With the factors driving Norway’s bull market still very much in place, the question is not whether it will continue to grow but how far.

The market, reflecting a booming oil-driven economy has increased by 10% since the start of the year. With most indicators predicting continued growth the biggest threat is inflation.

Taking the recent market growth into account, Bjorn Morstad, head of equity research at Christiania Markets, says: “If I take the bottom-up perspective, taking the potential for each individual stock, I would say there is a major 10% upside potential. From the top down, looking at low interest rates and the vast liquidity pouring into the market I would say it still has a long way to go.”

Morstad describes what is happening as a boom, driven by increasing oil production. As a result, the government has the luxury of a large budget surplus in an election year. It is also making dramatic progress towards re-ducing its national debt.

Gunnar Holen, senior analyst at FIBA Nordic Securities (UK), agrees with Morstad’s assessment for growth. “The long-term interest rate has come as far down as we can expect. For shares, with 16% growth, most of my target for this year has been met, but with this environment and with companies performing well, we could see another 10%.”

Besides the oil revenues, Holen believes that the bull market is being driven by the increasing internationalisation of equity. Norwegian equity, once the domain of domestic funds and the larger international players is being targeted by a much wider spread of managers. This is coupled with the fact that Norwegian stock was undervalued until recently.

The government did make attempts last year to stem the strengthening of the currency but was forced to allow it to float, raising the spectre of inflation, but analysts are divided over their assessment of the threat.

Morstad says: “The streng-thening of the currency seems to be sufficient to prevent inflation from rising, even though we are in a boom economy with low inflation rates. The effect of a strong currency means that we are importing lower inflation.”

Jean-Marc Fraysse, European investment manager at Cazenove Fund Managers in the UK, believes the opposite, however. “I think the danger really comes from imported inflation,” he says, although he also suggests that the high level of the dollar may mitigate its effects.

In terms of the growth sectors, Morstad says that he expects the consumer sector to do well, in addition to shipping and banking. Those sectors that are suffering are those affected adversely by a strong currency. “We are more sceptical about the industrial cyclicals such as raw material producers.”

Fraysse is largely in agreement favouring oil servicing and consumer-related sectors, placing high-tech companies third. On the downside he says: “Much of the export sector such as oil, pulp and paper is priced in dollars so the major impact will be on translation costs rather than transaction costs.”

Holen, however, reserves judgement on the whole questions of which sectors will do well. “I think it’s very much a question of stock picking. It is really hard to find any particular sectors.”

All analysts agree that the trend for pensions funds to invest in equities, both dom-estic and foreign, will in-crease. Morstad points out that with interest rates at under 4%, many funds have been forced by insurance policy guarantees to look for higher interest securities, further fueling what should be a bull market for some time to come.”