exchange, brokers and companies".

The future would see two broad trends in the euro zone, he said. Fund managers would spread their investments across the zone and Germany, France and Italy would begin to build up their pension provision, which was low relative to Britain, the Netherlands and the Republic. Increasing investment by pension fund managers from Germany, France and Italy was likely to create pressure for investments in other than a limited number of European, blue-chip companies, he said. This would create opportunities for good medium-sized companies to appeal to euro zone investors.

Mr Healy said broking firms and companies must make a "serious commitment" to accessing euro zone markets. "Even a modest inflow of euro zone funds could have a dramatic impact," he said.

The major European stock exchanges were moving towards facilitating a common European equity market based on interlinked electronic trading systems and harmonised trading rules and regulation, he said.

"It will likely be late 2000, or 2001, before this harmonised and linked market in blue chips begins to become reasonably effective, but the Irish Stock Exchange will have to be positioned to embrace it well before then."

Mr Healy said that, following the flotation of Telecom, shareownership among the general public was now higher than in the United States. The Irish rate of participation, with half a million share owners, is 20 per cent of adults, which compares with a rate of about 14 per cent in the US. In the euro zone, Finland and the Republic probably have the highest rates of share ownership, he said. However, the British rate, at 25 per cent, is significantly higher than the Irish rate.