Norway ETFs Lagging Nordic Rivals

ETF Trends

Amid tensions in Ukraine, some of the air has recently come out of exchange traded funds holding European stocks.

That does not mean those stocks and ETFs are structurally damaged. With the SPDR EURO STOXX 50 Fund (FEZ) , WisdomTree Europe SmallCap Dividend Fund (DFE) higher by 46% over the same time, a pullback is perhaps necessary and health for Europe ETFs. [Europe ETFs Take a Break]

As that pullback has unfolded in recent weeks, Nordic ETFs have remained sturdy. Year-to-date, the iShares MSCI Sweden ETF (EWD) is higher by 3% while the multi-country Global X FTSE Nordic Region ETF (GXF) is up nearly 6%. The iShares MSCI Denmark Capped ETF (EDEN) is the star of the Nordic ETF group with a 2014 gain of nearly 10%. [Danish Dominance in This ETF]

Getting left behind are Norwegian stocks. The Global X Norway 30 ETF (NORW) is up just over 2% this year. Although the situation has improved a bit recently, NORW’s relative strength as measured against EWD and EDEN has been worsening since the fourth quarter of 2013, notes Bartlomiej Fraszczyk, portfolio manager at Generation Systematic Solutions.

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“I suspect the energy sector is making NORW lag the other Nordic ETFs,” said Fraszczyk in an interview with ETF Trends. NORW allocates nearly 43% of its weight to the energy sector, making it vulnerable to price action in shares of Statoil (STO) and the oil futures market.  By comparison, the energy sector is just 6% of GXF’s weight while EWD has benefited from resurgent Swedish banks and industrial firms. EDEN has been buoyed by a massive allocation to the health care sector.

Still, Norway’s status as one of the largest non-OPEC producers of oil and gas could again benefit NORW as it has in the past.

“My two- second read is that it is a petro-economy with great fundamentals and a huge sovereign wealth fund,” said Richard Griffiths of Investment Strategy Wire in an email to ETF Trends.

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