Liams Last Post : markets off to the races , Euro problems recede , Aer Lingus takes off against my expectations..

Good Afternoon ,

 

Markets opened sharply higher this morning , very little corporate news, there seems to be more of a belief that a political solution to the European crisis may come about. The Germans are still resisting and but the pressure on Spain seems to be abating and the market has had a decent bounce.

 

Irish Financials are rallying also now that the Budget is almost out of the way.  Various components of the Budget are being voted on but comfortably passing so all quiet politically, The news of Fianna Fail infighting is hardly worth mentioning.

 

There is life in the Irish Financials on the back of Bank of Ireland announcing an exchange offer for the sub debt, This if successful will lead to a capital gain of eur750m which is   sizeable step on the road to raising the extra capital required by private means. AIB is also miraculously hanging in there still on the belief that the Govt will inject fresh equity at 50c per share. Not exactly a credible reason for the stock to trade at these levels as the govt could always change the terms….

 

The Construction sector continues to feature in the year end rally stakes as this dog of a sector has a long way to go to catch uup in relative performance terms. Grafton has also been a beneficiary of the rally in the UK merchants. I still like this one and would urge that it be bought here.

 

Aer Lingus has taken me by surprise , I thought that there was enough taken out of peoples pockets in the Budget to really knock confidence  but the market is reacitn to the travel tax news which is a positive.. Ironically it might encourage Ryanair to increase capacity inDublin which would increase competition rather than increase traffic. Better for the consumer. Not sure how it will play out for the carriers. The plight of Ireland has some punters thinking that the state will sell the stake to Ryanair. All I can say is having met the Department of Transport last year , I think that they may sell the stake but I don't think they will sell it to Ryanair under any circumstances as it goes against a pretty wel thought out public policy position re competition and international connectivity.

 

The oils are also in favour even the tiddlers , an interesting sector with lots of newsflow to continue for the next few months… watch this space.

 

Abbey had results this morning ,  a true deep value plc.  Guidance that the outlook is quite bleak would upset most people but Charles Gallagher is a notorious bear. The news that they are commencing the last phase of a project in Kilcoole outside Dublin is an interesting counterpoint to the bearishness. Abbey are saying that House prices have continued to fall slightly in the UK is not new news either but it seems like a relatively steady state now .

 

Fitch news about the latest down grade of Ireland was entirely expected , the news that they now consider the outlook to be stable probably does reflect an inflection point at the bottom of one hell of a long fall. Well hopefully we are at the bottom and not on another ledge…

 

Have a good evening.

 

Liam

 

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

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