Hibernian investment managers focus 2007

31st January 2007

Download HIM Outlook 2007 (1mb pdf)

Hibernian Investment Managers (HIM), one of Ireland’s top three fund managers today (Wednesday 31 January) presented details of its investment outlook for 2007.

HIM remain confident that the trend in global economic growth will provide a positive backdrop for equity markets:

It is expected that growth will be more balanced this year, with more emphasis on Europe and Japan, as the US works through a period of more moderate growth
The positive reaction of equity markets to the dip in Q2 last year bodes well for prospects in 2007
Markets are expected to be supported by the belief that companies are fairly valued at current levels
HIM is predicting Irish GDP growth of 5.4% in 2007 after an estimated 5.8% last year

HIM Economist and Senior Fund Manager, Fiona Hayes said:

“We are confident our forecast is pretty secure. In Ireland we expect consumer spending to be supported by SSIA releases, with late joiners more likely to be big spenders than those who were first in line to join the scheme. There is full employment right now, new immigrants are adding to the pool of workers and consumers, and consumers in general are increasingly wealthy from past property and equity market gains.”

Despite worries about rising interest rates Fiona Hayes pointed out:
“Real interest rates are still negative. Even if the ECB moves rates beyond 4%, remember the current Irish inflation rate is at 4.9%.”

From an investment perspective, the more important question is what happens during 2008 and thereafter. HIM is pencilling in a couple of years of softer growth; 3.9% in 2008 and 3% in 2009, before the economy recovers to trend. The main swing factor will be how rapidly house building adjusts to a level more in keeping with long-term demand. HIM estimates a soft landing or gradual decline over the next three years.

Fiona Hayes said:

“We have a prime example of a hard landing in what has happened to the housing market in the United States recently. The 28% fall in new house building over the last twelve months is equivalent to Irish registrations falling to just 63,000 over the next year (currently 90,000 plus). We are certainly not forecasting that scenario here. However, despite what happened to its housing market, the impact of this situation for the wider US economy – employment and consumer spending – was limited.”

On the subject of whether equity markets can achieve five in a row following four successive years of double-digit returns, Roy Asher, HIM Chief Investment Officer posed the question: should Irish investors who have been heavily overweight in property over the last ten years now diversify into equities?

Roy Asher believes equities can indeed provide another positive return in 2007:

There are numerous positive influences for markets; globalisation and an increasingly balanced international growth profile, a robust US consumer, fair valuations, merger and acquisition activity, and liquidity conditions which are not yet in the restrictive zone.”

About Hibernian

Hibernian Group is Ireland’s largest composite insurer, ranked first for general insurance and top three for life and pensions.
Hibernian Group is a subsidiary of Aviva plc, the world’s fifth-largest insurance group and the UK’s largest insurance services provider (based on gross worldwide premiums at 31 December 2005), and is one of the leading providers of life and pension products to Europe, with substantial positions in other markets around the world. Aviva employs 58,000 staff worldwide.
Aviva’s principal business activities are long-term savings, fund management and general insurance, with worldwide total sales of £41.5 billion and assets under management of £364 billion at 31 December 2006.
Morley is the UK-based asset management business of Aviva plc. Firms within the Morley group of companies manage £169bn (€247bn) from offices around the world as at 30 April 2007.
With a strong track record in the property arena, Morley has seven European property funds focusing on a range of sectors and markets and over the last 24 months has acquired over 50 properties in 11 countries. These funds account for over €1.1bn of European assets under management.
In 2006 Morley Fund Management won two awards at the Central and Eastern European Real Estate Quality awards taking ‘Outstanding Company of the Year’ and ‘Investor of the Year’ for its Central European Property activities.
The product information above is for press release purposes only; full details are contained in the product literature available from Hibernian.
The value of property investments is generally a matter of valuer’s opinion rather than fact. In addition, property investments may not always be readily saleable and very occasionally there may be constraints on cashing in units.
The value of investments abroad may rise and fall due to exchange rate movements.