THE Irish market reached a succession of new records this week, buoyed by enthusiasm for Bank of Ireland's £600 million takeover of Bristol & West. Although it eased a little on Thursday, buyers flooded back at the end of the week.
Players said "weight of money" was supporting the market. The virtual absence of fund-raising in the first quarter, strong institutional cash flow and the injection of funds from the Flogas and Inishtech buyouts have combined to boost the volume of cash looking for a home.
Many investors are reluctant to "sell stock which they feel may be "difficult to reacquire, supporting the view that the current bull market will continue.
However, this week Friends Provident also warned that now could be the time to sell. The pension manager, part of the Europe-wide Eureko group, pointed out that institutional cash holdings are at a low of 2.8 per cent, which usually suggests the market is due for a sharp correction in the short-term.
Foreign funds poured into the bond markets with the National Treasury Management Agency raising almost £625 million over the week. The agency raised funds from the market on three days running and announced a new five-year bond yesterday, underlining the buoyant demand for Irish gilts from abroad.
The surprise half-point cut in German interest rates also dominated sentiment towards the end of the week.
Irish bonds outperformed European markets while German, British and US funds are reported to have poured hundreds of millions into the market over the week in "convergence trades". Domestic institutions were also involved with one player said to have invested over £100 million on Tuesday.
Financials saw some heavy activity, boosted by Bank of Ireland's acquisition. The bank saw heavy gains on the announcement of its acquisition of Bristol & West but drifted back slightly on Thursday. It remains to be seen whether all the good news from the acquisition is priced into the share.
Although AIB also benefited from improved sentiment in the sector, Bank of Ireland has been catching up in terms of market capitalisation. The gap has now closed to around £100 million, threatening AIB's much-cherished position of largest Irish company.
Interest rate cuts in banks and building societies pushed financials higher overall yesterday.
Fyffes saw heavy activity, with a big deal involving four million shares at 108p on Wednesday hitting its price. Sentiment recovered later in the week.
Mid-week the focus switched to industrials after results from JS Corp in the US. The US paper sector rose 4 per cent overnight, after Merrill Lynch announced it was bullish on the sector. Some dealers suggested that Smurfit may have turned the corner although it lost some of its gains later, in the week.
CRH reached new highs last week, with speculation that the cement company is close to some British and European acquisitions. CRH also benefited from a sector re-rating. NCB is extremely bullish about the company and a research note at the beginning of the week suggested that 600p was a reasonable target for the shares.
