Much has been speculated on what will happen to the Irish market once the single currency arrives, but if the views of Morgan Stanley Dean Witter (MSDW) analysts are accurate then Irish second-liners will have to get used to selling themselves to international investors if they want to be part of the big institutional investment portfolios.

Already, there have been clear signs of Irish institutions using the bull market to reduce their weighting of Irish stocks ahead of EMU and the move to a pan-European market where investors will focus more on sectoral rather than national investment.

There will be outflows of capital from equities in Ireland, France, Holland and Austria as investors move to a pan-European benchmark where the Irish market will account for just 1.2 per cent, says MSDW. But only Ireland will see a net outflow - $7 billion (£5 billion) - if new demand for equity is taken into account. A net outflow of £5 billion is about 10 per cent of the Irish market at its current valuation.

MSDW believes large capitalisation stocks will undoubtedly gain, but institutions will no longer need the smaller domestic stocks in their own countries. They will be able to pick and choose more liquid investments anywhere within the single currency area.

"Stock-picking is going to become more, not less important in the post-EMU environment," say the MSDW analysts. They say small and middle capitalisation companies will suffer from the rebenchmarking of European equities. So, companies that, by their very size, do not automatically find their way into investment portfolios will have to go out and sell themselves to the institutional investor.

Overall, the MSDW analysts are absolutely bullish about the prospects for European stock markets past-EMU. The single market will trigger stronger economic growth, interest rates will be lower, corporate taxes will fall while there will be an increase in mergers and acquisitions and share buybacks.