Oslo Børs: A Year With Big Fluctuations – But A Strong Finish

The OBX Index, which comprises the 25 most traded shares listed on Oslo Børs, gained 18.0% in 2010, while the OSEBX Benchmark Index gained 18.4% and ended the year on 439.72 points. The Benchmark Index recorded a rise of 10.5% in December, which was one of the strongest December performances in the history. Turnover in the Norwegian stock market grew by around 20% between 2009 and 2010, with a daily average by the end of 2010 of NOK 7.2 billion.

The year ended as it began, with the Chinese authorities announcing measures to slow down the pace of economic growth. This caused a broad and sharp fall in share prices internationally in January, but the increase in Chinese interest rates during the Christmas holiday season did not have the same dramatic effect. The Christmas announcement did unsettle the markets to some extent, but the developments that will be remembered most for their impact on the securities markets in 2010 will be the debt problems faced by some European economies. Many commentators see good prospects for the Norwegian economy and Norwegian companies as we move into 2011, but the continuing unresolved European debt crisis makes it difficult to forecast what will happen in the markets. A new international downturn is certainly not out of the question, and this could also affect Norway and the companies listed on Oslo Børs. The experts are divided in their views, but there seems to be some degree of optimism for 2011. It is in any case clear that the oil price will, as always, have a major impact on the outlook for the Oslo market in 2011. At the close of 2010 oil prices were around 19% higher than at the start of the year, and this clearly played a major role in the upturn seen on Oslo Børs in 2010.

Record year for capital raising

Capital raised on the equities markets of Oslo Børs and Oslo Axess totalled NOK 61.9 billion in 2010, which is the highest annual figure ever. These figures include new issues for businesses spun off, such as Statoil Fuel & Retail and Gjensidige. The previous record year for capital raising on Oslo Børs was 2006, when NOK 56.9 billion was raised. The fixed income market set new records in 2010 both for the number of issues admitted to listing and the volume of new issues of bonds and commercial paper. The marketplaces of Oslo Børs and Oslo ABM (Alternative Bond Market) admitted 387 new fixed income issues to listing in 2010, of which 153 were on Oslo Børs and 234 on Oslo ABM. In the previous record year of 2009, a total of 298 new issues were listed. The volume of fixed income issues also broke the 2009 record. While 2009 saw new issues on Oslo Børs and Oslo ABM totalling NOK 203.3 billion, the provisional figure for 2010, excluding increases to existing loans in December 2010, was NOK 211.4 billion.

One of the reasons for the record level of activity was that Norwegian companies carried out some major acquisitions in 2010, and used the securities markets to raise part of the financing required. For example Hydro acquired the aluminium activities of the Brazilian company Vale for around NOK 30 billion, and carried out a new issue to raise NOK 10 million for this purpose. This was the largest new issue in 2010, and was also one of the largest ever transactions on Oslo Børs after Telenor (new issue of NOK 15.6 billion) and Statoil (partial sale of state shareholding of NOK 13 billion) in 2000 and 2001 respectively. DnB NOR carried out an issue of NOK 14 billion in 2009. In addition, a number of companies carried out sizeable new issues for refinancing in 2010. These included issues by SAS and Renewable Energy Corporation (REC), each of NOK 4 billion.

Strong sectors

Oslo Børs enjoys a unique position internationally in certain specialist market sectors. This is particularly the case for the energy sector, but the shipping and seafood sectors also attract investors and issuers to Oslo in order to access our market. Oslo Børs accordingly pays particular attention to these sectors in its international marketing activity. In order to further strengthen our strong sectors, Oslo Børs entered into a memorandum of understanding with the Toronto Stock Exchange and TSX Venture Exchange in 2010 in respect of collaboration to facilitate the process of secondary listing of companies on each other’s exchange. Oslo Børs already has a similar agreement in place with Singapore Exchange.

Oslo Børs is the world’s second-largest stock exchange for oil service companies, both in terms of the number of listed companies from this sector and the market capitalisation of these companies. The oil service sector has performed strongly over recent years, and participants in the stock market have been keen to see a separate index to cover the sector. In response, Oslo Børs launched a new oil service index in October - Oslo Børs OBX Oil Service Index (OBOSX). As far as we are aware, there is no similar market index for the oil service sector in Europe at the close of 2010. The Oslo Børs OBX Oil Service Index is made up of the oil service companies that are included in the OBX Index at any time. DnB NOR and Handelsbanken were both quick to launch ETN products (Exchange Traded Notes) linked to the new index as soon as it was launched.

In order to improve the visibility of these strong sectors of the Oslo market and the listed companies involved, Oslo Børs launched new dedicated web pages for the sectors in 2010.

