2006 was yet another year of rising share prices and strong growth in trading activity on Oslo Børs. Despite some less favourable months in the middle of the year, the Benchmark Index gained 32.4% to close the year at 440.4. This means that Oslo Børs has now enjoyed four years in a row of sound improvement, representing an overall gain on a scale never seen before in the Norwegian stock market. Since the low point in February 2003, the value of shares listed on Oslo Børs has risen by almost 350%.
In parallel with rising share prices, trading activity continued to grow at a record pace, with the average daily value of trading in shares and primary capital certificates reaching NOK 10.3 billion in 2006. Oslo Børs has not seen such a percentage increase in turnover since 1993. 2006 was characterised by favourable economic conditions both in Norway and internationally as well as high oil prices, while strong corporate earnings also played an important role, and the number of companies listed on Oslo Børs with a market capitalisation in excess of NOK 10 billion grew to 30.
“Same procedure as last year”
2006 started in the way that 2005 closed, that is to say with a rally in share prices. However, the Oslo market took a serious knock on 11 May, and the Benchmark Index fell in total by 17% over just six trading days. It was very uncertain at that time whether this was the start of a prolonged downturn or just a natural price correction. The optimists proved to be right, although the market remained somewhat unstable through to the autumn. This meant that after 12 quarters of rising share prices the Benchmark Index recorded a decline in the third quarter, but it then improved sharply in the fourth quarter.
The big news story of the year was undoubtedly the merger of Statoil and Norsk Hydro’s oil and gas activities, and this naturally attracted great interest towards the end of the year. The majority of expert commentators seem to have a positive view of the merger, and holders of Norsk Hydro shares enjoyed a pre-Christmas boost when the Hydro share price gained 20% on the day the merger was announced. For Statoil, on the other hand, the news caused a fall in share price of almost 2%. This merger is the largest industrial amalgamation ever seen in Norway, and will create the largest company in terms of market capitalisation anywhere in the Nordic region.
Upward trend for all sectors of the market
All the sector indices showed an improvement for 2006 as a whole, with the telecommunications index - led by Telenor - showing the strongest increase at 81%. The consumer staples and financials indices also beat the overall Benchmark Index with gains of 66% and 35% respectively. The energy index, which plays the most important role in the overall market, performed in line with the Benchmark Index.
Among the major listed companies, shareholders in Telenor had the most to celebrate. With corporate earnings at a record level and positive sentiment from analysts and investors, the Telenor share gained a hefty 77% and reached a number of all-time highs over the course of the year. Even some political rumblings and attempts to influence Telenor’s decision making on specific matters seem to have little or no effect on its share price performance. Shareholders in other major companies such as Pan Fish, PGS, Tandberg, SeaDrill and Aker Kværner also had good reason to be satisfied with 2006, as shares in these companies recorded gains between 90% and 170%. Despite all the news and events that affected various companies, at the end of the day the common features behind the sharp increases in share price seen for many of the companies listed on Oslo Børs were sound operational performance and strong profits.
As many as 17 companies more than doubled their market capitalisation over the course of 2006, including Pan Fish, Tandberg and Aker. The sharpest rise of all for 2006 was enjoyed by the offshore supply company Odim, which gained a hefty 350%. Odim’s share price has risen by almost 500% since the company was first listed in 2005, reflecting a steady flow of announcements of new contracts. Tandberg was one of the market's weakest performers in 2005, (down by 44%), but the market rewarded its strong performance under a new chief executive in 2006 with a 127% increase in share price. Elsewhere, the relatively short list of shares that fell in 2006 was again dominated by the IT sector.
Record increase in market activity
Average daily trading in the Oslo market in 2003 was NOK 2.2 billion. The equivalent figure for 2006 was NOK 10.3 billion, up by more than 70% even from 2005, and the strongest year-on-year growth in turnover since 1993. The number of trades was also sharply higher, up from 21,600 daily in 2005 to 35,200 daily in 2006 representing an increase of 63%. This growth in trading activity was primarily due to ever-growing interest in investing in Norwegian companies and Norwegian industry from both Norwegian and international investors.
Moreover, the scale of trading volume was not restricted to just a few shares. Even if trading in Statoil and Norsk Hydro is excluded from the figures, daily turnover in 2006 was still around NOK 6.7 billion, which happens to be in line with total trading in the Oslo market by foreign investors. Foreign investors have also increased their ownership of companies listed on Oslo Børs, and at the close of November 2006 they held 39.6% of total market capitalisation, equivalent to almost NOK 800 billion.
100 companies
2006 saw 32 companies listed on Oslo Børs for the first time, while 22 companies were deleted from listing. All the companies deleted were removed as a result of mergers or acquisitions. Over the last three years, 100 companies have been admitted to listing, while 48 companies have been removed.
Of the companies listed during the year, 35% were related to the oil sector, while the other companies came from eight different sectors. This means that sectors other than oil played a larger role than in 2005, when 45% of the companies listed for the first time were related to the oil sector.
Record year for new issues
Listed companies raised over NOK 56 billion through share issues in 2006. This makes 2006 the best year ever for capital raising, and demonstrates the favourable conditions in the Oslo market. By way of comparison, new issues over the three years prior to 2006 raised a total of NOK 44.4 billion. The largest capital raising exercises in 2006 were carried out by SeaDrill, Pan Fish, REC, Prosafe and Sevan Marine. The volume of capital raised through the Oslo market in 2006 outstripped the total of new issue activity on all the other Nordic exchanges in the year.Good prospects for 2007
Given the current market situation, investors in the Oslo market can look forward to an exciting 2007, and it seems that many participants in the market expect favourable conditions to continue. Oslo Børs expects to see a number of companies admitted to listing over the next few months, and there is little to suggest that the level of market activity will not remain strong in 2007. However, one must remember that there is always a risk that market sentiment can change suddenly, particular since the securities market is very sensitive to bad news and uncertainty.
Twice as many contracts traded in the derivatives market
Derivatives trading on Oslo Børs has grown strongly over recent years. 2006 saw average daily activity of 52,000 contracts, which is more than double the daily average for 2005. Trading set a number of new records for turnover over the course of the year, with an absolute peak of 252,000 contracts on 14 December. Premium turnover almost doubled from 2005 to reach NOK 5.2 billion.
Bond market
The bond market also enjoyed a record year in 2006, not least in terms of the number of issues listed. Turnover in fixed income securities in the ordinary exchange market (excluding repos) averaged NOK 2.6 billion daily, and the figure increases to NOK 18.4 billion daily if repo trading is included. These figures are in line with 2005. In the Alternative Bond Market (ABM) which was opened by Oslo Børs in June 2005, daily turnover averaged NOK 260 million in 2006. By the close of 2006, 182 issues were listed on the ABM, while 734 issues were listed on the ordinary exchange market. A total of 287 fixed income issues were admitted to listing on the ordinary exchange market and the ABM in 2006. This represents a new record, with the number of new issues up 23% from 2005, which was itself a record year.
