The Irish stock market enjoyed another record week, hitting new highs as overseas investors remained keen to buy Irish shares. The ISEQ index has now breached the 5,100 level, well outstripping even the most optimistic end-year forecasts in the broking community.

In February alone, it rose by a stunning 14 per cent to bring the year-to-date growth to more than 25 per cent. Over the past 12 months, the Irish market has risen by nearly 70 per cent as investors, particularly from overseas, continue to bid for shares, driving prices further ahead. Among the positive factors supporting the market are the continued strong domestic economy, an upward revision of earnings forecasts, high levels of institutional liquidity and an additional boost from lower taxes in the Budget and the prospect of lower interest rates.

However, there are some uncertainties ahead.

These include fears that sustained economic growth and pound weakness could lead to higher inflation, although figures released this week showing that the annual rate of inflation fell slightly to 1.7 per cent in February suggest price pressures remain subdued.

There is also some concern that stocks with overseas exposure could suffer from a global slowdown caused by the Asian crisis, while problems in the technology sector have raised fears of knock-on effects on the Irish economy, which is increasingly dependent on high-tech employment.

Intel, Motorola and Compaq, between them significant employers in Ireland, have all issued recent profit warnings.

As European Economic and Monetary Union (EMU) approaches, volatility could also increase. But fund managers remain optimistic about the Irish market, nonetheless.

"Although valuations are less attractive, the prospect of further gains remains bright. We remain overweight in Ireland," Mr Dara Fitzgerald, portfolio manager at Hibernian Investment Managers, says.

Strong company results have been among the primary drivers of the market in recent times and there was further evidence of the health of corporate earnings this week.

Strong results from Norwich Union, Qualceram and Readymix cheered the market, while Waterford Wedgwood reported profits before tax and exceptional costs of £40 million, a 15 per cent increase on 1996 and bang in line with expectations.

But in a sign of the times and the high level of market expectations, Waterford's share price drifted back from an all-time high of 123p prior to the figures because the results had not substantially exceeded analysts' forecasts. It ended the week at 115p.

Other notable features this week were CRH, which joined the double digit share price club when it breached the £10 level, hitting a high of £10.20 yesterday.

Independent Newspapers steadied after a weak performance of late.

By contrast Smurfit, a market laggard in recent times, began to make up lost ground, boosted by better inventory figures. It clawed its way up through the 200p level to end the week at 215p.