Good flow of new companies

2010 was a good year for new listings. As mentioned above, 2010 was a record year for new fixed income issues, while there were 20 new share listings, of which 13 were Norwegian companies and 7 were foreign. The spring months saw a very high level of market activity, and there were good reasons to expect an even higher number of new companies admitted to listing on Oslo Axess or Oslo Børs over the course of the year. However, the markets were unsettled by debt problems across Europe in May and June, and this caused many of the companies working on a listing to defer their plans. The level of new listing activity recovered to some extent over the course of the autumn months, and towards the end of the year the Oslo market also saw three major listings by Statoil Fuel & Retail, Seawell and Gjensidige. Both Statoil Fuel & Retail and Gjensidige were immediately included in the OBX Index, and by the close of the year these issuers were respectively the 9th and 20th largest companies listed on Oslo Børs. November saw the IT company Bouvet transfer its listing from the Oslo Axess marketplace to Oslo Børs, making it the first company to make this transfer.

It was also the case that a number of companies experienced challenging conditions and reluctant investors in the market for new listings. By way of example, several companies completed the entire process for admission to listing and were approved by the Board of Oslo Børs, but then withdrew from listing their shares, due in part to the level of pricing they anticipated from the market.

Securities infrastructure renewal

When Oslo Børs entered into a strategic partnership with the London Stock Exchange (LSE) in 2009, the agreement provided for Oslo Børs to migrate onto the same trading systems as LSE for equities, fixed income securities and derivatives. The derivatives trading system SOLA went live in December 2009, while the TradElect trading system for equities and fixed income products went live in April 2010. In addition, central counterparty clearing (CCP) was introduced in June for equities, equity certificates and ETFs traded on Oslo Børs, and for equities traded on Oslo Axess. CCP clearing is provided by Oslo Clearing, a sister company of Oslo Børs. These changes meant that Oslo Børs was involved in a number of major IT projects in 2010. This represented the culmination of a major renewal of the infrastructure for the Norwegian securities market, which is now among the most modern in Europe.

Sizeable movements in share prices in 2010

A number of companies showed strong growth in their share price in 2010. (7-10) of the companies listed on Oslo Børs and Oslo Axess saw their share prices rise by more than 100%. The best performance of all came from the Oslo Axess company PCI Biotech Holding, where the share price gained 379.5% in 2010. This pharmaceutical company announced positive results from trials of its cancer treatment products. Other companies where share prices gained more than 100% were: Camposol Holding (+156.2%), Nordic Semiconductor (+136.2%), Electromagnetic Geoservices, EMGS (+134.4%), Crew Gold Corporation (+125.0%), AGR Group (+121.6%), Global IP Solutions (+117.4%) and Maritime Industrial Services (+113.3%).

There were also a number of companies where share prices fell sharply. RXT (Reservoir Exploration Technology) saw the biggest fall in 2010 of 98.2%. RXT experienced difficulties in winning new contracts and raising finance. Other companies that suffered falls of more than 90% in their share price in 2010 were Green Reefers (-95.7%) and Hjellegjerede (-95.4%).

The “Robot” case

A legal case linked to the Norwegian equities market attracted great attention in 2010, both in Norway and internationally. In August, the Oslo Public Prosecution Service launched a prosecution of two private investors for price manipulation.

According to the prosecution case, the two investors manipulated share prices for a number of shares by finding weaknesses in a trading algorithm used by a broking firm. Algorithmic trading and computerised trading are becoming ever-more common features on all stock markets, and there is as yet little legal precedent in this area. The case became known as the ”Robot” case, and was heard by the Oslo District Court in September. Both the investors were found guilty of manipulating the market for the shares in question. However these judgements were appealed, and accordingly do not yet have legal effect.

Increased competition for securities trading

European regulations have paved the way for new marketplaces to be established that compete with the existing stock exchanges for trading in securities. A number of venues now offer trading in shares listed on Oslo Børs. In 2010, Oslo Børs captured 85% of all trading in these shares carried out through electronic trading systems in Europe. If the comparison also includes trading outside the electronic order books that is carried out directly between brokers and subsequently reported, Oslo Børs held a market share of approximately 70% in 2010.

Oslo Børs has implemented a number of measures to maintain its competitiveness in this changing environment, and this has included internal reorganisation and cost savings. In addition, Oslo Børs has reduced the fees it charges for trading on several occasions, most recently with lower fees from April 2010 for trading in shares listed on Oslo Børs and Oslo Axess. This represents the third round of reductions in trading fees for equities since September 2008.