So far this year the Irish equity market has under-performed most of the world's major equity markets by quite a significant margin. The equity market is still producing positive returns, but the year-to-date return of 7 per cent pales in comparison with the rise in the British market of 10 per cent and the French market of 11 per cent.

One of the major reasons for this lacklustre performance has been due to the weakness in bank shares which may seem curious given the good recent results from Anglo Irish Bank and Bank of Ireland. The banks still account for just under 40 per cent of the total market capitalisation of the ISEQ and therefore any share price weakness in the banks will pull down the overall index.

Private investors are heavily represented on the banks share registers and must be wondering whether the current malaise is likely to be a temporary aberration or whether it is the start of a period whereby bank shares under-perform their industrial counterparts. Of course it is important to keep this recent modest under-performance in perspective coming after a long period of strongly rising bank share prices.

Year-to-date the Irish bank sector has declined by 5 per cent, but share prices are still double the levels of two years ago.

Internationally bank shares have been doing quite well so far this year with some particularly strong returns from British banks with some share prices up by 20 per cent so far this year. With the advent of the euro, trends in the euro zone are now much more relevant, but European banks have risen on average by more than 10 per cent so far in 1999. The only explanation for this negative switch in investor sentiment towards the Irish banks seems to be the result of fears that the Irish economy is in imminent danger of overheating.

The international financial media has been comparing the Irish property boom with the ill-fated property bubble in Britain in the late 1980s. The hangover from that boom still reverberates in the form of negative equity. British banks suffered from large bad debt write-offs in the early 1990s due to their huge exposure to the deteriorating property market.

Recent comments from the Central Bank governor regarding the mortgage lending practices of the Irish banks would seem to have raised fears amongst international investors concerning the asset quality of the Irish banks loan books.

While the performance of all sectors of the Irish property market has propelled values into uncharted territory, there is little evidence that banks have been over-lending. Also the key factors which have been pushing up property values seem most unlikely to be reversed in the short to medium term.

Interest rates in the euro bloc seem set to stay at current very low levels for a prolonged period of time and if anything they could even decline later in the year. The Irish economy continues to boom, and while a slowdown from current rates of economic growth is inevitable, a slide into recession seems a remote possibility.

Finally, the demand for housing and commercial property is being driven by a rapidly growing workforce, that has created supply shortages in both the residential and commercial property sectors. It will take some time for supply to catch up with demand underpinning current values.

For private investors who have invested in bank shares over the years there seems little reason to read too much into the current bout of weakness. If anything this probably represents an opportunity to buy the banks at relatively attractive prices.