Ireland: HIbernian Investment Managers Focus 2007

Article date: 31 January 2007

Hibernian Investment Managers (HIM), one of Ireland’s topthree fund managers today (Wednesday 31 January) presented detailsof its investment outlook for 2007.

HIM remain confident that the trend in global economic growth willprovide a positive backdrop for equity markets:

  • It is expected that growth will be more balanced this year,with more emphasis on Europe and Japan, as the US works through aperiod of more moderate growth
  • The positive reaction of equity markets to the dip in Q2 lastyear bodes well for prospects in 2007
  • Markets are expected to be supported by the belief thatcompanies are fairly valued at current levels
  • HIM is predicting Irish GDP growth of 5.4% in 2007 after anestimated 5.8% last year

HIM economist and senior fund manager, Fiona Hayes said: "We areconfident our forecast is pretty secure. In Ireland we expectconsumer spending to be supported by SSIA releases, with latejoiners more likely to be big spenders than those who were first inline to join the scheme. There is full employment right now, newimmigrants are adding to the pool of workers and consumers, andconsumers in general are increasingly wealthy from past propertyand equity market gains."

Despite worries about rising interest rates Fiona Hayes pointedout: "Real interest rates are still negative. Even if the ECBmoves rates beyond 4%, remember the current Irish inflation rate isat 4.9%."

From an investment perspective, the more important question is whathappens during 2008 and thereafter. HIM is pencilling in a coupleof years of softer growth; 3.9% in 2008 and 3% in 2009, before theeconomy recovers to trend. The main swing factor will be howrapidly house building adjusts to a level more in keeping withlong-term demand. HIM estimates a soft landing or gradual declineover the next three years.

Fiona Hayes said: "We have a prime example of a hard landingin what has happened to the housing market in the United Statesrecently. The 28% fall in new house building over the last twelvemonths is equivalent to Irish registrations falling to just 63,000over the next year (currently 90,000 plus). We are certainly notforecasting that scenario here. However, despite what happened toits housing market, the impact of this situation for the wider USeconomy – employment and consumer spending – waslimited."

On the subject of whether equity markets can achieve five in a rowfollowing four successive years of double-digit returns, Roy Asher,HIM chief investment officer posed the question: should Irishinvestors who have been heavily overweight in property over thelast 10 years now diversify into equities?

Roy Asher believes equities can indeed provide another positivereturn in 2007: "There are numerous positive influences formarkets; globalisation and an increasingly balanced internationalgrowth profile, a robust US consumer, fair valuations, merger andacquisition activity, and liquidity conditions which are not yet inthe restrictive zone."

HibernianInvestment Managers Focus 2007

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Press contact:
Kela O’Riordan, 01 898 8482,086 606 8842, kela.oriordan@hibernian.ie

Notes to editors:
HibernianInvestment Managers is Ireland’s third largest fund managerwith over €14 billion under management.

HIM is part of the Hibernian group in Ireland. Hibernian is asubsidiary of Aviva plc, the world’s fifth-largest insurancegroup and the UK’s largest insurance services provider (basedon gross worldwide premiums at 31 December 2005), and is one of theleading providers of life and pension products to Europe, withsubstantial positions in other markets around the world. Avivaemploys 58,000 staff worldwide.

Hibernian news releases are also available onwww.hibernian.ie

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