DNB Scandinavia - Portfolio Manager's commentary 10/2013

The Nordic region versus Europe: better growth prospects

I think the Nordic countries will have higher growth than Europe. The reason behind is that they have not as much debt than Europe. Debt to GDP ratios in the Nordic countries are much lower than the debt to GDP ratios in European countries. And the Nordic countries then don’t have to raise taxes and cut down on spending.

Top-line growth - key to investor returns

Why have the Nordic countries outperformed global equities and European equities? And outperformance from the 1970s is quite high in fact. It is around 4% annually compared to global companies. I think that top-line growth is the main reason why the Nordic countries have performed historically, and I think that is the main reason going forward as well. Higher top-line growth in Nordic companies than European companies will lead to higher returns.

Current positioning

We think that global growth will be above trend in Q4 and in 2014. And when global growth is above trend Nordic companies tend to have quite good earnings growth. And therefore we are more cyclically tilted towards companies now and have taken down the more expensive defensive tilts.