Magazine rows back on positive Ireland outlook

A leading financial publication which previously told international investors to pump their money into Ireland’s economic “bounce” is now telling them to take their profits and run.

Moneyweek, which describes itself as Britain’s “bestselling financial magazine”, said from an investment point of view Ireland had started to look “interesting” last year.

“Last September, with the Irish stock market down by almost 75% from its 2007 highs, we thought that the bad news could well be ‘in the price’. So we suggested buying shares in Magners and Bulmers Irish cider maker C&C Group. At the time it was a good bit cheaper than other UK brewers, so we reckoned it was looking quite good value.”

However, since then, Irish two-year bond yields have halved because of the European Central Bank’s longer-term refinancing operation which had provided a large chunk of euro to buy eurozone bonds. That was driving prices up and yields down.

Moneyweek does concede that Ireland has agreed a deal with the ECB to cut future financing needs and does agree that this country is in a far better position than Greece or Portugal.

But it also points out that Irish property prices are still falling, and that Ireland fell back into recession in the second half of last year.

It quotes Ben May of Capital Economics as saying: “Ireland’s domestic slump is far from over. Ireland looks set for a lot more pain before its fiscal and economic problems are fully resolved. We expect to see Ireland pushed deeper into recession.”

It says this would mean a lower tax take making it harder for the Government to meet its fiscal targets.

“In other words, don’t bet on those Irish bond yields staying at their current low levels,” said Moneyweek. “And if bond yields rise, the chances are that the ISEQ will drop right back again.”

Last month it emerged US mutual funds company Franklin Templeton pumped $2.5bn (€1.9bn) of its clients’ money into Irish government bonds.

The man behind that gamble, Michael Hasenstab, said: “Ireland’s example could offer other indebted countries some inspiration for solving their own crises.”