Your Money: Worth a punt
Continuing his look at stock markets around the world, Liam Robb sizes up India, Indonesia, Ireland and Israel
Wednesday 19 February 1997
Securities trading has taken place in for 200 years, and the first formal stock exchange was established in 1875.
Current economic concern centres on high interest rates (which peaked at 19 per cent last year), poor roads, ports and telecommunications, and slackening consumer demand (30 per cent of the 935 million population live in poverty). The cost of servicing the public debt accounts for 6 per cent of GDP. This depressing economic landscape has not, however, kept multinationals away: overseas investment in n shares almost doubled last year, to nearly $3bn.
Privatisation may hold the key to the future; the government recently announced measures aimed at stimulating international demand, which presaged the biggest ever daily rise in the BSE 30 last month - 5.4 per cent. Most widely traded companies include Steel Authority of , Reliance Industries, Hindustan Lever and State Bank of .
The world's largest archipelago has 3,700 islands stretching from the Malay Peninsula to New Guinea. Energy resources - particularly oil - have helped finance rapid industrialisation and the country is the world's largest liquefied gas exporter.
A major challenge is finding jobs for a workforce which increases by 2 million every year. National debt stands at more than $100bn. Such worries have not, however, prevented the 141 companies listed on the Jakarta Stock Exchange from recording dramatic growth, and the local index was up 24 per cent last year. One of the biggest fillips for the market came in the shape of Bank Negara Indonesia, floated last November. Daily trading volume now stands at around $150m a day, compared with only $10m four years ago.
Mary Whitehead, who is in charge of Asian allocation for Clerical Medical pensions, believes that the banking sector could surprise this year, as rationalisation leads to take-over speculation.
Republic of Ireland
The Irish Stock Exchange dates back to the 1790s. Until 1995 it was a constituent of the UK market, but in response to the EC directive on investment services, a separate Board of Exchange was established.
Strong consumer spending coupled with consistently low inflation (currently around 2 per cent), a balance of payments surplus and little upward pressure on interest rates meant real GDP grew by more than 5 per cent in 1996. Unemployment - 14 per cent - is one of the few blots on the landscape.
Irish equities have returned a respectable 22 per cent over the past year. Of the 91 listed companies, the biggest in terms of market capitalisation are Allied Irish Banks (AIB), Bank of Ireland, CRH, the buildings materials group, the packaging manufacturer Jefferson Smurfit and the pharmaceuticals company Elan Corporation, which also has a listing in the US.
Optimism for a successful conclusion to the peace process with Syria increased foreign investment by more than 30 per cent last year. It was not enough to prevent the 100 index shedding 12 per cent of its value. Inflation stands at around 11 per cent and, with interest rates having peaked at 17 per cent last year, the resultant strengthening of the shekel put severe dents in export industry profits. High unemployment, caused in part by an influx of nearly one million Jews from the former Soviet Union, has also hampered the economy.
The Tel Aviv stock exchange, however, is the Middle East's largest and most advanced capital market. Banking is an important sector and the country boasts massive agricultural potential. Food retailing has performed well, benefiting from a growing population (up 2.5 per cent last year). The sector is dominated by Supersol and Blue Square, which together account for more than 70 per cent of supermarket sales.
The telecoms industry is also increasingly important, and plans are afoot to sell a $415m, 23 per cent stake in Bezeq, the state-owned monopoly, by the end of this year. Analysts believe that, if the peace process continues, Israel can establish a foothold in international telecomsn
Performance statistics: Datastream. Country-specific funds include Foreign & Colonial's n Investment Company, Fleming n investment trust and BZW's Israeli investment trust. AIB manages the First Ireland investment trust and Natwest runs an Irish Smaller Companies fund.
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