€12bn wiped off value of Irish shares

CLOSE to €12 billion has been wiped off the value of Irish shares in the past month as mounting bad debts, linked to the housing sector in the US, continues to destabilise the markets.

Concerns about the Irish housing market have meant the ISEQ has been harder hit than most. So far the ISEQ has lost more than 20%, or more than 20bn this year.

Continuing bad news out of the US saw the European markets lose further ground yesterday, with the ISEQ 100 down more than 2% by late afternoon, representing a one-day loss of €2bn-plus.

Investors were unnerved by warnings of bad debts of $8bn-$11bn at Citigroup.

In Dublin, Allied Irish Bank lost 3.36%, or 55c, yesterday to close at €15.80. Anglo Irish Bank shed 4.49% or 50c to €10.63, while Bank of Ireland was down 2.7% at €11.50 as investors remain pessimistic about the outlook for the economy due to the housing slowdown. CRH has also been caught in the backwash of the housing sector and its shares fell by over 1% to 24.98.

C&C, the cider company, suffered a 3.62% loss on the day to bring its share price down to €5.15.

Food stocks bucked the trend with Kerry Group, Glanbia and IAWS all up.

Dollar weakness is adding to market turmoil, analysts said. As a result gold went above $800 for the first time in more than 25 years.

Mark O’Byrne, director, Gold and Silver Investments, said “with the continuing dollar weakness we are looking at gold going more than $1,000 an ounce”.

Market sentiment was hit further by Citigroup’s estimated bad debt exposure of between $8bn and $11bn to the subprime housing sector in the US.

A warning from investment bankers Morgan Stanley that the US and Japan will be forced to intervene to “prevent a violent correction” to the dollar added to the overall investor gloom, said Mr O’Byrne.

The dollar was trading at $1.4478 to the euro by late evening yesterday, marginally above the all-time low hit last week of $1.4518.

Any further bad news on bad debts could put the currency under severe pressure, analysts warned.

In a new move, Mr O’Byrne pointed out that the Revenue Commissioners has ruled that those saving for retirement can invest in gold bullion.