Norway’s sovereign wealth fund shrinks in first half of the year

Norway's sovereign wealth fund, the world's largest, shrank by some 1.68 trillion kroner ($173.2 billion) in the first half of the year, weighed down by tech stocks, the Norwegian central bank said Wednesday.

Pictured is an oil rig in Norway.
Norway's sovereign wealth fund made a loss in the first half of this year. Pictured is an oil rig in Norwegian waters. Photo by Jan-Rune Smenes Reite:

The fund, in which the state places its oil revenues, posted a negative return of 14.4 percent in the first six months of the year, with its total value dropping to 11.65 trillion kroner ($1.20 trillion) at the end of June.

“Percentage-wise, it’s the second-biggest decline for a half-year result” since the fund was created in 1996 “and the biggest decline in kroner”, the head of the fund, Nicolai Tangen, said in a presentation.

Since the start of the year, markets have been rocked by rising interest rates and high inflation due in particular to soaring energy prices and the war in Ukraine, all of which are fuelling fears of a recession.

READ MORE: What does Norway do with its oil money?

The fund was weighed down primarily by its equity holdings, which declined by 17 percent.

Technology stocks performed particularly poorly during the period, registering a 28-percent fall as the end of restrictions related to the
Covid-19 pandemic dragged down giants such as Meta, the parent company of Facebook, Amazon, Apple and Microsoft.

Energy was the only sector where the fund saw a positive development, with those shares up by 13 percent. Stocks accounted for 68.5 percent of the portfolio at the end of June.

The fund holds stakes in some 9,300 companies and controls around 1.3 percent of global market capitalisation. The value of its bond investments, which accounted for 28.3 percent of its assets, shrank by 9.3 percent, while its unlisted real estate holdings, which made up three percent of the portfolio, climbed by 7.1 percent.

The fund’s placements in unlisted renewable energy projects — which accounted for just 0.1 percent of its investments — also plunged by 13.3 percent.

All of the fund’s investments are outside Norway, Western Europe’s biggest oil and gas exporter, so as to avoid overheating the Norwegian economy. While the fund — which is aimed at financing the future needs of Norway’s generous welfare state — lost money during the first half of this year, rising share prices have helped it rebound in the beginning of the second half. 

On Wednesday, according to a counter on the central bank’s website, the fund was valued at 12.3 trillion kroner ($1.26 trillion).

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Which rising costs are consumers in Norway most concerned about?

It feels as if everything in Norway is fast becoming much more expensive than it already was. New figures have revealed which price increases Norwegian households are most worried about.

Which rising costs are consumers in Norway most concerned about?

In Norway, the cost of living is rising across the board. In August, inflation was measured at 6.5 percent, compared to the same month a year before, figures from national data agency Statistics Norway show.

Additionally, households have been warned on numerous occasions by experts and analysts to prepare for a winter of sky-high energy prices. 

And on Thursday, Norway’s central bank, Norges Bank, announced it was raising the key interest rate by 0.5 percentage points, meaning loan and remortgage repayments will become even more expensive in due course. 

So, which rising cost has consumers across Norway most concerned about? High energy bills have consumers in Norway most worried, according to a survey by Sparebank 1. Norwegian newswire NTB reports that 54 percent of those who responded to the survey are concerned by high electricity prices. 

Analysts in Norway have warned that prices in southern Norway could rise as high as 20 kroner per kWh this winter due to low-reservoir filling levels, the war in Ukraine and soaring gas prices. 

Norway relies on hydro-power to meet its energy needs. However, reservoir filling levels in parts of Norway remain at 20 year lows.

However, the high prices are only felt in south-east and south-west Norway. In north and central Norway, prices are much lower than in the south as reservoirs are fuller and hydroelectric dams typically make more power than these parts of the country need. 

Unfortunately, for those carrying the burden of high energy bills in the south, power from the north is not easily transferred. Typically it needs to be exported to Sweden first and then re-imported. 

After energy prices, the cost of food was the next biggest worry for Norwegian households, according to the bank’s survey results. Some 46 percent of those who answered the survey said food bills were concerning. 

The Scandinavian country is one of the most expensive countries in Europe for food shopping, according to Eurostat, which monitors price levels across the EU, EEA and EU candidate countries. 

Unfortunately, grocery bills in Norway have risen by 10.3 percent over the past year, according to Statistics Norway

As a result, people in Norway are tightening their purse strings and trying to save a few kroner where possible. This is evidenced by the use of the surplus food app Too Good to Go seeing record use last month.

In August, around 245,000 bags of surplus food or groceries were sold via the app- a record for the app. The app allows users to buy surplus food from shops and eateries that would have been thrown away.

READ MORE: Six apps to help you save money on your food shopping in Norway

And finally, 41 percent said that increased interest rates were an issue. Earlier this week, the key interest rate was raised by 0.5 percentage points. 

Norges Bank has said it sees increased interest rates as a tonic to curb inflation. However, this comes with the caveat of higher loan and mortgage repayments. 

For every 0.5 percentage points your loan or mortgage interest increases, your annual interest costs will increase by 5,000 kroner for every million you owe.