Norway Hikes Rates: ETFs to Play
The Norges Bank on Sep 23 become the first developed central bank to raise interest rates following the emergence of the coronavirus pandemic.
The Norges Bank on Sep 23 become the first developed central bank to raise interest rates following the emergence of the coronavirus pandemic. After cutting rates three times in 2020 due to the pandemic-driven crisis, Norway’s central bank decided to hike rates to 0.25% from zero. This shows the policymakers’ faith in the country’s economic growth momentum.
“A normalising economy now suggests that it is appropriate to begin a gradual normalisation of the policy rate,” said Governor Oystein Olsen in a statement on Sep 23, as quoted on CNBC. Another hike is likely in December, per the bank. Norway’s currency soared to its highest levels since June against the euro, and gained against the U.S. dollar also.
“The reopening of society has led to a marked upswing in the Norwegian economy, and activity is now higher than its pre-pandemic level. Unemployment has fallen further, and capacity utilisation appears to be close to a normal level,” the bank added in the statement, as quoted on CNBC.
The Norwegian economy grew 1.1% sequentially in the June quarter of 2021, rebounding from a 0.6% shrinkage in the previous period due to virus-led restrictions. Household consumption, government spending and fixed investment all bounced back. Both exports and imports recoiled sharply.
Apart from the economic stability, rising oil and gas prices will likely boost Norway's GDP ahead. Norway is one of the world's largest exporters of oil and gas. With oil and gas prices rising steadily, Norway has every reason to cheer.
Not only Norway, many other regions are also considering similar moves. The ECB recently said it will slow down emergency bond purchases over the coming quarter. This would be a step forward for the ECB toward unwinding the emergency aid that has shored up the Euro zone economy during the coronavirus pandemic (read: ECB Trims Support, Will Fed Follow Suit? ETFs in Focus).
Federal Reserve Chair Jerome Powell also said last week that the central bank could start scaling back asset purchases as soon as November and finish the process by mid-2022. Several officials are even interested to hike interest rates next year. The announcement of the Fed QE taper may come in the policy gathering on Nov 2-3. However, the Fed chair Powell left the door open to waiting longer should the need be and stressed that tapering is not directly corelated with the timing of rate liftoff (read: Fed Taper to Start in November? 7 ETFs to Buy).
Against this backdrop, below we highlight a few Norway-based ETFs that could be played right now.
ETFs in Focus
iShares MSCI Norway ETF ENOR
The underlying MSCI Norway IMI 25/50 Index is designed to measure broad-based equity market performance in Norway. Financials (21.56%), Consumer Staples (17.64%), Energy (15.87%), Communication (14.08%) and Materials (11.56%) are the top five sectors of the fund.
Global X MSCI Norway ETF NORW
The underlying MSCI Norway IMI 25/50 Index is designed to measure the performance of the large, mid and small cap segments of the Norwegian market. Financials (22%), Consumer Staples (17.64%), Communication Services (14.5%), Energy (14.3%) and Materials (11.7%) are the top three sectors of the fund.
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Global X MSCI Norway ETF (NORW): ETF Research Reports
iShares MSCI Norway ETF (ENOR): ETF Research Reports
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