DNB Scandinavia - Portfolio Manager's commentary 05/2014

As you know, the Nordic stock market has performed extremely well over time. Better than both the European and the global stock markets. And our product since the beginning of 2008 has outperformed the market with 19 per cent gross. Also, last year was a good year both for the market and for the DNB Scandinavia product.

What can we expect to happen in the Nordic equity market this year?

We believe that valuation is still on the inexpensive side compared to the low interest rate environment we do have. Furthermore, earnings momentum should take up with the improved macro outlook globally. In addition, the Nordic countries continue to have a decent economic growth, probably higher than in the EU region. So in our model we forecast about a 10 per cent earnings growth this year. Given that multiples will not change you can get the earnings growth plus dividend meaning 10 to 15 per cent return in the stock market. But what about multiples? Could they go up? At least one positive factor is M&A. We see a lot of M&A activities also in the Nordic space, particularly within healthcare and industrials.

How is DNB Scandinavia positioned?

Well, we have a slightly positive tilt towards the market, a beta over one, we have a slight tilt towards cyclical sectors and we have several stocks that could benefit from an increased M&A activity. So, we believe that tactically, the market is still attractive and also long-term the market outlook is good. As you know the Nordic stock market has outperformed the global stock market quite a lot historically, and we believe that the fundamentals are in place for this continue to happen long-term.