Global X announced today the launch of its third new ETF in the last week, introducing the FTSE Norway 30 ETF (NORW). The fund, which seeks to replicate the FTSE Norway 30 Index, is the first U.S.-listed product to offer pure play exposure to the Norwegian economy. Global X also offers a Nordic ETF (GXF) that spreads exposure across Sweden, Denmark, Norway, and Finland.
The underlying index consists of 30 Norwegian equities, with the heaviest allocations to the oil and gas (41%), financials (18%), and telecom (11%) sectors. The biggest individual securities making up the benchmark include energy giant Statoil (19%), financial services group DnB NOR (15%), and telecom provider Telenor. Also included in the index is cruise company Royal Caribbean, which makes up close to 5% of total assets.
Closer Look At Norway
Norway is home to a stable and highly developed economy, utilizing an abundance of natural resources to create one of the highest standards of living in the world. Norway asserted sovereign rights over natural resources in an area of the North Sea more than 40 years ago, and in the decades since has discovered and tapped massive reserves of oil and gas in the region. According to the U.S. Department of State, Norway is the world’s fifth-largest oil exporter and third-largest gas exporter, providing much of Western Europe’s energy needs.
Because the Norwegian government has maintained significant ownerships in the energy sector–it remains the largest shareholder in Statoil–this oil wealth has kept Oslo’s coffers flush with cash, and allowed the government to respond quickly and aggressively to the recent economic slowdown. The petroleum industry accounts for approximately one third of the government’s revenue, through both direct ownership interests and taxes generated. Going forward, many experts expect that oil production may peak and decline, while natural gas production accelerates at both new and existing fields. Beyond oil and gas, Norway is also rich in hydropower, fish, timber, and various minerals.
The government’s resource wealth has led to a public sector that is among the largest in the world as a percentage of GDP. Norway has traditionally offered generous social benefits, including sickness and disability benefits, guaranteed pensions, and heavily subsidized or free universal health care. The country’s resource wealth has also led to one of the world’s largest trade surpluses and a massive sovereign wealth fund.
Norway’s per capita GDP comes in at approximately $57,000–among the highest in the world (only Liechtenstein, Qatar, Luxembourg, and Bermuda rank higher according to the CIA World Factbook). Norway ranks first on the Human Development Index, a composite statistic that considers life expectancy, education (as measured through mean years of schooling), and per capita GDP. Following Norway in the HDI rankings are Australia, New Zealand, and the U.S. The high standard of living in Norway makes labor expensive, which some believe stands as a potential hurdle to economic growth outside of the energy sector.
The Norwegian central bank recently voted to leave its key policy rate unchanged at 2%, citing tame inflation figures and an economy that is “continuing at a moderate pace.” The Norwegian economy contracted in 2009, but did not suffer the same economic struggles that hammered much of the developed world. Norway’s non-oil economy grew by 0.5% in the second quarter of 2010 following an expansion of 0.2% in the first quarter; the economy is expected to grow at 1.7% this year and more than 3% in 2011.
Norway is also unique among European economies because of its currency independence. “Norway still lies outside the European Union and has not adopted the Euro currency, helping to maintain what many believe is the world’s most stable economy,” said Bruno del Ama, CEO of Global X Funds. “Ever since we launched the Nordic ETF, we have heard investors asking for a more targeted way to access this very developed and stable country. This Norway ETF should feed that demand well.”
Disclosure: No positions at time of writing.