Ireland ETFs: Ireland’s economic turnaround gathering momentum

Mar 19th, 2012 | By | Category: Equities

Ireland’s ability to begin reducing its deficit and restore growth has enabled it to separate itself from European countries with more troubled economies such as Portugal and Greece, according to Desmond Mac Intyre, chairman and chief executive officer of Standish Mellon Asset Management, part of BNY Mellon.

Ireland ETFs - Ireland’s economic turnaround gathering momentum

Ireland’s economic turnaround is gathering momentum, as Michael Noonan, Ireland's Finance Minister, bullishly suggests economy could “take off like a rocket”.

Among the reasons for optimism cited by Mac Intyre were the reduction of the government deficit below 10% in 2011 and the estimated expansion of its economy by 0.9% in 2011, the first growth since 2007.

“Standish expects this growth to continue into 2012, with medium to high expectations ranging from between negative 0.1% to positive 1.0%,” he said.  “While the country is clearly not yet firing on all cylinders, there is likely to be growth nonetheless.”

Other positive signs include exports rising above previous peaks, the savings rate of approximately 8%, and the success by government and business leaders to encourage foreign direct investment, he said.  Mac Intyre added, “Standish views foreign direct investment as a key building block behind Ireland’s success, its quest for job generation, and its export-led recovery.”

While Mac Intyre noted that unemployment remains too high and further reductions are necessary in the budget deficit, he said Standish was optimistic that Ireland will overcome these challenges.  He added, “It is our view that the Irish economy has the ability to grow out of recession.”


iShares MSCI Ireland Capped Investable
Market Index ETF

– Provides exposure to the performance of equities
in the top 99% (by market cap) of the equity
securities listed on stock exchanges in Ireland

– Currently has 21 holdings ranging from building
materials giant CRH, to bookmaker Paddy Power
and dairy products company Glanbia

– Physical replication with full transparency
to underlying holdings

– Listed on NYSE Arca, eligible for SIPPs

– Total Expense Ratio 0.52% pa

Mac Intyre’s positive outlook follows bullish comments by Ireland’s Finance Minister, Michael Noonan, who suggested the economy was poised to “take off like a rocket” if global economic growth picks up.

The Irish government predicts that GDP will expand about 2% next year (4% including inflation), and that nominal growth could increase by as much as 6% if the global economy grows faster than anticipated.

While the minister’s optimistic projections are towards the upper end of consensus forecasts, Ireland’s medium-term outlook is undoubtedly improving thanks to an “internal devaluation” of 16% since the onset of Europe’s financial crisis by pushing down labour costs.

With the European Central Bank now pumping in liquidity via its LTRO programme and fear in the European debt markets easing, growth prospects are likely to improve in coming months.

Noonan added: “We have become so competitive in this period of austerity that if the world economy picks up, then Ireland can take off like a rocket. We may have very strong growth rates in the next couple of years.”

For investors seeking an investment play on Ireland, they are limited to just two ETFs, the Irish Stock Exchange-listed ISEQ 20 ETF (IETF) from NCB and the NYSE-listed iShares MSCI Ireland Capped Investable Market Index ETF (EIRL).

The ISEQ 20 ETF tracks the Irish Stock Exchange’s ISEQ 20 Index of leading Irish quoted companies. This index comprises 20 of the most liquid and largest market-capitalisation securities listed on the Irish Stock Exchange. The fund has a Total Expense Ratio (TER) of 0.50% and trades under the ticker code IETF.

The iShares MSCI Ireland Capped Investable Market Index ETF (EIRL) tracks the MSCI Ireland Investable Market 25/50 Index. This index is a free-float adjusted market-capitalisation weighted index designed to measure the performance of equity securities in the top 99% by market capitalisation of the equity securities listed on stock exchanges in Ireland. The fund has a Total Expense Ratio (TER) of 0.52% and trades under the ticker code EIRL.

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