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Friday, 8 February, 2002, 09:17 GMT
Blow to Irish market
AIB's Dublin headquarters
The AIB revelations are the latest stock market blow
For a normally quiet market, the first week of February has proved to be extraordinarily eventful for the Irish Stock Exchange.

The Iseq index typically takes its lead from other markets, but this week two of its largest companies have dictated share movements not just in Ireland but also elsewhere.

Elan Pharmaceuticals has fallen from its position as the biggest Irish company by market capitalisation following news that investors have filed lawsuits, alleging misleading accounting practices.

No matter how well you explain the intricacies of two different issues, there is always this aftertaste

Kevin McConnell, Bloxham Stockbrokers
Allied Irish Bank - the next biggest company - fell from grace on Wednesday morning as it told investors of a suspected $750m fraud.

"It is particularly annoying that these two quite unrelated events in two very different companies happened in such a very short period of time," Tom Healy, chief executive of the Irish Stock Exchange, told the BBC's World Business Report.

"As far as we are concerned there isn't anything basic wrong with the market."

"The regulatory regime in question there [with AIB] in fact is the United States one," he added.

Investor blow

The bulk of Elan's shares are traded in New York but the company has been a key driver of Irish markets in the past.

Once worth 22bn euros and accounting for about 20% of the Irish market, it now accounts for about 7%, with a market capitalisation of about 6bn euros.

With few liquid stocks - that is stocks that are heavily traded and easily bought and sold - in Ireland, retail investors don't have too much to choose from.

Merrion Capital's Seamus Murphy said: "To a market seen as a broadly defensive market, certainly it will undermine confidence in the market in the near term."

"It is a blow to the retail investor. Allied's retail base is about 10%," he added. "Pension funds in Ireland would represent about 15% of Allied's equity base as well."

The timing is "exceptionally unfortunate for the profile of the Irish market," Kevin McConnell, senior equity analyst at Bloxham Stockbrokers agreed.

"No matter how well you explain the intricacies of two different issues, there is always this aftertaste," he added.

Irish share buyers

In the past five years, Irish investors have been increasing their holdings in the stock market as a percentage of their disposable income, Mr McConnell said, pointing to sales of shares in Irish Permanent and Eircom as triggers for this.

Some say the impact on the market will be muted by investors' increased willingness to view stocks by sector rather than by country of origin.

Davy Stockbrokers' Robbie Kelleher pointed out that "people don't tend to look at Ireland per se. They are sector based."

Tom Healy, chief executive Irish Stock Exchange
"We have had two exceptional situations in a very short period of time"
The BBC's Mark Gregory
"There is no suggestion of high level fraud"
See also:

05 Feb 02 | Business
Irish drugs firm hit by lawsuits
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