Political surprises as well as rising oil and salmon prices characterised the Norwegian stock market in 2016. In June the stock market was caught off guard by the UK’s vote to leave the EU, while in November Donald Trump’s victory was an equally big surprise. Both votes created big but short-lived fluctuations in share prices.
2016 was characterised by a steady and stable upturn in share prices, if weignore January. The year ended with six months of rising share prices, and there were only two months over which prices fell. The majority of the upturn in share prices seen over 2016 took place in the last quarter of the year. Rising prices in international stock markets following the presidential election in the USA and the increase in the price of oil following an agreement to cut production helped make the fourth quarter the strongest in 2016 for the Oslo Børs Benchmark Index, during which period it rose 9.8%. On 1 December the Oslo Børs Benchmark Index finally broke through its previous all-time high set in April 2015. Since then the index has closed at six new all-time highs.
2016 was the year that started with a big fall. InJanuary the Oslo Børs Benchmark Index fell 8.1%, the largest fall over the course of a single month since May 2012. Concerns about a hard landing in China and a rapidly falling oil price contributed to this weak start to the year. The price of oil has doubled since the low set in January, and at the same time the outlook for the world economy has become brighter.
Oslo Børs has risen by more than other stock exchanges. By way of comparison, the Stockholm stock exchange rose 4.7% in 2016 (OMX Stockholm 30), and when Oslo Børs closed before the New Year, Germany’s DAX 30 Index was up by 6.9% for 2016, the FTSE 100 by 14.4% and the S&P 500 by 9.8%. If we factor in the fact that the Norwegian krone has strengthened against most other currencies in 2016, particularly the British pound, and measure the return in krone terms, saving by investing in Norwegian shares has been even more profitable compared with other exchanges.
Private individuals are saving more in shares. Therehas been a shift towards saving more in individual shares following many years of falls in the number of private shareholders. At the same time, the value of shares held by private individuals has risen to record-high levels in line with the increase in the value of shares on the Oslo Børs marketplaces. Private individuals are also saving more into equity funds, with net inflows into equity funds amounting to a sizeable NOK 5.8 billion during the first 11 months of the year. Pension saving has been an important contributor to this, and investment through defined contribution pensions represented a quarter of net inflows into equity funds.
Seafood, oil and finance contributed the most to the upturn in share prices on Oslo Børs in 2016. While the oil market was characterised by oversupply, the scarcity of salmon sent the salmon price up sharply in 2016. The Seafood Index rose 56.4% in 2016, making seafood the best performing industry on Oslo Børs in 2016. Grieg Seafood, Norway Royal Salmon and the Scottish Salmon Company were the seafood companies whose share prices rose the most in 2016, with all three delivering returns in excess of 100%.
Energy companies again the largest sector. Energy companies represent approximately 35% of the total value of all the companies listed on Oslo Børs, and are easily the largest sector. The Energy Index climbed 31.8% in 2016, with Aker BP leading the way. Aker BP rose 183.1% over the year and thereby made it onto the list of the biggest companies listed on Oslo Børs. Oil service companies, such as Subsea 7, TGS-NOPEC and Aker Solutions, came back strongly in 2016, as did Statoil, the biggest company listed on Oslo Børs, which delivered a return of 35.5%.
Financial companies had a good year, with theFinancials Indexrising 24.3% in 2016. SpareBank 1 SR-Bank, Skandiabanken and Storebrand made the greatest contributions to the index’s increase, along with the holding company Aker.
The health care sector was the best performing sector, with theHealth Care Index up 80.5%. Nordic Nanovector rose by an impressive 586.2%, meaning it was one of the best performing shares on Oslo Børs in 2016 and responsible for the lion’s share of the increase in the Health Care Index. Health care is a relatively small sector on Oslo Børs, and is not a large component of the Benchmark Index. The utilities sector is also relatively small, and in 2016 Hafslund caused the Utilities Index to rise 50.4%.
Consumer discretionary and telecoms were the two weakest sectors in 2016. Schibsted and Telenor contributed to the Consumer Discretionary Index and the Telecoms Index falling by 28.5% and 8.2% respectively.
2016 was a busy year for new share listings, with many new “goods” on Oslo Børs’ “shelves”. In total 17 new companies were admitted to the Oslo Børs marketplaces in 2016: six of these were listed on Oslo Børs and Oslo Axess, while 11 were admitted to trading on Oslo Børs’ new marketplace, Merkur Market. The launch of Merkur Market has been a success. In the weeks before Christmas, four new companies were admitted to trading and, if market conditions remain stable, our marketplaces may well continue to be busy with new admissions in the coming months.
It is important for investors to have a broad range of companies to invest in. The companies admitted to the Oslo Børs marketplaces in 2016 came from a broad range of sectors and included both smaller and larger companies. More small companies were admitted in 2016 than in previous years, and the total market value of newly admitted companies on their first day of admission totalled NOK 31.5 billion in 2016. The market value of companies admitted to the Oslo Børs marketplaces has only been higher in one year since 2011, which was 2014. It is also important to offer companies listing products that are adapted to the structure of business and industry in Norway, as Norwegian business and industry need capital to grow. The launch of Merkur Market is Oslo Børs’ answer to this need.
Numerous records in the fixed income market. Never beforehave so many new fixed income issues been admitted to listing on the Oslo Børs marketplaces in the course of a single year as in 2016, when 571 new issues were listed. The previous record of 552 fixed income issues was set in 2013. We are approaching 1,900 listed fixed income issues, the outstanding value of which has recently passed NOK 1,700 billion.
Municipalities and banks helped the level of issuance activity in the fixed income market reach a record high. Most of the record-high volume of debt issued in 2016 was due to debt issued by banks, with banks dominating both in terms of the number of fixed income issues listed and the amount of capital raised. However, with regard to new issuers, Norwegian municipalities were in a league of their own, with municipalities representing 43 of the 66 organisations that had a fixed income issue listed for the first time in 2016. This caused the number of municipalities and county authorities with fixed income issues listed on Oslo Børs to increase to 54 from 11 at the start of 2016. The flurry of municipalities listing debt on Oslo Børs is explained by the better borrowing terms they can achieve.
Share trading volumes picked up at the end of 2016. The level of trading on Oslo Børs and other marketplaces was relatively low in the summer and autumn. The average daily value of shares traded in 2016 was NOK 4.15 billion across 92,300 trades. This was 10.5% less than in 2015 in krone terms.