Four different ways to invest in Europe
This article first appeared on professionaladviser.com on 2nd September 2022 “When has Europe ever...
The Irish economy is in good health. Boosted by the best period of sustained and synchronised global growth in a decade, the Emerald Isle is forecast to grow by 3.9%* this year. This figure is slightly lower than 2017’s 4.8%, but it is still some three time larger than the growth forecast for the UK.
The Irish government acted quickly and sharply to sort out its structural problems after the global financial crises, but the country has been plagued by stagflationary issues for a number of years. Today, however, unemployment is falling, with some 1,000 full-time jobs created each week, and wage growth is finally starting to show signs of life, helped by tax changes and an increase in the minimum wage that kicked in this January.
The government also plans to increase capital spending which is set to include the funding of social housing construction and supportive infrastructure projects. This construction investment, coupled with projected consumer spending increases on the back of more disposable income, is set to support growth in the coming year or so.
However, there are a couple of elephants in the room: Trump’s tax reforms, which could see some multi-nationals returning to US shores, and Brexit. The UK is one of Ireland’s largest trading partners and Irish exporters have been hurt by both the falling pound and the uncertainty. Despite this, the Irish stock market has outperformed the UK stock market by 5%** since Article 50 was evoked in March 2017.
While most passengers seem to have a love-hate relationship with Ryanair, a number of Elite Rated fund managers are investing in the company. It is a top ten holding for Jupiter European and represents the fund’s total 5.3% weighting to Irish businesses, while Threadneedle European Select has a 2.69% holding. GAM Star Continental European Equity, which has a huge 13.5% allocation to Ireland, also holds the airline along with Paddy Power and two building materials companies, Grafton Group and Kingspan Group.
Companies that can benefit from housing construction are also popular in other portfolios. Threadneedle European Select has 1.66% invested in Kingspan, while Fidelity Special Values is backing CRH plc, a manufacturer and supplier of products for the construction industry, which is a top three holding for the trust.
Fidelity Special Values also has an overweight position in Bank Ireland Group, while Lowland Investment Company favours the Irish shipping and transport company, Irish Continental Group.
*CSO data, December 2017
**Returns in Sterling using the FTSE Ireland and FTSE All Share from 29 March 2017 to 14 March 2018
All fund holdings information was sourced from FE Analytics on 14 March 2018