Helsinki stock exchange: why Finland is the new investment safe haven
11:07, 15 October 2019
Finland is among the few EU countries that appear resilient enough to wither the current global economic uncertainty. The US trade wars with China, the rising tensions in the Middle East, and the Brexit are the leading causes of the uncertainty. According to analysts, most economies in China, Asia, the US, and the UK are headed for a recession.
In an interview with CNBC, Christine Lagarde, the head of IMF and the incoming European Central Bank president, blames the US for the downturn. Trump tariff wars with China are sending ripple effects to most economies, and it is just a matter of time before the impact becomes apparent.
Finland is not immune to the uncertainty but has in the past proven to be highly resilient. This, coupled with the fact that the Finnish economy is currently at the bottom of a bear market, provides a buying opportunity for value investors.
CFD traders should also consider investing in Finland stock exchange given the anticipated short term volatility. A bearish economy is an opportunity to buy, especially when the long term growth forecast is bright.
Finnish economy outlook: the bear market presents an opportunity to buy!
Data from Focus Economics shows a slowdown in Finnish Economic growth and predicts that the trend will continue through 2020. The recession is blamed on external factors, including the Brexit uncertainty and also the trade wars waged by the US. However, analysts predict that the economy will bounce back by the end of 2020 and maintain constant growth through 2025 and beyond.
Reading from the books of Warren Buffet, the world renowned value investor, recessions provide a perfect opportunity to buy stocks at a lower price. During a recession, speculators tend to dump their stock holdings hence driving the prices down. Value investors tend to benefit from this panic irrespective of whether the stock market tanks further after buying. For stable economies such as Finland, recovery is usually fast.
Unlike most economies in the Eurozone, the Finnish economy stands a better chance of quick recovery, given its strong fundamentals. Finland is known as the world's gateway to Europe, given its strategic location and resilience to political instabilities. An unstable Europe is likely to divert foreign direct investments to the Finnish stock exchange.
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Why bet on Nasdaq Helsinki stock exchange
Helsinki stock exchange, or Helsingin Pörssi, attracts investments from across Europe, Asia, and the US. The strategic location of the city of Helsinki makes it the entry point to other EU markets and the world. It is no wonder that foreigners own nearly half of the shares traded on the Helsinki stock exchange.
According to a study by Deutsche Bank, the large-cap companies listed on the Finnish stock exchange offer a diversified and truly global investment. This means that it is not affected by a slowdown in revenues from one region. While the Brexit crisis is likely to cause significant volatility, its impact is limited.
In the best part of 2019, the Nasdaq Helsinki stock market has maintained stellar performance as shown by OMX Helsinki 25 Index. For the record, this index tracks the performance of the 25 most traded Finnish stocks in the Helsinki stock exchange. Data from Trading Economics shows that the index has grown by 6.76% since January 2019. The Helsinki stock exchange index is expected to rise slightly by the end of this quarter.
Investing in Finland: best value stocks to buy
Now that we know why Finland might be the best investment destination in Europe let us look at some of the most promising value stocks. According to Investopedia, a value stock is a stock that trades at a lower price relative to fundamentals such as earnings, dividends, or sales. The characteristics of such a stock include low P/B and P/E ratio and high dividend yield.
From our analysis, we find Nokia (NOKIA) to be the best value stock traded on OMXH stock exchange. The stock appears promising from both a fundamental and technical perspective. Nokia has announced that it will be rolling out the 5G network in 2020, and this development is expected to boost its stock significantly.
The stock price is currently at the bottom low of its 52-week range trading at $48.85 at the moment of writing. Consequently, value investors could buy before prices rebound. Analysts predict that Nokia’s earnings will rise by 18.7% annually in the next five years. The stock EPS of $0.27 is also expected to go up 48% to $0.40 by 2020. Nokia has also proven itself as a consistent dividend payer.
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Cargotec (HLSE: CGCBV) is another Finland stock worth watching in 2019. According to Simply Wall ST, this stock has a PE ratio of 13.96x, which makes it undervalued when compared to the current FI market average of 19.9x. The case remains true even when the stock earnings growth is taken into account.
Analysts predict that Cargotec will maintain an annual growth rate of 12% into 2020 and beyond. The company's earning per share is expected to rise from €2.038 to €3.153 in the next three years. Cargotec is currently trading at the bottom of its 52 weeks range which means that this is the best time to buy.
Bottom line
The Finnish stock market provides the best opportunity for investors looking for a place to grow their cash with minimal risk. Finland has in the past proven to wither recessions and rebound before other markets in the Eurozone, Asia and the US.
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