SEB report: Selected bonds good choice in difficult markets

7/31/2019 SEB report: Selected bonds good choice in difficult markets

1/39

InvestmentOutlookpiv bkig - ivm gy

Searching or sae havens

in a turbulent marketMa


2/39


3/39

3Investment OutlOOk - mAY

Contents

Sragy

rodcio..........................................................................................................................5

Sary ...............................................................................................................................Macro ary ...................................................................................................................

Poroio coary: Modr Progra.............................. ............ 10

Th: riy or growh - or boh ............................... ................................. ............ 13

Th: h pr i id copay argi a bbb? ..................................... 1

Th: arch o o rr..................................................................................... 19

Th: Gr i dirif a poroio..........................................................22

cl

Nordic qi ................................ ................................ ................................ ................... 2

Goba qii.................................................................................................................. 2

Fixd ico ............................ ................................. ................................ ........................ 2

Hdg d ............................. ................................ ................................ ......................... 30Ra a ................................ ................................ ................................ ......................... 32

Pria qiy ................................ ................................ ................................ .................... 3

Coodii ........................... ................................ ................................. ......................... 3

Crrci ................................ ................................ ................................ .......................... 3


4/39

4 Investment OutlOOk - mAY

pGoba Had o Sragy

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ha.pro@b.

l gu Goba Had o Macro Sragy

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ar.apa@b.

v d OPoroio Maagr ad Had o S Lxbrg

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[email protected]

d OSior Poroio Maagr

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adr..oo@b.

Had o S Norway

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Jh h Sragi

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joha.hagbarh@b.

c bw Sragi

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car.barow@b.

j ludEqiy Sragi

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bjor.da@b.

J dEcooi

+46 8 76 6 7

joa.ado@b.

kEcooi

+ 6 6

[email protected]

D gEcooi

+46 8 76 6 8

dai.gcr@b.

cF Ecooi

+46 8 76 6 8

car-fip.robac@b.

J G Ecooi

c khCoicaio Maagr

+46 8 76 6

cciia.oho@b.

Thi rpor wa pbihd o May , .

co ar bad o ioraio aaiab bor May , .

Sragy

Thi doc prodcd by SEB coai gra arig ioraio abo i i prodc. hogh h co i bad o orc jdgd o b

riab, SEB wi o b iab or ay oiio or iaccraci, or or ay o whaor which ari ro riac o i. i rarch i rrrd o,

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Mor ioraio abo SEB i rcodaio ad i aag o coic o ir c. ca b od a hp://www.b./ppyigar.

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ir ay ihr ri or a, ad i i o crai ha yo wi g bac yor id capia. o ca, o ca xcd h iiia ao id.

Whr ihr d or yo i i crii doiad i a orig crrcy, chag i xchag ra ca ipac h rr. o ao ar y rpoib

or yor i dciio ad yo hod away obai daid ioraio bor aig h. For or ioraio pa ir aia h ipifd

propc or d ad ioraio brochr or d ad or rcrd prodc, aaiab a www.b.. cary yo hod adic aiord o

yor idiida circac ro yor SEB adior.

i u x: a cor o or raioa Pria Baig oc i Lxborg, Sigapor ad Swizrad yo ar obigd o p

iord o h ax r appicab i h cori o yor ciizhip, ridc or doici wih rpc o ba acco ad facia raacio. SEB do

o proid ay ax rporig o orig cori aig ha yo yor proid cocrd ahorii wih ioraio a ad wh rqird.


5/39


There are great tensions among voters because

o the austerity programmes now under way

around Europe, and the political picture will re-

main a risk actor or nancial markets. The era

o generous political programmes is past, and

the consequences are painul. Meanwhile the

solution to debt problems is economic growth.

