Renewed Interest Among Foreign Investors


With extensive experience in bringing foreign investors to Iceland, Fossar Markets employees have developed a widespread contact network.

Fossar Markets CEO Haraldur Thordarson noted in a recent interview with Helgi Vífill Júlíusson for Markaðurinn, the weekly business paper of Fréttablaðið, that the interest of foreign investors in the Icelandic market has awakened once more this autumn, as the FTSE began including Icelandic companies in its set of indices. Numerous investors refer to such indices and even follow them precisely, or as Thordarson points out, “These indices attract the attention of foreign investors that have not been focusing on Iceland.”

Iceland Capital Markets Day in New York

During the first week of November, Fossar Markets held its Capital Markets Day in New York. Iceland’s Central Bank Governor Ásgeir Jónsson explained the Icelandic economy, and three CEOs introduced the companies they direct: Benedikt Gíslason from Arion Bank, Orri Hauksson from Siminn, and Sigurdur Vidarsson from TM.

According to Thordarson, it is attractive for foreign investors to put money into Icelandic securities. “For one thing, this is because the Icelandic market shows little correlation with international markets. The risk is idiosyncratic. Secondly, the fundamentals of the Icelandic economy are strong, and the multiples of listed companies here are attractive. Assets in Iceland fit nicely into a diversified portfolio of international assets.”

Thordarson goes on to observe that foreign participation in both fixed income and equities markets is quite low: “Foreign participation in the other Nordic countries is around 40%, in Iceland it’s about 15%, even if that figure does vary somewhat due to the dual listing of Marel and Arion Bank on exchanges in other countries. Of course, the number of foreign investors has increased substantially since capital controls were lifted in 2017, when foreign participation was closer to 3%. Nonetheless, it remains considerably less than what is common in the countries we normally compare ourselves to.”

Serving both sides of the Atlantic

Thordarson mentions that Fossar Markets had already hosted an Iceland Capital Markets Day in London last June. “In fact, we plan on hosting a Capital Markets Day on both sides of the Atlantic Ocean every year. Fossar Markets has been at the forefront of bringing foreign investors to Iceland, and has built up a rather extensive network of international investors, as demonstrated by the excellent participation in the Capital Markets Day in New York. The event was also attended by a number of new investors coming from New York, Connecticut and even Boston.”

What questions are the foreign investors asking?

“They ask about the fundamental health of Iceland’s economic system, what the outlook is and how the Icelandic krona is doing. Our currency gets discussed quite a lot, with some investors taking a conservative view and hedging themselves against movements in the currency, while others feel that there is opportunity in keeping an open position. They feel the fundamentals are promising and see potential gains in a stronger krona,” states Thordarson.

Equities are not the only asset class

What are the feelings of foreign investors about this country’s general drop in share prices in recent years, with the exception of Marel?

“This price drop makes the Icelandic opportunity even more attractive for those thinking of investing here. Those who are already invested may have a different view of course. However, equity investors typically have a longer-term view and the patience to wait for market values to reflect the fundamental value of the companies they have invested in. Furthermore, let’s keep in mind that there are more asset classes than listed equities. For example, bonds have been performing very well.”

Aren’t foreign investors worried that there might be insufficient liquidity in the Icelandic market to allow for efficient pricing of assets?

“The overall set of international investors is highly diverse. While some of them have requirements of minimum liquidity, others specialize in small caps which are generally accompanied by a low liquidity. Again, some investors concentrate exclusively on specific industries; yet others aim for diversified exposure within the economy and so there is no single universally applicable answer to this question.”

*This interview (here slightly abridged) originally appeared on 13 November 2019 in Markaðurinn, the weekly business paper of Fréttablaðið.