Ireland on course to regain its AAA rating status
In its outlook for 2015, the country’s largest stockbroking firm, said Ireland’s age of austerity had ended, “giving way to a more neutral and more sustainable budgetary stance”.
The rise of Sinn Féin and other left wing parties is not a cause for concern among international investors buying Irish government debt, according to Davy global strategist, Donal O’Mahony.
This could change closer “to the political hustings,” said Mr O’Mahony. However, Ireland has ratified the fiscal stability treaty, which means governments will be bound by obligations, he said.
The 7.7% GDP growth rate posted over the second quarter of this year has been artificially boosted by ‘contract manufacturing’, said chief economist Conall MacCoille. Some of Ireland’s largest multinationals are outsourcing manufacturing to other jurisdictions, although booking the sales in Ireland, which is propping up GDP figures.
However, Mr MacCoille said he expects GDP to grow 5% this year and 4% for 2015. Sectors hardest hit over the past few years like construction, retail and tourism will continue to recover.
However, bank lending is constrained by high levels of household debt. The housing market remains dysfunctional with the supply of housing undershooting demand. He urged the Government to lower the cost of construction and speed up the process of resolving mortgage arrears.
Head of research Barry Dixon picked CRH, Wolseley and Smurfit Kappa as his top three stock picks for 2015.
CRH was picked based on its valuation not reflecting the potential for management-driven returns enhancements. It has the strongest cashflow and balance sheet in the sector, which will drive underlying profitability and returns.
Wolseley’s exposure to the rapidly recovering US market will drive earnings, said Mr Dixon.
Smurfit Kappa can now direct resources to mergers and acquisitions, dividends and or share buybacks.
