Finnish Stocks: A Hidden Value Post China and Russia Economic Struggles

Finland's stock market might just be a hidden gem for investors seeking value, as signs point to a brighter future for these shares.

Finland's year has been tough, particularly for its stock market which has lagged behind most of Europe. The reasons can be traced to the nation's exporters facing headwinds due to tension with Russia and issues related to China's economic slowdown. Moreover, investment funds have shown a preference for larger companies leaving the small and mid-sized Finnish firms in the lurch.

Nevertheless, the top 25 stocks on the Helsinki exchange have a combined value of $150 billion, though they've experienced a 10% drop this year, in contrast to a rise in other markets like the S&P 500. Investors are seeing the lower prices as an opportunity, especially considering a potential global economic upswing that could breathe life back into these undervalued cyclical stocks.

Bargain seekers like Tomas Hildebrandt, at EVLI, a Nordic fund manager, see Finnish stocks as underpriced with the potential to rebound with the world economy possibly as soon as 2024.

There's a sentiment that we're close to hitting the market bottom, with expectations of only a modest recession. This belief is supported by indicators that are starting to show positive signs, such as a recent uptick in South Korean semiconductor exports.

Finnish stocks have more room to bounce back since they've been devalued more harshly due to their reliance on China and the geopolitical friction with Russia. But with Finland's NATO membership cementing its defense against Russian risks, investor confidence is starting to return.

Noteworthy companies that have felt the sting include Kone, a major industrial firm in Helsinki. Kone, known for its manufacturing of elevators, sold its Russian business after Ukraine's invasion and has also felt the pinch from China's real estate sector cooling off. But a recent less-than-expected drop in orders signals some resilience, offering a window into possible recovery.

Other companies that haven't fared well, like Metsa Board and Stora Enso in the forestry industry, and Outokumpu in steel, might also see an upswing if market analysts' predictions hold true.

Historically, Finnish industrial companies have enjoyed a premium over their European counterparts, but that premium has shrunk dramatically, signalling a potential buying opportunity. Analysts suggest that with everything negative already factored into their current prices, any sign of recovery could see Finnish stocks outpace those from countries like Sweden and France.

The broader market in Finland also shows promise, with earnings growth projections outpacing many other European indexes for 2024. This points to an advantageous position for investors willing to hold their nerve and invest with a long-term perspective.

In the end, with a brighter look expected for the European economy by 2024, Finnish cyclicals are poised to make a comeback, making now an interesting time for investors to consider bolstering their portfolios with these Nordic shares.

Investors, Finnish, Value