Ireland's stock market scaled fresh record highs today as upbeat news on one of Europe's fastest growing economies encouraged investors to buy into bank stocks promising healthy dividends and into growth stocks.
Ireland's ISEQ index has added 4.1 per cent in the first 10 days of this month after having already risen 3.5 per cent in January. It has outperformed the broader European market by about 3 per cent so far this year.
"It's still looking good relative to bonds. It's looking technically fine, and fundamentally it's not overvalued, so steady as she goes," said Mr Bernard McAlinden, head of equity research and strategy at NCB stockbrokers.
"We've seen good economic data on Ireland, which benefits the financial stocks," he added after January data showed that the annual rate of inflation had fallen by more than expected and was now in line with the rest of the euro zone.
Shares in AIB, Ireland's biggest company by market value, were up 1.3 per cent at €15.87 by 2:31 p.m., their highest level since April 1999.
The stock, which gained over 20 per cent last year, is up 3.9 per cent so far in 2005 after analysts and fund managers started the year by tipping bank stocks as an obvious place to invest for those looking to cash in on Ireland's thriving economy.
Bank of Ireland rose 1.8 per cent to levels not seen since August 2002, while Anglo Irish Bank also flirted with record highs and financial services group Irish Life & Permanent was 2.1 per cent stronger.
Given expectations that European interest rates will remain low in the near future, the dividends alone promised by such companies often look more attractive than the current returns on bonds.
The healthy prospects for the Irish economy also have encouraged some investors to switch out of safer cyclical stocks and into those seen as having strong growth potential.
Shares in bookmaker Paddy Power, which is expanding into the British market, were up 3.3 per cent at €12.65 , extending their gains so far this year to 17 per cent after a surge of 51 per cent in 2004.
Eircom, which wants to enter the potentially lucrative mobile market, gained 2.9 per cent to €2.11, its highest level since the company relisted last March.