Norway is home to a bustling energy sector. While the decline in oil prices has weighed on the economy, the recent selling pressure in the Norwegian market and country-specific exchange traded fund may be overdone.
BlackRock has increased its position on Norway’s krone currency against the euro, betting that the market is overly pessimistic about the negative effects of lower oil prices on the country’s economy, reports Marianna Duarte De Aragao for Bloomberg.
Investors who also believe that Norway’s markets have been unduly oversold can take a look at country specific ETFs like the Global X Norway 30 ETF (NORW) and the iShares MSCI Norway Capped ETF (ENOR) , which include a hefty tilt toward the energy sector.
The energy sector makes up 32.4 of NORW and 30.4% of ENOR. Statoil ASA makes up the largest position in both ETFs, accounting for 15.8% of NORW and 14.8% of ENOR.
Citigroup (NYSE: C) analysts also upgraded their view on Statoil ASA from neutral to bullish on Tuesday, Bidness ETC reports. Citigroup analysts contend that the market is failing to take into account the positive management that can help alleviate pressures from falling oil prices.
The Norway ETFs have been weakening, along with other European markets, over the Greece financial drama, but Norway recently rebound with global markets. Over the past week, NORW was up 3.8% and ENOR was 4.3% higher. Year-to-date, NORW gained 2.1% and ENOR added 1.7%.
Marilyn Watson, a product strategist at BlackRock, argues that the Norwegian central bank will not need to ease its monetary policy any further.
“The decline in the oil price, while having a negative impact on the domestic economy, was not as large as many feared,” Watson told Bloomberg. “Furthermore, the weakness in the currency has lessened any required rate adjustment by year-end.”
Consequently, Watson believes that there is room for the Norwegian krone to appreciate as the domestic economy strengthens.
An appreciating krone currency would also add to returns in Norway ETFs as the funds do not hedge currency risks.
Global X Norway 30 ETF
For more information on Norway, visit our Norway category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.