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Oslo stock exchange: outperformer from the high north
It’s sunshine all the way on the Oslo stock exchange. While red numbers have dominated on European equity markets so far this year, Norway is soaring. The lead index, the OBX, is more than 15% above the level reached at the end of 2017. Two sectors have played a key part in the outperformance of the Scandinavians: oil & gas and fish farming. While the first of these is profiting from the rise in energy prices, it is structural factors that are driving prices in the fishing industry. As the world's leading producer of salmon, Norway is benefiting from the fish’s popularity. Whether the trend towards a healthy diet, the growing middle class in various regions of the world or its sheer taste, the typically pinkish and particularly protein-rich meat of the fish is making it enormously popular. And business for Norway’s fish farmers is booming accordingly.
EU the most important export market
According to figures from the Norwegian Seafood Council, the country exported 556,000 tonnes of salmon in the first half of the year. That represents an increase of 7% on the volume for the same period in 2017. While exports actually declined in the first three months of the year, in the 2nd quarter they rose by a tenth. “Some factors made a positive contribution to the record semester”, explains Paul T. Aandahl, analyst at the Norwegian Seafood Council. Pointing to the currency situation, Aandahl says the Norwegian krone (NOK) appreciated by 7% relative to the US dollar in the first six months, whereas it gave up 5% against the euro. “Since two thirds of Norwegian salmon goes into EU territory, the export results remained positive”, Aandahl says. This is reflected in the fact that volumes supplied into the EU rose by a disproportionate 13% in the first half. A decline in production within the EU also played into the hands of the Scandinavians. Looking ahead to the 2nd semester, the analyst assumes that Norwegian salmon exports will continue their upward trend.
Diversified investment approach
Swissquote is now responding to the positive momentum in the sector with a special investment solution: the bank has launched the Norwegian Fishing Portfolio Index. To achieve the best possible returns, a team of experts systematically sought out the most promising fish farm operators. Eight of the industry representatives listed on the Oslo stock exchange feature in the initial make-up of the index, with Bakkafrost taking the role of heavyweight. Based on the Faeroe Islands, the company accounts for 19% of the benchmark. Bakkafrost covers the entire value added chain. Its fields of activity range from fish food to consumer products such as frozen fillets or fresh salmon. With the company's profits having fallen sharply in 2017, analysts anticipate a turnaround. The consensus is for average growth of 15.5% in earnings per share for 2018 and 2019 (see table). That makes Bakkafrost typical of the Norwegian Fishing Portfolio Index. The market anticipates double-digit percentage growth rates for all companies over the stated period.