Two years ago, the outlook for private share ownership was bright.

A growing number of demutualisations, including that of Irish Permanent, had whetted the public's appetite for owning shares. The historically low rates of interest available on deposits further underlined their attractiveness, standing in marked contrast to the stellar returns from international stock markets which were enjoying an unprecedented bull run.

The flotation of Eircom, which attracted interest from more than one million people, was expected to further spur the share-buying process. Some 27 per cent of people who bought privatisation shares in Britain went on to buy shares in other companies and Irish people were expected to follow suit, bringing Irish share ownership levels more into line with Britain.

But two years on, share ownership in the Republic appears to have levelled off.

New research commissioned by the Irish Stock Exchange (ISE) found that 13 per cent of Irish adults currently own shares, identical to the figure published in a Goodbody report in June 1999.

According to the ISE survey, 12 per cent of adults own shares in companies listed on the Dublin market. The survey, of 2,400 adults aged 15 and over, found that 7 per cent held shares in Eircom, 5 per cent held shares other than Eircom, while just 1 per cent owned shares listed on another exchange such as in the US or Britain.

Share ownership was highest among white collar workers and those aged between 35 and 49. Among those who held shares on the ISE, 68 per cent were male and 32 per cent female, while the Irish stock market remained the first choice of three times as many would-be investors as overseas markets.

The ISE, which commissioned the research to gain a better understanding of people's attitudes to share ownership and share purchase, found that 11 per cent of 25 to 34-yearolds, 17 per cent of 35 to 49year-olds and 16 per cent of 50 to 64-year-olds owned shares.

In social terms, 29 per cent of investors fell into the AB social category, 14 per cent were in the C1 class and 6 per cent in the C2DE. Farmers accounted for 10 per cent of share owners.

As well as being below share ownership levels in the US and Britain, Irish share ownership continues to lack the breadth and depth of that seen elsewhere, with too many people exposed to the vagaries of a single share.

The ISE research found that the average number of companies in which investors held shares was 1.9. Excluding Eircom shareholders, 42 per cent of those who owned shares quoted on the ISE held stock in just one company. A further 21 per cent were invested in two companies, while 7 per cent held shares in three firms and only 3 per cent held stock in five or more companies.

Some of the reasons for the failure of Irish share ownership levels to maintain the momentum seen in the late 1990s are obvious.

Rather than drawing more people into the stock market, the Eircom flotation ended up scaring people off. Of the 570,000 people who originally subscribed for shares, some 485,000 loyally held onto the stock and have ended up significantly out of pocket as a result of the Eircom share price collapse. Instead of showcasing the rewards of equity investment, the Eircom debacle merely highlighted the risks.

The US-led slowdown in the world economy, the collapse of the technology bubble and the tough times faced by equity markets over the last 18 months have not added to confidence either. With professional investors, such as pension fund managers, scaling back their equity allocations, it is hardly surprising that the private investor is playing it safe.

"The retail market is battered and bruised," says Mr John Keilthy of NCB Stockbrokers. "People are sitting on their hands, leaving money on deposit and not committing to the market."

But the ISE research, conducted in April and May, also underlines the attachment of Irish investors to more traditional investment classes, particularly property.

Asked which investment they felt would offer the best return, a significant 21 per cent of survey respondents singled out property, whereas just 7 per cent opted for Irish shares and an even more modest 5 per cent plumped for shares on a foreign exchange.

Interestingly, a quarter of male respondents and 30 per cent of the key AB investor group identified property as likely to offer the best return.

Asked about their preferred investment option, 19 per cent again picked property compared to 7 per cent who chose Irish shares and 4 per cent who preferred shares listed on foreign stock exchanges.

"This research clearly suggests that people have been struck by the more recent short-term performance of Irish property investments - and have strong expectations that this will continue in the medium term," says ISE chief executive Mr Tom Healy. "Clearly, there is an onus on those of us who wish to increase the level of investment in Irish equities to promote this historic performance and to demonstrate the strength of equity investments over the long term."

Mr Healy points out that comparative investment returns over a 10-year period show equities delivered a return of 20.2 per cent per annum compared to 16.8 per cent for property. Over a longer 20-year time frame, equities again outperformed property, producing returns of 18.9 per cent per annum against 14.0 per cent.

Cash also remains popular, given the current uncertainty in stock markets worldwide, says Mr Eamonn Glancy of Goodbody Stockbrokers.

"The property market is not exactly a safe haven. There are signs that it is coming off and cash is king," he says.

But despite the lack of growth in share ownership, all is not doom and gloom.

Mr Healy says that given recent market conditions, the ISE regards it as "encouraging" that share ownership levels have remained stable rather than falling. The survey also found that 9 per cent of respondents had considered purchasing shares in the Irish market, while a further 5 per cent had looked at buying them on foreign exchanges.

Meanwhile, 5 per cent described themselves as "very likely" or "fairly likely" to invest in an Irish company in the next 12 months, although a very significant 82 per cent said they were "very unlikely" or "fairly unlikely" to do so.

Only time will tell how many of those who have been scared off equities by recent events will come back to the market when things look up.

"The share ownership situation in Ireland is still undeveloped," Mr Keilthy says. He believes that many investors are waiting for confirmation that the bottom has been reached and that recovery is in sight before committing again to the market.

"It would be a pity if people's view of shares was coloured by Eircom which is only one share among a vast array," he said.

jmosullivan@irish-times.ie