The NORW ETF (Global X) created in 09/2010 is listed on the NYSE in USD and replicates the MSCI Norway Index which is composed of the 62 main Norwegian stocks, half of which consist of oil stocks and banks. NORW offers a "pure" exposure to Norway but this index also carries a significant risk related to the evolution of the local currency.
The fee for this ETF is 0.5% for AUM of $ 175M. The replication method is direct (physical) and there is an annual dividend distribution policy.
Alternative ETFs: ENOR (iShares in USD)
Index & components
The MSCI Norway Index is quite diversified with 62 stocks and a strong weighting of energy (31%), financial (22%) and consumer goods (16%).
The first capitalization is the Equinor oil company which represents 18% of the Norwegian index. The other two large caps of the index are the DNB (13% of the index) and the Telecom oprator Telenor (9%). Norway has a diversified and technologically advanced economy.
GDP stood at $ 392bn in 2017, Norway's economy is essentially based on the exploitation of its natural and energy resources (oil, gas, hydropower, forests and minerals). Oil production dominates the economy, accounting for nearly a quarter of GNP. Shipbuilding, metals, pulp and paper, chemical industries, machinery and electrical equipment are Norway's main manufacturing industries. Norway has one of the largest and most modern fleets in the world. The industry employs one-fifth of the labor force and accounts for more than a third of GDP, declining in recent years.
The service sector is highly developed, employs more than 75% of the population and accounts for more than 60% of GDP. Since 2014 and the fall in oil prices, investments in the energy sector have slowed down (energy account for more than 50% of exports and a quarter of Norway's budget revenues and GDP). The Norwegian leader, Statoil, has abandoned several major exploration projects in hard-to-reach Arctic areas. The level of hydrocarbon production is momentarily flat.
The capitalization of the sovereign wealth fund, to which almost all Norwegian hydrocarbon revenues are paid, has exceeded € 1000 billion in 2017. This is a considerable challenge for the Norwegian economy (more than 300% of Norwegian GDP) and an important partner for France, which ranks 4th in the fund's equity portfolio (5% in value), although its share is declining in favor of emerging countries. Its volume (1.2% of the world's capitalization) makes it a key prescriber on the markets. The Norwegian authorities regularly point out, particularly with regard to investment in the euro area, that the only investment criterion is long-term return, without any political considerations. A levy of 2.9% of its value, which remains below its real long-term yield and at the limit of the rule of 4% allowed, enabled the country to fill its budget deficit in difficult years (2014).
Latest developments
After increasing by 13.9% in 2016, NORW grew by 19% in 2017, which is in line with the MSCI World (+ 20.6%). Since the beginning of the year, NORW has increased by around 13%, which represents a significant outperformance compared to the European indices (stoxx600NR: 0%) and American indices (S&P500: +8.8%), driven by the increase of the two biggest capitalizations Equinor (+ 23%) and DNB (+ 15%).
The Norwegian economy's growth is fairly correlated with hydrocarbon prices, which are rising sharply this year, while the oil sector generates significant tax revenue for the state, but also represents a major source of demand for other sectors. Norway, whose economy is mainly based on natural resources and services, is benefiting from the strength of global growth and seems somewhat immune to the theme of the trade war initiated by D.Trump.
