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Friday, 18th September 2020
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Foreign investment raises the stakes for Irish firms back

Since the adoption of the euro, the Irish investment market has become increasingly dominated by foreign investors. Conor O‚€ôKelly argues that the bearish outlook for Irish equities has forced many investors to come back to Irish brokers.
A large component of the Irish market has always been owned by overseas investors and this has increased dramatically following the adoption of the single currency. Overseas investors, particularly those from the UK and the US have always demanded analysis, service and execution of the highest quality. Investors in London and New York continue to set the global standards in the asset management sector and demand these exacting standards from their stockbroking counterparts.
Conor O'Kelly


The sector is continually changing with the emergence of specialist fund management styles, alternative investments, new technology, not to mention the impact of increased regulation on the industry. Irish stockbroking firms have moved continually in step with these changes which has meant constant education and investment in our businesses. The outcome of this exposure to an ever-changing and cutting edge client base has meant an extraordinarily high standard of service exists among the top three Irish broking firms.

Returning Irish emigrants from all over the world have augmented and added to the skill base at home. The Irish firms all employ personnel who trained in some of the biggest and best investment banks in the world. Having personally worked on Wall Street and in other parts of the world for many years, I can confidently say that the standard of service and talent in the Irish market place can and does compete with the best firms in the world.

Selling not buying
Another feature of a small market like Ireland is that stocks get sold not bought. The Irish market is less than 1 per cent of the European index, and getting an Irish stock on the radar of a large overseas investor is a very difficult task. International fund managers who buy Irish stocks have literally thousands to choose from. Succeeding to persuade investors to purchase Irish stocks has required high quality analysis, sales and execution capability from the Irish brokerage community.

Companies too have had to spend an increasing amount of time on investor relations. Company access has become a requirement in many investor decision making processes. It‚€ôs a dilemma for chief executives - should you spend more time out on the road meeting investors telling your story and making the investment case? Or should you be back at the ranch running the day-to-day operations? As the ownership of the Irish market becomes increasingly dominated by large overseas investors whose commitment to Ireland may be relatively fleeting, the pressure on the big three Irish brokers and the Irish plcs to deliver research, access, trading and execution of the highest quality will remain relentless.

International indifference
Irish companies are more recently learning the harsh lesson that international investment banks don‚€ôt care about this market. All the big international firms that have been courting Irish management during the good times have abandoned the Irish market at the first sign of weakness. Merrill Lynch, UBS and Citigroup have all been particularly bearish on the Irish financials.
Many Irish companies have been seduced by the international investment banks but in their haste to head up the aisle the companies forgot to ask their shareholders whose opinions they really value.

Local knowledge
Large global investors choose to use local brokers in a small market like Ireland for a good reason. Only the local brokers dedicate the time, resources and consistency that long term coverage of regional markets require. The big investment banks are not interested in Irish stocks because they are too small and do not pay enough fees to pay an average investment bankers bonus! It is worth noting that the big three Irish firms execute over 80 per cent of all trades on the Irish Stock Exchange.

Analysts in the international investment banks throw in the smaller and mid cap stocks for the sake of completeness but their sales force have zero interest in these stocks and the top analysts spend zero time on the phone to clients pushing those smaller stocks. The last six months have been a reality check in this regard and, as so often in the past, it is back to the local broking community to re-establish confidence in Irish equities with overseas investors. This will of course happen and new investors will emerge to take advantage of the undoubted value that currently exists in the market place.

NCB‚€ôs partnership with European brokers through ESN has brought a new dimension to analysing local research on a pan European sectoral basis. With the recent addition of Danske Markets, ESN now covers over 1,000 European stocks. This immense database is managed in Dublin by NCB and gives our analysts an ability to compare and contrast European stocks in a way that is unrivalled in the Irish market and has no doubt once again raised the standard for the market as a whole.
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