Economy shows positive signs for year ahead

IRISH equities got the thumbs-up from one of the country's leading investment management firms yesterday. Hibernian Investment Managers (HIM) said it was upbeat about the prospects for the Irish economy in the year ahead and that it would invest a greater portion of its funds in Irish stocks than most of its competitors.

The company also tipped high-yielding stocks that paid bigger dividends as an attractive home for investors.

"Ireland ticks all the boxes as far as international investors are concerned," said HIM chief investment officer Roy Asher. "Our economy is growing three times faster than that of our European counterparts, supporting double-digit earnings growth in the Irish market."

Mr Asher said Irish stocks were still relatively cheaper than American or European stocks, despite significant increases in Irish equity prices last year.

The firm favoured CRH, Ryanair, Kingspan and Grafton, as well as high-yielding international stocks such as drinks giant Diageo, Bank of America and industrial company Caterpillar.

Speaking at the launch of the firm's investment outlook for the year ahead, Mr Asher said the risks now facing investors were much the same as last year. These included a falling dollar, rising oil prices, a housing market bubble and increases in debt and inflation.

The company said the residential property market had become less attractive and that the so-called "smart money" was beginning to diversify into other assets, such as commercial property and equities. HIM had little enthusiasm for bonds, however, predicting that the period of strong growth would soon come to an end.

HIM senior economist Fiona Hayes said net rental yields in the buy-to-let market had slowed and were now teetering below 1% in most sectors.

But it would take a hike of around 3% in interest rates to cause yields to fall below zero, she said. Residential properties were now trading at price-earnings ratios of almost 30 times and were delivering "quite a poor return" when compared to other forms of investment, the firm said.