Several buoyant weeks in the US stockmarket brought a positive undertone in Europe. Indeed the spring month of May got off to a very bright start, but towards month-end indices across the world lost ground after US companies announced first-half profit warnings. However, Oslo Exchanges has the jump on most of the world's bourses in price terms. In May the new Main Index gained 2.9 per cent, while the OBX index rose 1.5 per cent. In the world at large a number of trend-setting indices fell, among them London and Frankfurt. Tanker, oil and offshore-related shares were the main contributors to the upturn in the Norwegian market.
The struggle for Storebrand - government in focus
Much attention was given to Storebrand, which attracted two suitors overnight. From abroad the Finnish investment company Sampo signalled its interest, while Den norske Bank (DnB) once again showed its keenness on a Norwegian solution. However, greatest attention came the way of Norwegian politicians who wasted little time in giving their support to DnB and a merger of Norwa's biggest high street bank and insurance company. The quickest response was by finance minister Karl Eirik Schjøtt Pedersen, who a few days later moderated what looked to be a diktat to the National Insurance Fund to use its sizeable holding in Storebrand to block the Finns' path.
The Norwegian authorities' sometimes rigid notion that Norwegian companies should remain in Norwegian hands sits poorly with the same authorities' plaudits for Norwegian companies' foreign acquisitions. In the final analysis this prompts negative reactions from foreign players, who increasingly threaten to restrict their investments in Norway.
The Finnish Sampo's bid of NOK 75 per Storebrand share brought an immediate 25 per cent rise in the Storebrand share price. The price was stable at this level in the next few days, but then dropped back somewhat due to the uncertainty about who would be "allowed" to take over Storebrand. The market's enthusiasm did not extend to the DnB share which lost ground after their bid was announced. DnB is offering 1.5 DnB shares for each Storebrand share, equivalent to NOK 59.40 at end-May. In the course of the month Storebrand rose 19.7 per cent to reach NOK 70, while DnB lost 1 per cent.
Norske Skog growing through acquisitions
While foreign entrants to the Norwegian market may be unpopular in some circles, Norwegian companies' acquisitions of foreign companies are all the more popular. Norske Skog was very active in the month behind us, buying up two paper factories in Germany and the Netherlands which entailed a capital requirement of just over NOK 11 billion. The company announced a flotation to the tune of NOK 3.2 billion, partly to fund the acquisitions. In the course of May the price changed little but, despite the acquisition news, ended the month 1.4 per cent down after falling 8 per cent when the the flotation was announced. Many observers reckon that the time is not right for major increases of capital, particularly in view of Statoil's stock exchange listing.
Braathens fly low
After several quarters of sizeable deficits the Braathens airline now looks set to be taken over by SAS. On 22 May SAS took over KLM's and the Braathen family's shareholdings and put in a bid for the remaining shares. The bid was worth NOK 35 per share, making Braathens one of the month's winners on Oslo Exchanges with a price advance of 26 per cent. For its part SAS share gained almost 10 per cent in value.
As from October 2001, when KLM withdraws, Braathens will stand alone in an industry of alliances. Given Braathens' large deficits, moves to take over the company cannot have come as a major surprise. Now it is up to the shareholders, and possibly even more the Norwegian competition authorities, to decide Braathens' fate.
New downturn for IT shares
IT and telecoms shares showed a sharp upturn on the American Nasdaq in April and much of May. However, new profit warnings from major US companies, this time for the second quarter, turned the positive sentiment into renewed scepticism. The uncertainty in the US economy persists, although signs of appreciable optimism have been noted among several experts in recent weeks.
Oslo Exchanges' new telecoms services index dropped 4 per cent, while the new IT index lost 3.8 per cent. Eltek, Enitel, InFocus, Opticom, Telenor and Tandberg Data were among those that put a brake on these indices with price falls of between 10 and 20 per cent. In comparison the Nasdaq ended the month almost unchanged after falling back somewhat towards month-end.
Popular tanker shares
The tanker market has a couple of years of rock solid earnings behind it which is naturally reflected in share prices. In Norway much turns on Bergesen and Frontline which this month too helped to lift the general trend with price rises of 13 and 6.7 per cent. Both figure among the bourse's 10 - 12 biggest companies, and are frequently among Oslo Exchanges' most traded shares. High activity levels and persistently high freight rates are the main explanation for the lasting buoyant trend. John Fredriksen's Frontline is very active on the acquisition front, and in May took over two of Bergesen's tankers and two contracts to build new tankers.
Offshore shares such as Det Søndenfjeldske and PGS also had a good month, with price advances of 19 and 10 per cent respectively. These shares now figure in the energy index, while tanker shares are included in the new industrials index which put on 5.5 per cent in May. This index also includes companies such as Norsk Hydro and Tomra, the last mentioned rising 9.7 per cent over the month.
Money market rates down
Three-month money market rates broke the upward trend in May, dropping 18 points to 7.37 per cent. Even so, few analysts believe in an imminent rate cut by Norges Bank. With interest rates now subservient to inflation targets, probably more than a drop in money market rates will be needed for Norges Bank to make adjustments. Further rate cuts are expected in the USA in the course of the summer, while here in Norway rates are just as likely to be raised as cut.
In the bond market trading averaged NOK 2,521 million daily, i.e. about NOK 500 million more than in the previous month. The daily average for the first five months of the year is NOK 2,300 million.
Derivatives market
In May an average of 13,384 contracts changed hands daily, producing a total traded volume of 267,680 contracts. So far this year the daily average comes to 14,691.
