Oil fall lays Norwegian funds low

The oil price fall has hit Norwegian equity funds hard, and prompted the government to call an emergency meeting on the economy.

With a stock market heavily reliant on oil production and services company listings – such as Statoil, Aker Solutions and Frontline – it is unsurprising that Norwegian equity funds have been hard pressed in the opening weeks of 2016.

Data from Morningstar Norway – below – illustrate the level of falls experienced by funds in local currency thus far.

However, the outlook has become so concerning to the government that prime minister Erna Solberg on the morning of 25 January called in not only Norges Bank governor Øystein Olsen, head of the central bank, but also Harald Magnus Andreassen, chief economist of Swedbank, professor Steinar Holden of the University of Oslo, Elisabeth Holvik, chief economist at the Sparebank 1 group, and professor Hilde Bjørnland at the BI Norwegian Business School.

Following the meetings, the government announced that it had had the “thumbs up” from these macroeconomic experts. However, the meeting comes shortly after the OECD said in its Economic Survey of Norway 2016 that not only was the economy sensitive to changes in the oil price, but that sectors such as construction were subject to a near trend of soaring residential house prices, which posed a challenge to the broader economy.

According to the Morningstar data, the losses made by some Norway equity funds have tipped into double digits within less than a month. That said, many have offered up negative return over the past 12 months, reflecting the ongoing trend for lower commodities prices affecting commodities exporting countries.

Much will depend on the portfolio itself. For example, the Swedbank Generator is over 35% exposed to the energy sector, and is more than 71% exposed to Europe ex-euro, and has Norwegian energy firm DNO as a top five holding, according to Morningstar data.

(Source: Morningstar Norge)