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2012 – Yet another turbulent year

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oslo bors2012 was yet another turbulent year for the stock market. Even though the Oslo market rose over the course of the year, with the OBX Index (which comprises the 25 most traded shares listed on Oslo Børs) up by 14.74% per cent by the end of the year, this was not enough to encourage investors to fully return to investing in shares. Investors have turned to asset classes other than shares, and trading volume in the stock market was sharply lower. This means that many investors have missed out on the upturn seen in the stock market in 2012.

Lower trading volumes in the stock market also affected the derivatives market, where trading activity was somewhat lower with average daily turnover of 43, 188 contracts as compared to 53, 719 contracts per day in 2011.

On an international perspective, stock markets were affected in 2012 by political developments in America and the presidential election, the crisis in the Euro zone and weaker economic growth in Asia. Investors showed particular concern over politicians’ handling of problems with national debt in many southern European countries.

Oil prices were high and stable throughout 2012. There are at the moment no particular signals that this will change in the near future. In contrast to the situation seen during the financial crisis of 2008 and 2009, this time around oil prices have not suffered as a result of the turbulent macroeconomic outlook.

Moderate level of new issue activity With the stock market characterised by a high degree of uncertainty and reduced risk willingness, companies seeking to list their shares have found conditions challenging. However, there were some periods when more optimistic market conditions offered opportunities for listing, and the exchange bell rang eight times in 2012: Three times for new listings on Oslo Børs (Selvaag Bolig, Veripos and Borregaard), once for a new listing on Oslo Axess (Crudecorp) and four times for transfers of listings from Oslo Axess to Oslo Børs (Sevan Drilling, Polarcus Limited, Spectrum and Bridge Energy).

Oslo Børs was in dialogue over the course of 2012 with managers working for a number of companies that are planning to list their shares. The new issue market is expected to become more active as soon as market conditions stabilise.

Capital raising in the equities market Companies raised less equity capital from the stock market in 2012 than in the three previous years, and one has to go back to the crisis year 2008 to find a year with a similarly low level of new issue activity. Capital raised by companies from the Oslo Børs and Oslo Axess marketplaces totalled NOK 17.5 billion in 2012. This is well down on the record year of 2010, when companies raised NOK 61.9 billion of new capital from the stock market. The largest new issues in 2012 were by Northland Resources, which raised NOK 1.8 billion in February to finance the company’s Kaunisvaara project, and by Borregaard, which raised NOK 1.7 billion in connection with its admission to listing in October.

Red-hot bond market – record level of new issue activity The bond market was again a regular source of financing for Norwegian business and industry in 2012. Not only was the volume of debt issued at a record level, but trading turnover in credit bonds also increased. Debt issued in 2012, including both new issues and increases in existing issues, totalled NOK 695.6 billion. Government borrowing accounted for NOK 424.6 billion (incl. rollovers in the swap arrangement) of the total, so the amount raised by other issuers, principally banks and companies, reached a new record of NOK 271 billion. Figures for trading volume show that if trading in government bonds is excluded, turnover in other bonds increased in 2012, particularly in the autumn when trading volume on some days reached the same level as trading in the stock market.

Winners and losers in 2012 The best-performing listed company in 2012 was Aker Philadelphia Shipyard, with an increase in share price of an impressive 267.6 % for the year. Other companies on the list of best performers were SeaBird Exploration (+263.9 %), Grieg Seafood (+185.2 %), Norwegian Air Shuttle (+160.5 %) and Sevan Marine (+142.5 %).  Companies with the weakest performance included RomReal (-90.8 %), Norse Energy Corporation (-87.7 %), Blom (-87.5 %), Funcom (-87.5 %) and DiaGenic (-85.3 %).

Increased competition between trading venues Increased competition between trading venues has resulted in lower market share for traditional exchanges and a general reduction in the profit margins that exchanges generate from securities trading in general, and from equities trading in particular. Oslo Børs maintained a market share in 2012 of approximately 65% of all trading in shares listed on Oslo Børs that was carried out through electronic trading systems.

Oslo Børs implemented a number of measures to improve its competitiveness in 2012.

In October, Oslo Børs entered into an agreement with the owners of the Swedish exchange Burgundy to take over 100% of the shares in the company. Oslo Børs and Burgundy will together be a strong and viable competitor both for other Nordic exchanges and for foreign trading platforms that offer trading in Nordic securities. The acquisition of Burgundy is subject to approval by the relevant authorities in Norway and Sweden.

Oslo Børs again implemented reductions in trading fees for share trading in 2012. A new price tariff will come into effect from 1 January 2013.

Oslo Børs migrated to a new trading system for equities and fixed income instruments on 12 November. Millennium Exchange is one of the fastest trading systems in the world. Speed of response has become an ever more important factor for market participants, and by implementing Millennium Exchange Oslo Børs has strengthened its competitive position.

Comprehensive statistics and up-to-date information for all the products listed and traded on the Oslo Børs marketplaces can be found on the Oslo Børs website: www.oslobors.no

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