Davy predicts ‘significant’ equity gains in coming year

ONE of the country’s leading stockbrokers Davy is predicting “significant gains” for major equity markets in the 12 months ahead.

The forecast is contained in the first edition of its new quarterly research bulletin called the Alpha Generator, aimed at domestic and financial institutions.

Donal O’Mahony, the group’s global strategist, said the indicators that forecast the global slump in early 2007 are turning positive and there is evidence of a major change in “sentiment” starting to take hold.

Though the focus of the new report is the global market, O’Mahony said “this is a rising tide story that can lift the Irish economy as well”.

Davy has already forecast 4% growth for 2011 on the back of this changing global trend.

Mr O’Mahony attributes the more positive mood “to the unprecedented policy interventions of the past 12 months” that has seen the US print $1.75 trillion in new money and which has pumped $750bn in a stimulus package into the economy.

The ECB and other central banks have all supported their economies with similar action and the net result is the slow but definite shift in global sentiment, he said.

As a result global economy is on the brink of a more positive rebound than what’s being anticipated by “both public and private forecasters” at this point in the global economic cycle.

The trough in equity markets was reached last March and by end June the global economy had also bottomed out, he said.

As a result the “green shoots” of recovery being hinted at for some time are now heading “towards full bloom”, he said.

Economies are starting to see the re-emergence of capital investment as confidence starts to grow again as the economies of the world move past the global credit crunch. It is clear also that in the case of the banks confidence is also returning.

O’Mahony believes this is so because central bankers tackled the bad assets issue, allowing them to repair their balance sheets and hopefully to get back lending in the period ahead.

NAMA has tackled that issue for the Irish banks and he agreed “absolutely” with the claim of Finance Minister Brian Lenihan in the Dáil on Tuesday that the bad bank will return €4.8 billion to the taxpayer when it is wound up in 2020.