In the turmoil of recent weeks the Irish equity market has held up exceptionally well compared with the declines in many other western stock markets. The ISEQ index is now only 5 per cent below its peak level of 3925 which it reached in mid-October. The fall has been much more severe on the British and German markets which fell by 10 and 15 per cent respectively.

The better performance of the Irish market should not come as a big surprise given that there are very few Irish listed companies with significant exposure to the troublesome Far East. Furthermore, with financial stocks accounting for a very high proportion of the Irish market the benefits of the Celtic Tiger economy in terms of higher corporate profits continue to buoy up the Irish market. The Irish banks are continuing to see rapid lending growth and virtually no problems from bad debts.

Industrial stocks have not fared quite so well and the share prices at Waterford/Wedgwood and Smurfit have fallen by 20-25 per cent from their recent peaks. Some level of underperformance from both of these company's share prices is justified. In both cases less than 10 per cent of turnover occurs in Ireland and both companies do have exposure to weakness in the Far East.

In Smurfit's case the danger is that a widespread recession in the Far East would lead to a glut in the worldwide market for paper products causing a fall in pricing and profitability. In Waterford Wedgwood's case the danger is more direct, in that a substantial portion of its sales are dependent on Far Eastern markets either directly or through demand from purchases from Japanese tourists travelling abroad.

As well as falling sharply in the recent market turbulence, the share prices at both of these companies have underperformed over the past three years. However, the similarities end there and the differences between the two companies' businesses is striking.

After painful restructuring in the early 1990s profits at Waterford Wedgwood have been on a steady upward trajectory growing from over £20 million (after tax) in 1994 to a projected £34 million in 1997.

In contrast, Smurfit's profits peaked at just under £300 million in 1995 only to decline to a projected £90 million for 1997. Smurfit is in a commodity business where it has virtually no ability to differentiate its products from its competitors. On the other hand Waterford Wedgwood has a number of unique brands which have a global presence. This gives it substantial pricing power in its markets, whereas Smurfit is a price-taker in virtually all its product areas.

Waterford Wedgwood has recently begun to expand in a modest way through acquisition with the purchase of Stuart Crystal in Britain and the stake building in the German ceramics manufacturer, Rosenthal. In contrast Smurfit has pulled back from headlong expansion through acquisition and aims to rationalise its operations, particularly those in North America.

While recent events such as strength in sterling and the fall out from weakening demand from the Far East will have some short-term impact on Waterford Wedgwood's profits, the long-term outlook for the company looks attractive.

Therefore, investors might use the current weakness in the share price as an opportunity to invest in the company. At current levels the shares are trading on a price-earnings multiple of just over 16 for 1997. For a company with attractive growth prospects, this represents good value.

The situation regarding Smurfit is a little more difficult. It is an inherently more cyclical stock and therefore if recession does emerge in the Far East it will be difficult for the industry to push through price increases over the coming year. At the current share price existing investors should continue to hold the stock.

Potential investors might sit tight and await either evidence of price rises for the industry's products or the announcement from Smurfit of its long-awaited restructuring of its US businesses.