Irish shares ‘to lure investors’
The analyst singled out the main Irish banks and Ryanair as being of particular interest to investors. He also placed an overweight rating on the country.
“We took a view that Ireland went into the crisis early, took the medicine, and is probably going to be one of the early recovery stories,” said Andy Lynch, manager of the Schroder Euro Dynamic Growth Fund. This Schroder fund, valued at €176.4m, has lost 9% in the six months to June, compared with a decline of 8.4% for its benchmark.
“The Irish economy isn’t going back to the 7% growth, the Celtic Tiger rate, but the structural advantages are still there: low local tax rate, English speaking, open economy,” he said, adding that negative perceptions of Ireland have made valuations more attractive.
The fund has 4.2% of its money invested in Ireland, compared with the benchmark 1%.
This includes stakes in Bank of Ireland and Allied Irish Banks.
Mr Lynch said: “The need for both banks to recapitalise meant we knew we would be asked to buy a lot more shares but we went in with our eyes open.”
The Schroder investment in the Irish banks must be set against a warning from credit ratings agency Fitch that the banks may lose some short and medium term investors once the government guarantee underpinning the banks’ loan books expires.
The view from Schroder comes as a timely boost for the banks in the face of the Fitch investment warning.
Meanwhile, Ryanair has been another recent addition to the Schroder fund. The company’s decision not to buy 200 planes from Boeing and instead return cash to shareholders was key to Lynch’s decision. Ryanair will this year pay its first dividend since its flotation in 1997.
Mr Lynch also pointed to the company’s operational strengths: “You know what you’re going to get and you’re not surprised when you get it — a cheap flight that goes from A to B.”
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