Brokers predict strong share growth

IRISH shares with a proven track record have the ability to deliver strong growth in 2003.

That optimism comes from Merrion Stockbrokers who maintain the ISEQ Index has the ability to grow 25% next year. The brokers argue that compared to the US, European and Irish shares are still on modest price earnings ratios of 11 times 2003 earnings.

Merrion’s Rory Gillen argues that shares are looking attractive on the basis of forecast earnings for the S&P in the US.

Projected earnings for the top of the range firms is up at 5.8% for 2003 against bond yields of 4.2% and while the signs of an economic upturn are still tentative the brokers are taking the optimistic view that stock markets are gearing up for a better 2003.

That view has to be set against a backdrop of global equity markets still between 40 and 50% of their early 2000 highs before markets went on their downward spiral.

Ulster Bank Markets, in its recent Outlook 2003, still urges caution however in terms of a global economic revival.

Risks are on the “downside” still with messages about where the US is headed in the short-term still very mixed, according to Niall Dunne, chief economist of Ulster Bank Financial Markets.

Nonetheless the bank’s take on the Irish economy is quite upbeat. Growth this year is close to 2% in GDP terms, according to Pat McArdle, chief economist of Ulster Bank Group. Next year the outlook is for better than 2% growth.

And the current rate places us on a par with the US, ahead of Britain at 1.5% and well ahead of the Eurozone at 0.75%.

Those figures are for Gross National Product which discounts the outflow of profits from the multinationals, which McArdle suggests is a better overall measure of how the economy is doing.

On that basis the GNP performance has dipped from 9.7% in 2000 to 4.6% last year and 2% in 2002.

Dan McLaughlin of Bank of Ireland disagrees with such a gloomy assessment and argues the sceptics have reverted to the GNP measure to support their own more pessimistic views of economic growth.

To add to the confused economic picture Merrion Stockbrokers says the GDP figure will be no more than 3.75% this year with the risks towards an even lower figure.

Mr McArdle agrees that the gloom and doom has been overdone.

Merrion suggests top Irish stock market performers such as Ryanair, Anglo, Irish Life & Permanent, DCC, IAWS, Grafton and United Drug will deliver good growth next year. Cyclical stocks such as CRH, Jurys and Kingspan should add to the overall improvement. While banks will do well in the low interest rate environment Merrion says other Irish shares have better earnings potential.