A Better Index for Investing in Scandinavia

 

Moving beyond the single country focus of exchange-traded funds [ETFs] such as iShares Sweden (EWD), I have developed a NordiCaps Region Stock Index and Top 50 market cap-weighted ETF proposal which includes 116 companies based in the Scandinavian countries of Denmark, Finland, Iceland, Norway, and Sweden with market caps over $1 billion US Dollars as of the market close on August 11, 2008.

Table of 66 Other Companies

Table of NordiCaps Top 50 Active Companies

 

 

The Nordic region is expected to outperform both the United States [US] and the EURO-zone [EU] economies with a forecast of real gross domestic product [GDP] growth of 2.3% on a market-cap weighted average basis for both 2008 and 2009. This real GDP growth compares favorably to predicted growth in the US (0.8%, 1.4%) and EU (1.6%, 1.9%) for 2008 and 2009. Norway and Finland are predicted to experience the strongest real GDP growth at an average of 2.7% through 2009 thanks to strong demand and high prices for exports such as shipping services and petroleum products.

This regional ETF approach also provides investors with diversified exposure to the various industries which dominate each country’s economy – such as the energy sector in Norway with $92 billion [USD] market cap leader StatoilHydro (STO) and the shipping/transport industry in Denmark with $45 billion [USD] market cap leader AP Moller-Maersk. As illustrated in the table above, the Top 50 companies by market cap as part of my idea for a NordiCaps Region Top 50 ETF outpaced its European ETF benchmarks such as iShares Sweden (EWD), Vanguard European Stock (VGK), PowerShares Europe Small/Mid-Cap (PWD), iShares S&P Europe 350 (IEV), as well as the Nasdaq OMX Nordic 40 Index.