Manic Monday for investors as Irish shares plunge almost 10%

IRISH shares plunged almost 10% yesterday resulting in yet another manic Monday for investors.

The market was reacting to reports that the Government guarantee scheme could cost Irish banks anywhere between €500m and €2bn.

This was reflected with a sharp fall in financials as Anglo Irish Bank slumped 22% to €3.99 and Irish Life and Permanent fell 23% to €5. AIB and Bank of Ireland dipped €1.10 and 85c to €6.40 and €4.00 respectively.

The ISEQ Index retreated 390.76 or 9.9% to 3,552.9, the most in a week. The measure lost 49% this year.

It was down €15bn to €48.5bn yesterday from Friday’s close. However, it was still ahead of the previous Monday’s close when the value of Irish stocks slumped to €45.5bn.

“It’s not surprising with the concerns in the European banking sector that it’s a lot of the financials that are weakest,” said Stuart Draper, an analyst at Dolmen Securities.

The performance of Irish shares mirrored those across Europe where shares also dropped significantly.

Britain’s leading share index recorded its biggest one-day points fall with banking and commodity stocks taking a battering.

Markets were also reacting to Germany being forced to pledge €50bn to rescue Hypo Real Estate Holding and BNP Paribas taking control of Fortis.

In the US, the Dow Jones at one point had fallen by almost 800 points, but later recovered some of its losses to close down 369 to 9,955. Analysts warned to prepare for another week of turmoil. Goodbody chief economist Dermot O’Leary said fear continues to grip the markets with Irish banking shares posting the biggest drop in markets across Asia and Europe despite the Government’s blanket guarantee for banks.

“Further government intervention, including bailouts, guarantees and nationalisation can be expected,” he said.

Spokespeople from the four listed Irish banks said yesterday that there have been no recent changes to dividend policies.

AIB, which in August announced a 10% increase to its dividend, confirmed it made payments to shareholders as planned last week. The bank, however, said it could not comment if there were any changes being proposed going forward.

Bank of Ireland recently cut its dividend in half and a spokeswoman said no other changes are planned.

Anglo, which is in a closed period at present would not comment on the issue, while Irish Life and Permanent said no changes have been proposed.

Elsewhere yesterday, Elan, Ireland’s largest drugmaker, fell the most in two months in Dublin trading after Merrion Capital downgraded the stock to “reduce” from “hold”.

Elan declined €1.18 or 15% to €6.80, the most since October 1.

The stock has fallen 54% this year, giving the company a market value of €3.23 billion.

Also Greencore shares fell 27.7% after a major shareholder off-loaded a block of more than €20m shares.

Meanwhile, the Euribor rate, the interbank lending rate in the Eurozone, rose indicating that banks are still fearful about lending to one another.

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