Norway's stock exchange has touched recordlevels, propelled by higher oil prices and foreign buying
interest. But analysts say the bullish trend probably will not
last. Tight restrictions on foreign ownership of shares have
held back development on the market, they say. While some of
these rules could soon be eased, Norway's unresolved economic
woes mean the prices boom is likely to be short-lived.
    Last Thursday, the all-share index reached 325.48 points to
beat the previous record of 325.31 set in mid-November, 1985.
    Brokers say the new record, spurred by firmer oil prices
above 18 dlrs a barrel which are crucial to Norway's economy,
has for now set the Oslo bourse apart from the current
fluctuations on other world stock markets.
    "It's an underdeveloped market...Virgin territory ," Jenny
Tora, a Scandinavian securities analyst with London-based
stockbrokers James Capel, told Reuters.
    But the attraction for foreign investors of the stock
market, where price/earnings ratios average around a relatively
low 11, is tempered by restrictions and some nervousness about
the future of Norway's economy, analysts say.
    Foreign ownerhsip is limited in all sectors and varies
between 10 and 40 pct of the shares of any company - and the
class of shares rarely carry voting rights.
    "It's often hard to get stocks as the quotas are full," Tora
said. "There can be problems of liquidity in the market. You can
get into the market, but perhaps not get out."
    Analysts said this meant that foreign interest had been
restricted mostly to professional trading rather than client
buying, and that the market missed some speculative impetus.
    There are also no stock options, and bonds cannot be held
by foreigners in Norwegian securities trading.
    Thor Bang, chief economist at Den Norske Creditbank A/S,
Norway's biggest bank, said he thought the stocks boom had
little foundation in Norway's economic situation.
    "One of the factors (in the rise) is a belief in...Political
stability," he told Oslo's business daily, Dagens Naeringsliv.
    The minority Labour government has looked increasingly
stable since it came to power in May, 1986, with the former
right-centrist coalition in disarray.
    But stock market analysts say continued economic problems
could soon jeopardise the bourse's bull trend, in spite of the
appreciation of the crown against the dollar.
    Although firming oil prices mean better news for Norway,
Western Europe's biggest oil producer after Britain, analysts
point to high interest rates, uncertainty over the future price
of oil and a weighty current account balance of payments
deficit as threats to the bourse.
    Interest rates stand at around 14 pct, while annual
inflation is 10 pct. The current account balance of payments
deficit stood at 32.8 billion crowns last year, against a
surplus of 26.8 billion crowns in 1985.
    "I'd be very cautious about present stock levels," Chris
Honnor of London-based brokers Grieveson Grant said.
    The record-breaking performance last Thursday meant that
the all-share index had increased by 16 pct from the start of
1987.
    On Friday the index leapt another 7.78 points to 333.26.
But analysts noted this was largely due to much better than
expected profits in the first quarter from Norsk Hydro,
Norway's largest diversified corporation.
    Foreign investors, spurred by the appreciating crown and
the rise in oil prices, have been more prominent in the market
this year, although they still trade selectively mainly in
Norsk Hydro, Norsk Data and a few other top-traded industrials.
    Earlier this month the government proposed allowing the
share of foreign ownerhsip permitted in financial institutions
to rise in a bid to boost competition. Depending on the
circumstances, the share foreign owners can have will rise from
10 pct to between 15 and 25 pct.
    Saga Petroleum, Norway's largest fully private oil company,
has also said it will seek government permission to boost
permitted foreign share ownerhsip to 40 pct from the present 20
pct. Saga shares have registered some of the strongest gains on
the bourse because of the move, adding more than 60 pct to
their value so far this year.
 REUTER
