Oslo Stock Exchange: A Correction on the Horizon?
Oslo Børs recently surpassed 1800 points, despite ongoing international uncertainty. Norwegian companies appear to be thriving, with the main index up eight percent. However, analysts are raising concerns about the sustainability of this growth.
Earnings Estimates Under Pressure
Petter Slyngstadli, Chief Investment Officer at Norne Securities, expresses caution regarding the performance of Norwegian companies. He notes that earnings estimates are not keeping pace with market valuations. “Earnings estimates are under pressure in 2025 and 2026,” Slyngstadli told Nettavisen.
This disconnect between stock prices and underlying earnings is leading to a multiple expansion, where stock prices continue to rise even as company profits lag behind. Slyngstadli warns that Oslo Børs has grow “too expensive, too fast,” creating a short-term correction risk.
Shifting Investment Strategies
Slyngstadli observes a shift in corporate behavior, with companies prioritizing returning capital to shareholders through dividends and share buybacks rather than reinvesting in growth. This trend contrasts with the investment-focused strategies of technology giants in the US, which continue to deliver strong results.
He suggests that Nordic fixed income funds may offer a safer alternative in the coming years, providing a current yield of nearly five percent. “It is difficult to expect more in the equity market now,” Slyngstadli stated.
Sectoral Performance: A Mixed Bag
The current earnings picture is mixed. Fishing and salmon prices have stumbled at the start of the year, although salmon companies have seen a slight recovery. Banks initially weakened but have also rebounded. Oil companies, however, have remained strong, benefiting from geopolitical factors and a rise in oil prices due to the Iran conflict.
Long-Term Resilience and Energy Demand
Despite short-term concerns, Slyngstadli remains optimistic about Oslo Børs’s long-term prospects. He believes that Norway’s key industries – energy, protein, and aluminum – are resilient and less susceptible to being overtaken by China.
He also anticipates that the growing energy demands of the AI revolution will benefit Oslo Børs. “This will likely lead to sustained high energy prices, which Oslo Børs will benefit from.”
A Red Flag for Valuations
While Slyngstadli previously held a positive outlook on Oslo Børs, he now sees a “red flag” in current valuations. The price-to-book ratio has reached 2.2, a level he considers concerning.
What is a Price-to-Book Ratio?
A multiple used to explain the price in relation to book value. It can be used for both individual stocks and to assess the stock exchange.
FAQ
Q: What is causing the concern about Oslo Børs?
A: The primary concern is that earnings estimates are not keeping pace with rising stock prices, leading to potentially unsustainable valuations.
Q: What sectors are currently performing well in Norway?
A: Oil companies are currently strong, while fishing and salmon sectors have experienced some volatility.
Q: What investment alternative does Slyngstadli suggest?
A: He recommends Nordic fixed income funds as a potentially safer option, offering a current yield of around five percent.
Q: Is Oslo Børs expected to continue growing in the long term?
A: Slyngstadli believes Oslo Børs has long-term resilience, particularly due to its key industries and the anticipated energy demands of the AI revolution.
Did you know? Norway’s key industries – energy, protein, and aluminum – are considered less vulnerable to competition from China.
Pro Tip: Keep a close eye on earnings reports and price-to-book ratios when evaluating investment opportunities in Oslo Børs.
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