Wednesday, October 19, 2011

Pharma Sales Curing Irish Ills

Most investors are aware of the ills affecting the Irish economy...after all, it is one of the PIIGS nations.

But most investors are unaware that Ireland is beginning to recover. Figures released several weeks ago showed the Irish economy grew 1.6 percent between the first and second quarters of 2011. This is the eurozone's second fastest rate of economic growth, behind only Estonia.

It was the first time Ireland achieved two consecutive quarters of economic growth since the property crash and banking crisis hit the country in 2007.

A surge in overseas sales is behind the country's turnaround. Net exports soared nearly 24 percent to $2.6 billion from the second quarter of 2010 to the second quarter of 2011.

This upturn in the Irish economy is prompting some economists and investors, like Wilbur Ross, to reconsider Ireland's ability to repay its debt without a second bail-out. Mr. Ross, a famous distressed asset investor, has recently purchased shares of the Bank of Ireland ADR (NYSE: IRE).

About three-quarters of Irish exports are driven by foreign multinationals, many of them pharmaceutical companies.

So it seems that Ireland is being helped through its economic 'illness' by strong pharmaceutical sales from companies such as Pfizer (NYSE: PFE). It became of the first global drug companies to set up an Irish operation way back in 1969.

IDA Ireland, the state agency whose task is to attract overseas investment, says the country hosts eight of the world's top 10 pharmaceutical companies.

Of course, it is not just pharmaceutical companies. According to IDA Ireland, the country is also host to 15 of the top 25 global medical device companies and seven of the world's top technology firms.

All of these firms are attracted to Ireland by favorable tax rates and a superb, highly skilled, English-speaking workforce.

The export sector, which is worth more than 100 percent of GDP, will be the driver for the Irish economy, helping it overcome its financial crisis.

For investors looking to buy into Ireland, ala Wilbur Ross, while assets are still selling at distressed prices, should look into an exchange traded fund which offers broad exposure to Ireland.

The only ETF currently available is the iShares MSCI Ireland Capped Investable Market Index Fund (NYSE Amex: EIRL).

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