Ireland is one of the richest and fastest growing economies in Europe. For those interested in investing passively in Ireland, we analyze its 4 most important stock market indices.
With just over 5 million people, Ireland is a small but very prosperous economy with very strong fundamentals and a bright outlook.
Ireland enjoys one of the highest GDP per capita on the planet, a low unemployment rate, high economic growth, foreign investment and, to top it all off, a favorable demographic profile.
While the Irish stock market is quite small, it offers us good opportunities to benefit from the future economic development of the country.
An interesting fact is that the Irish stock market is one of the worst performers since 2008. This is because its stock indices were heavily dominated by bank stocks at the time of the great financial crisis. Most of those stocks got obliterated in the subsequent years and very few remain as members of Ireland’s most important indices.
As a result, many Irish listed companies trade at very attractive valuations.
In the sections below we will analyze the 4 most important stock market indices in Ireland:
The ISEQ 20 is the most famous index of the Irish stock exchange. Calculated and published by Euronext, the company that operates the Dublin stock exchange, it has been in existence since 2004, when it was introduced with an initial value of 1,000 points.
The ISEQ 20 is made up of 20 of the companies with the largest market capitalization and most liquidity on the Dublin Stock Exchange. It is rebalanced every 3 months.
Some of its most famous companies are the airline Ryanair, the materials company CRH and the gambling corporation Flutter Entertainment.
Something to highlight about the ISEQ 20 is the spectacular drop it suffered as a result of the economic and banking crisis of 2008. The index went down by 80% in aggregate. Some of its most bank stocks fell by more than 95% as they had to be bailed out by the government.
For additional details about the ISEQ 20, here is the link to the Euronext website.
ISEQ All Share
The ISEQ All Share is the other major stock market index that Euronext calculates for the Irish stock market.
Unlike the ISEQ 20, the number of shares that are part of the ISEQ All Share varies over time. In it we find all Irish corporations that meet the eligibility criteria to be part of the ISEQ 20, regardless of whether they are selected for it.
A useful feature of the ISEQ All Share index is that it was introduced in 1985. Therefore, it is a great tool to analyze the long-term historical returns of the Irish stock market.
You will find additional information about it on the Euronext website.
Calculated by the US company MSCI, the MSCI Ireland stock index includes those Irish corporations that are part of the global MSCI World Index of developed countries.
The number of stocks in the index fluctuates over time and depends on how many companies meet the criteria to join the global index. For several years, the number of constituents has hovered around 5, so it is a highly concentrated index which offers very little diversification.
There are two reasons for the small number of stocks in the MSCI Ireland. First of all, Ireland is a small country, so it simply has fewer listed companies.
And secondly, the stock market crash resulting from the country’s banking crisis in 2008 caused many corporations to collapse and be removed from the MSCI World index and, consequently, from the MSCI Ireland.
Here is the link to MSCI’s website for additional information.
Very similar in construction to the MSCI Ireland, the FTSE Ireland is an index that includes all Irish companies that can be found in the global FTSE All World Stock Index.
This index has the same drawback as the MSCI Ireland: a very high concentration in a small number of stocks and, as a result, very little diversification.
There is nothing wrong with having concentrated investments. We simply must be aware of the risks that that represents
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And if you want to read about another interesting aspect of the Irish economy, check out this link:
Taxes in Ireland – A Complete Guide