CONTINUED selling of Eircom shares by overseas shareholders and a reluctance by Irish institutions to buy the shares conspired to drive the telecom group's shares down to yet another post-flotation low of €3.67 (£2.89), a fall of 13 cents on the day.

Dealers see little sign of a let-up in the negative attitude towards Eircom shares until Irish institutions - the natural buyers of a stock which makes up 12 per cent of the ISEQ Index - return as buyers. As things stand, by not having their full weighting of Eircom shares, Irish institutions are not suffering the full effect that the slump in the Eircom share price has had on the index since the share joined the ISEQ at €4.91 on July 21st. For that reason, they are in no immediate rush to increase their current shareholdings in Eircom.

It is understood that, since the flotation, Irish institutions have been net buyers of 140 million Eircom shares while 12 per cent of the 574,000 private investors sold their shares in the immediate aftermath of the flotation.

One Irish fund manager said: "As the share price has come off, most Irish funds have been happy to be underweight in Eircom. Some are probably testing the water as the stock is being sold by overseas investors but nobody really has a clue when it's going to reach bottom. Nobody wants to step in front of a moving train," he said.

He added, however, that when the share does reach bottom very little stock is likely to be on offer. "We'll then have the technical situation working in the opposite direction and the share will probably spike sharply upwards from its low point. Everybody will take the same view at the same time and go into the market looking for stock that isn't going to be there in any size."

He said that one of the major problems is the scepticism among international investors about the strength of the Irish economic story. The Republic has not being getting the credit it should be getting and that is affecting the perception of international investors.

The recent slump in the group's share price is not unique in the European telecommunications sector. At €3.70 (£2.91), Eircom might be 26 per cent of its €5 (£3.94 high) but it is just over 5 per cent off the €3.90 (£3.07) flotation price.

That 5 per cent fall since the July flotation compares with a 4 per cent fall by Tele Danmark, 3 per cent by Finnish group Sonera, 6 per cent by KPN, 6 per cent by Telefonica, 15 per cent by Telecom Italia and 18 per cent by British Telecom over the same period.