Thomas White Global Investing
Europe
Europe Stamp
November 5, 2010
A Postcard from Europe
Europe: Nordic Countries Lead the Way

The Nordic 30, an index of the biggest stocks in the Nordic region, has risen 21% this year.

The Nordic 30, an index of the biggest stocks in the Nordic region, has risen 21% this year.

It’s not all gloom and doom from Europe. Well, not always. Recently, we wrote about Germany’s surprising renaissance from a depressing recession. And now, benchmark indices from Nordic countries led by Denmark, Sweden and Finland are outperforming the MSCI World Index, according to a recent Bloomberg News report. If that is not enough, the NASDAQ OMX Group announced that it has launched a new trading system for its Nordic markets, Genium INET, dubbed the world’s fastest trading system. Things seem to be happening there. And fast.

In fact, Bloomberg data shows that indices in Sweden, Finland and Denmark have gained 22% this year. To put this staggering figure in perspective, the MSCI World Index during this period, dragged down by concerns over the extent of the economic recovery in Japan and the U.S., is lagging behind with a gain of just 4.7%. Also, in comparison, the Euro Stoxx 50, Europe’s blue-chip Index for the Eurozone, has slumped 3.1%. Clearly, these Nordic countries have benefited from the economic upsurge in Asia – especially as these countries rely heavily on exports to boost their gross domestic product. Added to that, Denmark, Finland and Sweden have a stable banking sector, which has been barely affected by the credit crunch crisis, helping investors who were shaken by the fragility of banking systems in the U.S.

Even taken individually, Denmark, Sweden and Finland have outshone more developed neighbors in the European Union. Denmark’s Economic Council raised the country’s growth estimate from 1.7% to 2.2% for this year, expecting robust export momentum. Sweden’s Riksbank has raised interest rates three times already since July – its latest hike as recently as the last week of October when the bank, concerned about inflationary pressures, increased the key interest rate to 1%. The Swedish central bank has comforting GDP numbers to fall back upon in doing so – annual GDP rose 4.6% in the second quarter. And Finland has enjoyed its own economic success – consumer confidence is high with the country’s central bank expecting growth to touch 3% next year.

Facts only tell part of the story. As if right on cue, the Legatum Institute produced the 2010 Prosperity Index. No surprises as to which countries topped that particular list. Denmark and Finland are in the top three along with Norway, while the U.S. just about squeezes into the top in the 10th slot. Sweden comes in at number six, and even much embattled Iceland almost overtakes the U.S. at 11. No wonder that Nordic countries make such an attractive investing proposition. They offer the stability of being developed economies with generous growth rates that can match many an emerging economy. Who knows, there may be more to come from this region yet.

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