Something to be cheery about
The results of this year’s FINANCE Stockbroking survey illustrate a significant advance in a process that has seen greater impact in other Irish financial services sectors - the internationalisation of markets.
As four of the leading stockbrokers note in articles in this issue, 2007 has been a year of further consolidation with institutional investors in the ‘Irish’ market further diversifying their holdings. The past year has seen the Irish market lashed in particular by the storms of the credit crisis, reflecting not so much Ireland as ‘a sell’, but the Irish stock market as one with an exceptional involvement and reliance in sectors that have been affected by the credit crisis - property and financials, and indeed construction, and building materials.
The Irish market, of course will recover, although, at the time of writing as the year end draws to a close, many of the more successful winners and analysts recognised in this year’s survey would caution investors that the time is still not right to venture into the market - at least for those contrarians who wish to execute a perfectly timed intervention at the bottom of the cycle. To judge by the nature of this (historically unique) credit crisis, there is still a distance to travel before all the bad news on credit is extracted from banks and institutions, and ultimately, borrowers, who don’t have a great incentive to part with that bad news.
It is clear, though, that when the market recovers, the proportion of Irish equities in Irish institutional portfolios will be seen to fall further. That is no bad thing - globalisation should be reflected in the portfolio allocations of Irish pensioners and investors.
Globalisation has served the rest of the financial services sector well - as our page 1 story of Citi’s private equity venture shows.
Another page 1 story - on the OECD’s December ‘Economic Outlook’ - illustrates again the extent of the Irish economy’s reliance on construction. The 30 member organisation’s prescription for Irish Government action in curbing excessive current expenditure is to be commended, and would be in line with the stance recommended in this publication, and in our October survey of Budget policy by the country’s leading finance sector economists.
If we take as evidence the 2008 Budget speech, the recent decision by Finance Minister Cowen to initiate a root and branch review of public expenditure in the early months of the new year, the announcement of a review of the regulatory regimes in Ireland in ‘network’ parts of the economy, the stamp duty reforms (most notably the reasons given for that reform - the encouragement of labour mobility) and, above all, the decision to defer politicians’ pay rises for a year, December has been a very good month for economic policy, and for the economy’s prospects in 2008-9. Now that’s something to be cheery about as we face into the new year. |
