Among the hardest hit nations by the recent financial crisis was Ireland, which saw its economy crumble as financial markets fell apart in late 2008. The country was the first in the EU to officially enter a recession and has been battling debt troubles, high unemployment, and GDP contraction ever since. However, Ireland was quick to take its austerity medicine and looked to try to be one of the first nations to recover from the debt bubble. Just when things started to turn around for the country, the euro zone debt crisis hit and sank the common currency. While this crisis has not been welcome news to many, it could end up being a very positive development for many Irish companies and could help to spur the country out of recession.
In fact, Neil Shah writes in the WSJ that “exports account for more than 50% of Ireland’s gross domestic product, ahead of even Germany. And while many euro-zone countries’ exports go to their European neighbors, Ireland sends much of its chemicals, business services, technology and food to the U.S. and U.K. That maximizes the benefit of the falling euro, which has lost approximately 15% against the U.S. dollar and 8% against the British pound since the beginning of the year.”
Ireland is hoping for a boost from increasingly competitive exports, and all eyes will be on the country as it reports first quarter GDP figures today. “Things are clearly starting to look up,” says Alan McQuaid, chief economist at Bloxham, Ireland’s biggest independent stockbroker. “Assuming the euro-zone debt issue doesn’t turn into a full-blown crisis, Ireland should be roaring back up over the next 12 months, led by a strong export performance.” As such, look for the MSCI Ireland Capped Investable Market Index Fund (EIRL) to be in focus in Wednesday’s trading as investors turn to the Emerald Isle for guidance on the impact on the declining currency on export growth [see Ireland ETF To Thrive On Weak Euro].
Ireland ETF In Focus
EIRL tracks the MSCI Ireland Investable Market 25/50 Index, a free-float adjusted market capitalization-weighted benchmark designed to measure the performance of equity securities in the top 99% by market capitalization of the equity securities listed on stock exchanges in Ireland. The fund currently holds 21 securities and has heavy weightings in materials (25%), consumer staples (23%), and industrial sectors (17%). In terms of individual holdings, its top holding is CRH (21.8%), a large building material product manufacturer, followed by Kerry Group (10.7%), a major Irish food producer. EIRL is a very new option available to investors; it has been around for less than one quarter and it has produced a loss of 10% since its inception [see The Case For The Ireland ETF].
Disclosure: No positions at time of writing.