When you see the ratings agencies downgrading a sovereign nation to the last rung of investment grade and with the outlook still cautious to negative, you generally would consider that it would be a bad day for the stocks of that nation.  That would particularly be the case with the banks if they had been in constant trouble and if they were going to need more regulatory capital to be raised ahead.  Moody’s did downgrade Ireland to Baa3 from Baa1 and said that the outlook was still negative.  The question to ask is how on earth this downgrade has not hurt the shares of Allied Irish Banks plc (NYSE: AIB) and Bank of Ireland (NYSE: IRE) in local exchange trading in Dublin.

Allied Irish Banks plc (NYSE: AIB) and Bank of Ireland (NYSE: IRE) both trade actively as ADRs in New York, but the real trading indication on each day starts in Dublin during what is the middle of the night for most Americans.

At 5:08 AM EST Bank of Ireland shares were down only 0.7% at 0.277 on more than 2 million shares in Dublin trading.  At 7:35 AM EST those shares were down just over 2% at 0.273 on more than 4 million shares in local trading in Dublin.

At the same time, Allied Irish Banks was up 0.8% at 0.242 on about 140,000 shares in Dublin trading.  At 7:35 AM EST those shares were still up 0.8% at 0.242 on about 800,000 shares in local trading in Dublin.

Both stocks have yet to show active pre-market trading in the NYSE-listed ADRs.

Listening to Moody’s and S&P on their coverage of the sovereign ratings of the Lands of the PIIGS is getting to be a bit like asking for a hanging chad count in Florida.  Ask yourself this question… Should Ireland still have what ratings agencies call an “investment grade” debt rating? 

The beat goes on.

JON C. OGG

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