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Summary

• Denmark has been able to restrict COVID-19 infections through proactive measures by Government, co-operation by its citizens, and perhaps due to its isolated location as Denmark only shares land border with Germany.
• The country has one of the highest living standards with high-quality healthcare infrastructure. It also provides free healthcare to its citizens, and the healthcare infrastructure is largely publicly-funded with limited private operators.
• Stock indices in the country largely include companies that have become dearer during the pandemic – Pharmaceuticals and Health Care.

Denmark is among the countries that have been able to contain the virus spread efficiently. Owing to its larger defensive sector contribution to indices, the domestic markets have been performing well. Denmark is home to large healthcare companies like Novo Nordisk, Coloplast. It is one of the best performing equity markets. Some Danish equity indices have outperformed their peers in Europe, Japan and the USA.

The benchmark index OMX Copenhagen 25 is currently trading at 1,439, up 18% for the year and up close to 50% from the lows that the index recorded on 16 March 2020. During the same time period, the U.S index is up in lower single digits.

Denmark’s successful fight against COVID-19

As of 7 August 2020, the country had around 14,422 confirmed cases with almost 12,840 recovered. Denmark has a population of around 5.8 million and is the southernmost Scandinavian country.

Denmark is a developed, industrialised and democratic state. It also has high standards of living, and income equality is better than its peers. In mid-April, the country slowly initiated re-opening in the country. It was also one of the first countries in Europe that lifted lockdown measures partially.

Denmark Government and citizens have fared far better than peers in Europe when it comes to virus spread and re-opening of the economy. The country’s proactive measures with greater intensity and contribution from its citizens allowed to achieve such results.

It was also benefitted geographically considering that the country only shares land border with Germany, which was also able to control the spread of deadly virus effectively. As a nation, Denmark has many islands, and very smaller number of islands are inhabited compared to the total number of islands.

If one looks at other countries in Europe like Spain, France, Switzerland, Italy, these countries share far more borders than Denmark. It is also suggested that the country’s lower population density added benefits in limiting virus spread.

Just like Australia, the Danish Government was also one of the first countries in Europe that imposed measures to limit the pandemic, declaring a national shutdown and border closures. Policymakers in Denmark banned public gatherings, closed public venues across cities, discouraged public transport.

Universities, schools and childcare centres were also shut as a part of restrictions imposed on citizens. The country has maintained a tradition of high-quality public hospitals with very few private ones, and the health care system is also free.

Meanwhile, it is also believed that citizens of the country support the Government as well as politicians. Prime Minister Mette Frederiksen announced the closure of schools, childcare and universities on 11 March 2020.

Denmark’s Queen also made a public appearance and urged citizens to respect the norms formulated by the policymakers. Experts also noted that Danish citizens were relatively better than their European peers in respecting the restrictions.

Over the recent past, the number of new infections detected in the country is also on the rise since late July. This could be somewhat attributed to the level of re-opening in the country.

Danish indices have also reflected resilience

Some of the mainstream indices in the country like OMX Copenhagen 20, OMX Copenhagen 25, OMX Copenhagen All Shares, OMX Copenhagen Benchmark have now surpassed their pre-COVID levels.

Healthcare and pharma companies, which have been favoured by investors amid this pandemic, constitute a major portion in the Danish indices. Although the economy contracted by 2% in the first quarter of 2020, Denmark was better than comparable developed nations.

Denmark is also home to cyclical businesses, AP Moeller Maersk is one of the largest shipping company in the world. Given the disruption to global trade, there could be an impact on the business of the company.

Danish companies are also not immune to the pandemic since cyclical companies will likely disappoint at the backdrop of this economic contraction. Most of the Danish banks have suspended their outlooks in the wake of a pandemic.

The income streams of banks would be crushed by the falling interest rates, but the consequent impact an individual bank would depend on its reliance on net interest income. It has also been observed that the dip in net interest income has hurt the profitability of the Danish bank over recent years.

Since banks across the markets are incurring impairment charges as a result of potential deterioration in creditworthiness, Danish banks might also join their peers in recognising the impairment charges, especially from sectors that are most impacted.

Danish banks also boast one of the highest CET1 capital reserves in European markets, providing further strength. Policymakers also released counter-cyclical buffer in the wake of the crisis and increased lending capacity.