Question: Shares held in Euro if Euro goes bust or two-tiered

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horusd

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Having looked at low interest rates available on foreign bank accounts, I am considering investing in more shares with a better dividend return. But I'm wondering about something regarding how they would be treated if the Euro fails (ok, highly unlikely), or a two tier Euro emerges with Ireland in the cheap seats left holding a devalued currency.

It would seem likely that if shares are are held in Euro with a stock listing in IRL, then the value would be reflected in the new currency/devalued currency. It would equally seem likely that shares held with companies abroad, denominated in Euro or in a different currency would be unaffected. I don't know that either of these assumptions would be correct. Anyone know how this might work out?
 
I think it is slightly more complicated than just looking at the currency used for pricing the company.
You really need to focus on the underlying currency for purposes of the companies income. Many companies are listed on different stock exchanges in different currencies, e.g. a large British telecoms provider can be bought for sterling in the UK and for € in Germany. While the "home" currency of the company is sterling, most of the companies income comes from outside the UK, which further complicates the currency risk.
Where I would see high risk in a euro break-up situation is if you have e.g. an Irish company that imports material, then manufactures here and sells on the Irish domestic market. A devalued new Irish currency would raise the price of imports while at the same time reducing the value of income.
On the other hand I own shares in a small British gold mining company which I bought for € in Germany. The underlying thing to look at here is gold, and not the sterling euro exchange rate.
Hope this helps
 
Thanks Chris , I just knew this was more complex than I imagined. Yep, your post helps in clarfiying this, but doesn't immediately help me decide what to do now! I'll have to put the thinking hat back on and do some more detailed research on particular companies & dividend returns. Thanks again.
 
@ rob1, any particular why are you specifiying shares held in certificate form ?
 
Chris (or anyone else) just thinking this thro a bit more. Lets say a company based in IRL (food processing 4 example) is valued at €10 per share with a total share issue of €100. New devalued currency @ 70% of existing € means total share capital now of 70 yet the underlying assets ( equip, + turnover etc), hasn't changed. Then this company should be revalued upwards in new currency to 130, all other things being equal. I assume that wages, costs etc & product price would simply be increased to reflect new currency.

Should this company export, then all export prices will be unchanged, except that they will be reported in new currency. And, if they import materials or earn profits mainly abroad, then the foreign transactions will likewise just be reported in the new currency. This would appear to be merely an accounting exercise in most cases. The big assumption in all of this is of course, that wages/prices etc can be increased to the same levels in the new currency. If not, then that would have an enormous impact on companies & society.
 
Hi rob1,ok about share certs, I understand your concerns, but they are a bit too illiquid for me!

I don't know about life funds at all. I invest only in shares & other asset types. Some of the posts in the deposits section might be useful. One of the banks that gets mentioned is Keytrade LUX. From a quick glance at their website they seem to offer fund investment. You should post a new thread asking the question specifically. You may get others with more knowledge of these to answer a specific query.
 

Hey horusd, yes, I think you are pretty much on the ball there, it is an accounting exercise even fi you cannot calculate it exactly down to the penny. As you already noted, there would be certain assumptions that you would have to make about wages, but also bear in mind the cost of borrowing. This could go up significantly, or the ability to borrow could further evaporate.
I mentioned a UK telecoms company earlier, which I have invested in. It is one of only two sterling investments I own, as I believe that sterling is at a higher risk of devaluation than the euro. Nevertheless, this company generates the majority of its income outside of the UK, with vast operations in Europe and Asia. This gives me enough confidence that my investment is relatively safe from a depreciation in sterling.
But I think you are on the right track. There are many investment opportunities out there that provide fantastic dividend income when compared to savings.
 
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