Eircom investors should continue to hold their shares despite the telecom's dip below the initial public offering price, say private client brokers and fund managers. At close of business yesterday, Eircom's price was £3.03 (€3.86) or one per cent below the offering price of £3.07 (€3.90). This new low is 23 per cent off the £3.94 (€5.00) peak price achieved on July 22nd.
"If investors went in on a medium to long term view they should ignore the vagaries in the market at the moment," says head of NCB's private client division, Mr John Keilthy. "People shouldn't be dissuaded from pursuing their long-term objectives by short-term changes in the share price. They should hang on in there."
The markets are generally showing volatility because of uncertainty about US interest rates movements and telecoms worldwide have taken a bit of a bash, said a spokesman for Goodbody Stockbroker. "I would certainly say there's no point in selling it now if you bought at flotation time," says Hibernian Investment Manager, Mr Fergus Ryan. Eircom is a good value at anything below €4, he said.
Investors who took out loans to purchase Eircom shares may be in some danger.
"People who borrowed to buy should really have sold their shares by now. They've had a lot of opportunity to take a profit. We've said don't be greedy - take your profit and move on," said Mr Keilthy. Borrowers with a longer term perspective need to think about interest rate risks. The risk is not in the price of telecom, it is in the increased cost of borrowing if interest rates move ahead.
"At the moment it isn't costing them a huge amount and they will get dividends if they hold for a year. If interest rates change, however, the cost of borrowing increases and then it's not a good situation," he said.
Investors should hold to their individual goals and not be persuaded to do otherwise by scare mongers.
"A psychology of market momentum can build up if it's a topic of conversation or in the papers. The danger is that those who would otherwise ignore the movements begin to take notice and think about selling," warned Mr Keilthy.
