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This European Country & Its ETFs May Gain from Russian Tension
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Talks about Russia-Ukraine tensions are back this year after 2014. Russia’s Crimea annexation (previously a Ukrainian territory) had then hit headlines thanks to its military move and the resultant standoff with the West as the Crimean maneuver was viewed as an utter violation of international law by the West.
This year too, the Russia-Ukraine crisis seems to have escalated. Western allies are now preparing for some kind of military hostility. NATO put more forces on standby. The U.S. Department of Defense said Monday that about 8,500 American troops are on high alert and will make a move in the region if Russia invades Ukraine.
Having said this, we would like to note that if the crisis worsens, Norway – an often-overlooked European investment destination – may gain.
Why Norway May Gain on the Russia-Ukraine Tension
Europe is highly energy-dependent on Russia, from where it imports about 40% of its energy requirements. This dependency has made it difficult for Europe to go against Russia completely.
But Norway is known for crude oil production. Apart from being the world's third largest natural gas exporter after Russia and Qatar, the country is getting strong footing on overall growth. Petroleum activities and ocean transport surged 10.7% in Q3, jumping sharply from a 0.2% rise in Q2. Norway supplies between 20% and 25% of the EU gas demand.
The Norwegian economy expanded 3.8% sequentially in Q3 of 2021, accelerating from a downwardly revised 1.0% growth in the previous period, and beating market consensus of a 3.3% gain, per tradingeconomics. It marked the strongest growth in the GDP since the fourth quarter of 1994.
Norway was 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 in September 2021. This shows the policymakers’ faith in the country’s economic growth momentum (read: Norway Hikes Rates: ETFs to Play).
Also, investors should note that since two-thirds of this export-oriented country's goods go to Europe, its economy will profit from Euro zone recovery. The Euro zone economy advanced 2.2% sequentially in Q3, following an upwardly revised 2.2% growth in Q2.
ETFs in Focus
For investors seeking to keep a close tab on the Norway market, may find the following ETFs useful investing options.
This ETF follows the MSCI Norway IMI 25/50 Index is designed to measure the performance of the large, mid and small cap segments of the Norwegian market. Holding 71 stocks in its basket, the fund is still somewhat concentrated from both a sector and an individual security perspective. Energy comprises roughly one-fifth of the total assets. The expense ratio of the ETF is 0.50%. NORW yields 1.78% annually.
The underlying MSCI Norway IMI 25/50 Index is designed to measure broad-based equity market performance in Norway. Energy takes about 20% of the fund ENOR. ENOR charges 53 bps in fees. The ETF yields 2.34% annually.
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This European Country & Its ETFs May Gain from Russian Tension
Talks about Russia-Ukraine tensions are back this year after 2014. Russia’s Crimea annexation (previously a Ukrainian territory) had then hit headlines thanks to its military move and the resultant standoff with the West as the Crimean maneuver was viewed as an utter violation of international law by the West.
This year too, the Russia-Ukraine crisis seems to have escalated. Western allies are now preparing for some kind of military hostility. NATO put more forces on standby. The U.S. Department of Defense said Monday that about 8,500 American troops are on high alert and will make a move in the region if Russia invades Ukraine.
Having said this, we would like to note that if the crisis worsens, Norway – an often-overlooked European investment destination – may gain.
Why Norway May Gain on the Russia-Ukraine Tension
Europe is highly energy-dependent on Russia, from where it imports about 40% of its energy requirements. This dependency has made it difficult for Europe to go against Russia completely.
But Norway is known for crude oil production. Apart from being the world's third largest natural gas exporter after Russia and Qatar, the country is getting strong footing on overall growth. Petroleum activities and ocean transport surged 10.7% in Q3, jumping sharply from a 0.2% rise in Q2. Norway supplies between 20% and 25% of the EU gas demand.
The Norwegian economy expanded 3.8% sequentially in Q3 of 2021, accelerating from a downwardly revised 1.0% growth in the previous period, and beating market consensus of a 3.3% gain, per tradingeconomics. It marked the strongest growth in the GDP since the fourth quarter of 1994.
Norway was 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 in September 2021. This shows the policymakers’ faith in the country’s economic growth momentum (read: Norway Hikes Rates: ETFs to Play).
Also, investors should note that since two-thirds of this export-oriented country's goods go to Europe, its economy will profit from Euro zone recovery. The Euro zone economy advanced 2.2% sequentially in Q3, following an upwardly revised 2.2% growth in Q2.
ETFs in Focus
For investors seeking to keep a close tab on the Norway market, may find the following ETFs useful investing options.
Global X FTSE Norway 30 ETF (NORW - Free Report)
This ETF follows the MSCI Norway IMI 25/50 Index is designed to measure the performance of the large, mid and small cap segments of the Norwegian market. Holding 71 stocks in its basket, the fund is still somewhat concentrated from both a sector and an individual security perspective. Energy comprises roughly one-fifth of the total assets. The expense ratio of the ETF is 0.50%. NORW yields 1.78% annually.
iShares MSCI Norway ETF (ENOR - Free Report)
The underlying MSCI Norway IMI 25/50 Index is designed to measure broad-based equity market performance in Norway. Energy takes about 20% of the fund ENOR. ENOR charges 53 bps in fees. The ETF yields 2.34% annually.