Election 2020: Irish stocks - 'Anything with a property angle is getting hit'
Shares in the Irish housebuilders and the banks tanked, but the cost of borrowing for the Irish State remained at record low levels, as markets reacted to the sweeping electoral gains of Sinn Féin.
“Anything with a property angle is getting hit,” said Richard Flood, investment manager at Brewin Dolphin in Ireland, as investors scrambled to anticipate policy changes for any potential government involving Sinn Féin.
However, the extent of the slide in domestic-facing shares was hard to explain and looked overdone well ahead of the outcome of the talks to form a new government, he said.
The sharpest falls suffered by the two stock market-listed housebuilders, Cairn Homes and Glenveagh Properties, was “slightly paradoxical” but the slide in the bank shares and for AIB, in particular, because it is 70% owned by the State, comes as investors fear that any future Sinn Féin legislation will turn the screws on the lenders and affect bank dividends, Mr Flood said.
Sinn Féin’s manifesto talked in almost “emotional” terms of seeking to punish the banks, he said.
Cairn Homes and Glenveagh had the largest losses among Irish shares, with sharp declines of as much as 11%, as investors reacted to any potential new vacant site taxes.
Ires Reit, which invests and rents apartments, fell by 7%
Shares in AIB and in 14%-government-owned Bank of Ireland ended 5.5% and 8% lower. Permanent TSB — which is 75% owned by the State — fell almost 4%.
AIB appears set to continue plans for sales of distressed residential mortgage loans, with transactions in train for two groups of loans, called Project Oak and Project Iris.
It comes despite the finance spokespersons of both Fianna Fáil and Sinn Féin having promoted bills over banking legislation in the past.
Project Iris is AIB’s proposed sale to a charity to ensure people stay in their homes, in which one of the two shortlisted charities includes debt advocate David Hall.
An AIB spokesman wouldn’t comment on any loan sale plans and said the bank had severely cut its non-performing loan burden to €4.5bn by working with customers as well as by means of loan sales.
The yield on the 10-year Irish bond traded little changed at minus 11 basis points, near to its record low level of last August.
Jack Allen-Reynolds, senior Europe economist at Capital Economics in London, said that political uncertainty was unlikely to weigh on Irish economic growth, although fiscal measures of public spending and tax cuts was likely to be loosened by a new coalition government.
In the long term, a potential push for Irish reunification under a Sinn Féin and Fianna Fáil-led government would have implications for the State’s public finances, he said.
