January 27, 2023

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While prices are down in the stock world, the Norwegian Stock Exchange is down 1 percent in 2022. But the leading indicator hides a tug of war between the sectors in the Oslo Bors.

Unrest: War, inflation and high interest rates affected the stock market in 2022.
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The year 2022 is drawing to a close, and the conclusion is clear: stock markets fell sharply internationally, while Oslo Poor’s finished slightly lower.

Experts note that the stock market has been characterized by higher energy prices, a faster-than-expected increase in interest rates, and a salmon tax shock.

Oslo Poor’s ended the year down one percent, as measured by the main index, which consists of a representative group of stocks on the stock exchange.

The S&P 500, a stock index of 500 important listed companies in the United States, fell 20.3 percent in the same period.

If you ignore energy and shipping, says Alexander Miller, investment director at management company Odin, there has been a significant drop in the stock market in Oslo.

– What separates 2022 from previous years is that there are one or two sectors that performed well on a bad stock exchange. There are a lot of stocks that have fallen very sharply in Oslo Poor’s, Miller says.

Here you can see how the main index of the Oslo Poor’s has performed compared to a group of important foreign stock market indices, the US S&P 500, the British FTSE 100 indexFTSE 100 indexStock index of the 100 most valuable companies listed on the London Stock Exchange and German DaxDaxStock index of 30 large companies listed on the Frankfurt Stock Exchange in Germany.

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War and inflation

The main reason for the strong development in energy shares is the war in Ukraine and the pressure it has had on energy prices.

Oslo Bors is known to be rich in oil. Equinor, the most important share on the Oslo Stock Exchange, is up 48 percent this year.

– Much of what happened this year happened in the early months, when it was realized that inflation would be much higher and central banks would have to raise interest rates even more. Then energy prices peaked, Miller explains.

Russia, led by Putin, invaded Ukraine on February 24 this year.

The big surprise in 2022 wasn’t necessarily that inflation and interest rates were higher, but that the increase was as big as it gets, according to Miller.

War, inflation and high interest rates mean that there is much less appetite for risk and people want to pay more for risk.

Investment manager Alexander Miller

Cautious and anxious investors are looking for companies that are doing well today because of this shift in risk appetite, according to Miller.

Growth and technology companies, many of which are based in the US, have taken a beating in the stock market.

– Miller points out that these companies will have more of their profits at some point in the future, and therefore they are more risky than companies that make money today.

weaker kroner

Investment manager Tore Andre Lysippo at DNB Wealth Management noted that the weak krone exchange rate, especially against the dollar, has contributed positively.

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– We have several large export companies with dollar income, so income has risen sharply in kroner terms, says Lisibo.

Investment Director Tore André Lisipeau at DNB Wealth Management

The krone weakened by more than 12 percent against the dollar for the full year.

The dollar is now at NOK 9.86, according to figures from Infront.

– Some were afraid

Eric Hoagland, Managing Director and Director of First Fondene, highlights the introduction of a land rent tax on aquaculture. It reacts to the way it was presented, including the fact that the changes go into effect on January 1, 2023 before consultation opinions are returned.

– Obviously, some were afraid and that contributed to the political stakes, says Hoagland.

The Oslo Poor’s Seafood Index, which is made up of salmon stocks such as Mowi and Salmar, is down more than 18 percent for the year. The decline came mainly in the fall, after the news of the introduction of the land rent tax.

Energy, shipping and seafood are important to Oslo Bors and make the Norwegian stock market stand out internationally.

In the chart below, you can see how these industries have developed on the Oslo Stock Exchange.

A comparison of the development of a number of important stock exchanges shows that the London Stock Exchange has performed better than the Oslo Stock Exchange this year – despite the fact that the Norwegian stock market has been doing quite well in an international context.

– You have to see where it came from. It has been boosted for a few years by Brexit and has also been affected by a weaker pound, says Lysebo of DNB Wealth Management on the London Stock Exchange.

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Rising commodity prices also contributed positively to the FTSE 100 index in London in 2022, according to Reuters.