Since the end of February the ISEQ has lost close to €10.3 billion or 12% of its value as investors look elsewhere for better returns.
Stuart Draper, head of research at Dolmen Butler Briscoe says it is not as major surprise to him.
Most of the financials got hit yesterday, with AIB Group down from an opening price yesterday morning of €16.46 to €16.19.
Other stocks to suffer sharp setbacks included McInerney down from €8.69 to €8.46. Market favourite Ryanair also got knocked back from €5.86 to €5.68, while CRH saw its value dip from €20.61 to €20.17.
The decline of the past two months of over €10 billion has surprised some commentators, but Mr Draper believes that, to a significant extent, the once under-valued ISEQ, has been more than fairly valued in the past few years.
The Irish market is at the stage where a lot of what is available in Ireland is expensive by comparison with British comparisons.
In his view AIB at its current price does not look like good value compared with its counterpart in Britain such as RBOS and some other of the major financial stocks.
Mr Draper said, no matter what financial measure you use at this stage, a lot of Irish stocks are expensive by comparison with what is available elsewhere. He still thinks there is value in the Irish market, but investors need to be selective. By the year end he expects the ISEQ could be up at 6,500 from its current level of 5,973. At the end of February the ISEQ was at 6,798.
Davy Stockbrokers are more bullish. Robbie Kelleher believes that by the year end the Irish index should be up at the 7,000 mark.
Kelleher notes markets have been cautious over the past few weeks.
The FTSE Eurofirst 300 is just 2% off its 2005 peak and the bullish trend underway for nearly two years is still in place. While over 65% above its March 2003 low point it is 40% off the peak it hit in Autumn 2000 before the bubble burst dramatically in early 2001.
In the US, the downturn has been more severe with indices there off 5% from their earlier peaks this year.
The Dow in particular has been particularly poor with the index below levels achieved in 2004 at this stage.
Ireland’s performance has been one of the poorest in the past few months and is down over 10% from its 2005 all time high. Elan has been a big factor that cannot be ignored whose share price has fallen 85% since the Tysabri set back it suffered earlier in the year.
Overall Mr Kelleher is optimistic. There is too much pessimism about, driven by excess anxiety about oil prices which is now over $58 per barrel and giving rise to serious concerns over inflation.
However, Mr Kelleher says the pessimism is overdone.
The US economy is set to deliver strong growth and earnings estimates are broadly positive.
Markets will soon realise that the overall global outlook for 2005 is pretty solid despite the concerns over oil, inflation and some failure by US corporates to deliver in terms of earnings expectations, he said.