Irish stocks could hit 8,500

THE Irish Stock Exchange could hit 8,500 by the end of 2006, according to a forecast by Davy Stockbrokers.

That is almost 18% higher than the current level of the index, Davy's head of research Robbie Kelleher says. He believes that the growth is possible if Irish companies meet his price expectations.

Davy says the Irish equity market seems set to finish the year on a strong note, having risen by over 5% so far in December.

"That brings the year-to-date gain to almost 17% and follows gains of 26% in 2004 and 23% in 2003. The index is now double the low point reached in early October 2002," Mr Kelleher said.

But Davy said the performance of the ISEQ in 2005 might come up a little short of that of the main benchmarks in Europe. The Morgan Stanley Capital Index (MSCI) Europe index is up 20% so far this year.

"If that gap is maintained through to the end of the year, it will be only the second calendar year since 1992 in which the ISEQ has failed to outperform the overall European market. The other year was 1999 when Irish institutions chose to diversify out of Irish equities into European equities."

Davy believe that even though the Irish market has moved ahead in 2005, shares do look a little undervalued.

Among the shares the broker is expecting to do were the main banks AIB, Bank of Ireland and Anglo Irish. Mr Kelleher says there is potential for the three bank to see their share prices rise by between 15-20% next year.

The broker is also expecting Ryanair and building materials group CRH to advance strongly in 2006.