Norway ETFs In Focus Post Rate Cut

By | March 22, 2016

Scalper1 News

In its latest meeting, Norway’s central bank lowered its key interest rate to an all-time low of 0.5% from 0.75%. This move was highly anticipated given a history of rate cuts and weak outlook. The outlook for Western Europe’s biggest crude producer, Norway, has gone from bad to worse in the last couple of months, thanks to persistently low oil prices. Norway is among the top 10 nations famous for oil exports and, with its comparatively low population, oil forms a key part of the country’s GDP. The central bank stated that the developments in the Norwegian economy have been weaker than expected, with unemployment expected to go northward from the current level of 4.5%. Negative Interest Rate on Radar The Norwegian central bank also hinted at further rate cuts and warned that it could even go to negative territory in order to revive the economy. Meanwhile, several other countries are also following a strategy of monetary easing, which generally comes in the form of an interest rate cut to boost growth. Earlier this month, the European Central Bank (ECB) came up with a more intensified economic stimulus and opted for multiple rate cuts and the expansion of its quantitative easing program to boost the economy. Apart from ECB, Norway’s neighbors Sweden and Denmark have also adopted this policy. Another European country – Switzerland – has lowest rates across the world and held the rates steady in March. Meanwhile, the Fed has also maintained its dovish stance. The central bank now expects the federal funds rate to rise to 0.875% by the end of the year, as compared with the previously expected 1.375%, implying only two rate hikes as compared to the previously expected four rate hikes. Although rate cuts are expected to boost economic activity, the Norwegian central bank noted that rock-bottom rates could hamper the profitability of commercial systems and affect the financial system adversely. A Closer Look at 2 Norwegian ETFs In the light of these developments, we highlight two ETFs – the Global X MSCI Norway ETF (NYSEARCA: NORW ) and the iShares MSCI Norway Capped Investable Market Index ETF (BATS: ENOR ) – that have gained 0.5% and 0.9%, respectively, in the last 5 days. Both have a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. NORW This is the most popular ETF tracking the Norwegian market with AUM of $59.4 million and average daily volume of almost 62,000 shares. The fund tracks the FTSE Norway 30 Index, holding 57 securities in its basket while charging 50 bps in annual fees from investors. The product is somewhat concentrated in both sectors and securities. The top three firms account for almost one third of total assets, while from a sector point of view energy dominates the fund’s assets with 30% share. The fund has a tilt toward large-cap stocks at 61%. ENOR This ETF follows the MSCI Norway IMI 25/50 Index, holding a basket of about 55 companies that are based or do most of their business in Norway. The product puts about 67.7% of total assets in the top 10 holdings, suggesting concentration. Although a capping methodology is applied, limiting the weight of any single stock to a maximum of 25% of total assets. Large caps are pretty prevalent, as these make up 61% of assets. With respect to sector holdings, energy again takes the largest share at 29.6%, followed by financials (20.1%) and consumer staples (15.3%). The product has amassed $17.9 million in its asset base while it trades in volumes of around 23,000 shares. It charges 53 bps in fees per year from investors. Original Post Scalper1 News

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