As expected, iShares became the first ETF issuer to list a product on the BATS Exchange today, debuting the MSCI Norway Investable Market Index Fund (ENOR) on the third-largest U.S. exchange. ENOR becomes the second pure play Norway ETF available to U.S. investors, following the launch of the Global X FTSE Norway 30 ETF (NORW) last year. iShares is expected to launch seven additional international equity ETFs on the BATS Exchange later this week, including small cap funds targeting stocks in India and the United Kingdom.
Under The Hood
ENOR is linked to the MSCI Norway IM 25/50 Index. The name of that benchmark reflects the capping methodology used to limit the allocation to any one component to 25% and the total of individual companies representing 5% or more to 50%. The capping feature of ENOR results in a slightly less top-heavy portfolio than NORW. The Global X Norway fund has five individual holdings that make up 5% or more of assets; they combine to represent about 53% of total holdings. The largest holding in both Norway ETFs is energy giant Statoil; that company, two-thirds of which is owned by the Norwegian government, accounts for about 22% of NORW and about 21% of ENOR [see Five Potential Pitfalls In International Stock ETFs].
In total ENOR has about 51 individual holdings; behind Statoil are telecom giant Telenor (7.7%), deepwater drilling company Seadrill (7.4%), and DNB ASA (6.7%), which is Norway’s largest financial institution. In total, about 52% of the ENOR portfolio is allocated to the energy sector, followed by financials (13%) and materials (9%). The remaining quarter of assets is spread across other sectors of the Norwegian economy [see the ENOR fact sheet].
Norway In Focus
The Norwegian economy has emerged as a potentially appealing investment destination in recent years thanks in part to its currency independence; Norway elected not to join the euro zone–a decision that seems smarter by the day. Still, the Norwegian economy is at least partially dependent on its neighbors; a crisis there would certainly eat into Norwegian GDP growth. Norway even offered up a loan of about €7 billion to help stabilize the euro zone late last year, reflecting the solid fiscal state of the Nordic country.
Norway’s economic success is attributable in large part to its oil wealth; the country is one of the largest exporters of the “black gold” in the world, producing far more than it consumes. The oil wealth generated from years of elevated energy prices has allowed Norway to provide generous social benefits to its population while still maintaining strong fiscal footing. Norway’s debt totals only about 44% of GDP, roughly half the average for the euro zone. Norway has run a budget surplus for the last several years, while most other developed markets have operated at growing deficits.
ENOR is the first ETF to be listed primarily on the BATS, which competes with the NYSE and NASDAQ for ETF listings. “Today marks an important milestone for BATS and we are pleased to welcome these new investment products from iShares, one of the leading global providers of exchange-traded products, to our market,” said Joe Ratterman, Chairman and CEO of BATS Global Markets. “Our goal is to continue to attract dynamic and innovative companies to our market through our focus on customer needs and market quality.”
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Disclosure: No positions at time of writing.