UPDATED: The value of shares in companies traded on the Oslo Stock Exchange took a dive when the market opened Monday morning. The steep decline followed diving markets in China, Japan and elsewhere in Asia during the night, and some analysts were predicting the beginning of a long decline.
The main index of the Oslo Børs fell by 3.45 percent during the first five minutes of trading. By late morning, the decline had deepened to nearly 4 percent, and then to more than 6 percent by mid afternoon. That made it the biggest decline since the finance crisis of 2009, with some of Norway’s biggest companies taking the biggest hits. It ended down 5.19 percent at 555.25.
State oil company Statoil, for example, was trading for NOK 119.60 per share at 11am, down 3.08 percent from its close on Friday, and it fell further, to NOK 118, by 2pm. It closed at NOK 116.30, down 5.75 percent. Aluminum giant Norsk Hydro was down fully 6.86 percent, to NOK 20.06 per share, even though it’s been among the export-oriented companies in Norway that has benefited from the country’s suddenly weaker currency, the krone. It recovered somewhat by the end of the day, closing at NOK 26.54, down 5.78 percent.
Telecommunications firm Telenor dove 6.2 percent to NOK 154.30 by mid-afternoon, while the prices of shares in Norway’s biggest bank, DNB, dropped 6.02 percent to NOK 112.40. Both Telenor and DNB recovered slightly by the end of the day. All four companies ranked as having the heaviest trading volume.
China gets the blame
Some commentators claimed that panic was setting in after China’s stockmarket took another dive during the night. Since China, with its huge population and demand for resources, is such a big buyer and seller with countries around the world, its fortunes have a heavy influence on other markets.
“The Chinese stock market is dragging the rest of the Asia stock markets with it into a powerful decline,” wrote Knut Anton Mork, senior economist at Handelsbanken Captial Markets, in his Monday morning report from the brokerage firm. He noted how the Shanghai exchange was down 8.85 percent after falling 4 percent on Friday. Mork said that undoubtedly is leading to an extremely nervous week for markets all over the world.
The trouble in China, the low price of oil and fear of market unrest also hit US markets before the weekend. Mork told newspaper Dagens Næringsliv (DN) that the “huge uncertainty” tied to “what’s happening in China” was being felt in all emerging markets as well.
‘Punch in the nose’
Other analysts, including Jan L Andreassen at Eika Gruppen, think China is moving towards a finance crisis, while Magne Østnor at DNB Markets wrote in his morning report that the market had been hit with “a real punch in the nose.” He thinks the stock market decline will continue: “China is stepping on the brakes, the oil market is flooded with oil and the central bank in the US is expected to raise interest rates in the not-too-distant future. Yet more stones are being laid on the burden.” He said market players had expected more and better measures aimed at offsetting the stockmarket dive from Chinese authorities during the weekend.
Analysts complained that an announcement that China’s large state pension fund would begin to invest in shares wasn’t enough, and that they’d expected other measures like cuts in reserve requirements for Chinese banks or transfers of more liquidity. “The Chinese authorities need to begin to wake up and see that the old tricks don’t work any longer,” Mork told DN.
Erlend Lødemel, chief strategist at Arctic Securities, told DN he still wasn’t overly worried, but noted that there’s a risk things will get worse. “There is a danger that this can be the start of a bear market,” he told DN, “but we don’t have that as our main scenario.” Meanwhile, oil prices continued to fall on Monday, with Norway’s North Sea crude trading at just USD 44.25 a barrel on Monday. That’s down from prices of more than USD 100 just a year ago, and more bad news for Norway’s oil- and gas-driven economy.