The revived interest in the so-called `old economy' banking and industrial stocks sent the Irish stock market to a new high yesterday, with the ISEQ Overall Index breaking through the previous high of two years ago to close up almost 2.5 per cent on 5,496.06.

But dealers cautioned against getting too excited about this latest landmark and observed that two of the biggest companies on the market, Allied Irish Banks and Bank of Ireland, are still at little more than half their level of a year ago despite some hefty gains in the past week's trading.

The main driving force behind the index's new high is the strength of Elan - the biggest company on the market, with a value of €12.7 billion and over 16 per cent of the index - and Eircom, worth €10.4 billion and making up over 13 per cent of the index. In contrast, the two big banks now make up just 18 per cent of the index, compared to over 30 per cent a year ago.

But with the FTSE up over one per cent, the Dow also firmer and the main technology indices lower, there were clear signs that the pattern of funds moving out of technology stocks into value stocks like the financials and industrials is being maintained. That pattern might not have been as pronounced yesterday as last week (when there were 5 per cent swings in the Dow and Nasdaq indices), but dealers said there was sustained demand yesterday for AIB and CRH, respectively the biggest financial and `old' industrial shares on the Irish market.

They also said there was scope for further gains by the three main banking shares, which have lost so much ground. But they warn that, while the mass movement into the so-called TMT (telecoms, media and technology) shares has been reversed, it will be some considerable time before the Irish banking shares regain their lofty positions of a year ago.

"The same old arguments are there: the belief among overseas investors that the Irish bubble is set to burst; too much lending by the Irish banks; and the fear of bad debts and a perceived tardiness in getting to grips with electronic banking," said one fund manager.