(Oslo, 16. July 2012) According to experts from DNB Asset Management, Scandinavian equity markets offer investors an attractive alternative, especially in today’s environment. While the eurozone continued in its struggle to overcome its problems, export-oriented Scandinavian countries benefited from the rapid growth trend in emerging markets. As Karl G. Høgtun, Head of the Nordic Equity Team and Portfolio Manager at DNB Asset Management, explains: "An increasing number of Scandinavian companies are benefiting from high growth in emerging markets and generating a significant portion of their profits there".
Strongly positioned companies in global growth markets
Experts are convinced by the innovative prowess and economic strength of individual companies. Norwegian browser vendor Opera Software is a case in point. For years, the globally active company has steadily contributed to the positive performance of the DNB Scandinavia Nordic equity fund co-managed by Karl G. Høgtun and his colleague Kjell Morten Hjørnevik. "Opera is a good example of how Scandinavian companies draw a great deal of their economic strength from innovative projects and through business in emerging markets," says Høgtun. The software developer, which was launched as a research project in Norway in 1994, generated more than a quarter of its 2011 sales in the Asia-Pacific region. The company is positioned in Asia with a market share of over 30 percent while in Africa its market share is as high as 65 percent. Novo Nordisk, a global player in the field of diabetes pharmaceuticals, likewise ranks among Høgtun’s favourites due to the company’s prowess in innovation, as well as its market leadership in China and India. Novo Nordisk has been marketing its products in China since the 1960s.
Finnish tyre manufacturer Nokian Renkaat, with profits beating expectations in the first quarter of 2012, is particularly attractive in Høgtun’s estimation. The company specialises in winter tyres for passenger cars and commercial vehicles. "The Group’s focus on high-end quality products gives it an advantage over sector peers in terms of its above-average profitability," explains Høgtun. In addition, Nokian Renkaat benefits from its proximity to Russia and the country’s booming automotive market. The demand for winter tyres is particularly strong in Russia owing to its climatic conditions.
A Norwegian success story
"In 2011 Norwegian companies enjoyed their third best year since 1995 while the rest of Europe continued to struggle with the financial crisis," explains Høgtun. Norwegian companies improved both sales and margins.” Oil and gas exports in particular were key drivers,” added Høgtun. Although the volume of unprocessed oil exports has roughly halved since 2002, prices tripled during the same period. But it’s not just Norway that is reaping profits. "Scandinavian countries have low unemployment rates, some have government budget surpluses, and they have positive foreign trade balances and strong currencies." Investing in shares of Norwegian and Swedish companies also offers investors the opportunity to diversify their portfolio with independent currencies, according to Høgtun.
Upbeat on medium-term risk/return profile
"Even assuming conservative earnings forecasts for Scandinavian companies, we are convinced that investors will find the risk/return profile in these markets to be highly attractive over the medium term," adds Høgtun. Given the global economic uncertainty and the fiscal challenges facing major industrialised, it is relatively difficult to accurately gauge the earnings performance of Scandinavian companies for the current year. However, he believes that corporate earnings growth of up to 10 percent is possible for 2013.
DNB Scandinavia co-managed by Karl G. Høgtun and Kjell Morten Hjørnevik achieved a performance of 13.7 percent on a three-year horizon. The fund’s performance since the start of the year stands at 4,8 percent.
