Continued growth in company earnings and possibly some merger and acquisition activity are likely to boost Irish share prices this year, though the gain in the value of the overall index is likely to be below last year, two of the Republic's leading stockbrokers said.
In their outlooks for 2007, both NCB and Davy agree that while the economy and corporate markets are healthy, the Iseq will struggle to match the 26 per cent gain seen last year. It has increased by well over 20 per cent for the past three years.
"2007 equity market gains may not match those of 2004-2006, but the corporate earnings outlook remains positive, supported by an economic backdrop that is buoyant in Ireland, encouraging in mainland Europe, stable in the UK and on track for a soft landing in the US," said NCB.
Davy, meanwhile, is forecasting the Iseq will increase in value by between 15 and 20 per cent this year.
In its outlook, NCB highlights five stocks, namely AIB, CRH, Irish Life & Permanent, Ryanair and C&C, all of which it believes are worth following this year. It also says many stocks in the Irish market are ripe for upgrades, following a significant number of revaluations last year.
The broker says that AIB is set for another good year, while the outlook for Irish Life & Permanent's two principle businesses remains favourable. Ryanair continues to offer value given the visible organic growth of more than 20 per cent over the next few years, the resilient business model and the continued route expansion.
Following a very good year in 2006, drinks group C&C remains a strong bet for 2007, though an even better one for further down the line once its new cider production facility comes on stream in 2009, according to NCB.
Building materials group CRH, which is also highlighted by Davy as likely to be one of the best-performing large-cap stocks this year, is set to benefit from its diverse presence in the US, the ongoing European recovery and more than €3 billion worth of acquisitions since mid-2005, according to NCB.
Davy also says that all the financials remain attractive, citing a particular preference for Anglo Irish and AIB.