W rcy hard h cio r ro Frac ad

Grc. Lar hi yar, h oc wi b o h Uid Saad h rica pridia cio. Wha ca poiica

adr do? Bi Cio capaig adior Ja Cari

aid i : d o hi i hr wa ricaraio,

wad o co bac a h prid or h pop. B ow

wa o co bac a h bod ar. o ca iiida

ryo. Cari word i rig r, ad ory abiio

poici wi b dic o carry o, gi oday facig

d. Th ra o gro poiica progra i dfiy

pa, ad h coqc ar pai.

Mawhi cooic growh i h oy way o ro h

db i i h og r. Th US ha rpady do-

rad hi ad ay do o oc agai. Erop, o h ohrhad, ha a ogr ad or dic jory ahad. hi

i o Investment Outlook, w ha ddicad or ai

Th aric o poiic ad i ipac o facia ar.

Th ar big i ha d o b xaid. Th dba

i Erop o baacig i ad b-ighig i o

xap. Ca ariy agr b r-goiad? i

poib o ac growh-iaig ar? , i i qi

poib. ay i a xap o a cory whr poiica pro-

gra ay b iwd a prooig growh.

oc ar, w ha wha ay b prcid a a para-

dox. Corpora prof argi rai high, dpi owgrowh ad a pric qz. To o x, hi ay b d

o h ao o ac i h cooy, high poy

c., b i raiy h picr i ch or copx. Thi

opic i irig ad dr or i-dph aayi.

xpaaio ay b ha oday copai ar ch or

xib i hir opraio ad ar h br opiid. High

argi ar o o h acor ha proid o hop abo

h oc ar, dpi raiy iid goba growh.

hi i, w ha cho o diid or Eqii cio io

wo par: o ha coy xai h Swdih ad ohr

Nordic oc ar ad o ha oc o h goba oc

ar oid h Nordic rgio.

Modr ior o bw dir a ca oday.

Th word or or opporii ha bor. W cap-

r o o h opporii i or Modr Progra, b w cao f ryhig io h por-

oio. Forad i ar o xap. r i

orad i i grar ha r. W ha ood a

h ario poibiii ha xi ad copard h poia

rr o ohr a ca. i worh h ri? r i hi

ry a roaic i ha gi yo ara cry

yo ca joy pdig i i, b who a yo wi ha

o wai a og i o bf ro?

acor ha ha worrid ay facia ior, ad

which w ha ochd o i arir i, i ha ry ow

bod yid a i dic o i capia a iid ri bwih raoab rr. B h rorc wi fd a o-

io. pporii xi, ad i oday i cia

whr or ad or pop wa o ii hir ri, or

Th aric o hi opic i ipora radig.

Thi i o a ay yar or ior (a i ay yar wr ay).

Soc ar bga rogy ad ay d h yar w,

i word cooic growh hod p. pi o ryhig, w

ar coiig o fd ar rr i corpora bod. W ha

copd o ad a ha qarr o wha wi b a irig

yar: pai ad dic i ay pac, y a irig yar.

Hans Peterson

CIO Private Banking

and Global Head o Investment Strategy

idu

A ear dominated b politics


6/39


Sary

extatios*nxt 12 moths

rasoig *F h b u vw d d u wh .tu isk

equitis 10% 19%

Negative in the short term uncertainty about the euro zone debt crisis and wobbly US growth. Positive

news already priced in. POSitive in the long term. Good uture conditions or the stock market. Trend

towards greater risk appetite in investors search or returns. Strong balance sheets and valuations belowhistorical averages.

Fixd iom 6% 9%

Negative towards government bonds in OECD countries. Central banks will stick to stimulus agendas.Because o low OECD government bond yields, investors are seeking returns elsewhere. POSitive towards

government bonds in emerging markets, where yields remain elevated. Falling ination in BRIC countries

will provide room or bond yields to all. POSitive towards corporate bonds, with a ocus on high yields

bonds, where yield gaps against government bonds indicate that the market is pricing in a signifcantlyhigher than probable percentage o bankruptcies.

Hdg fuds % 5%NeUtRaL/POSitive. Strategies with high market exposure have benefted, but a turbulent fnancing market has

created a generally tougher climate. Smaller uctuations in risk appetite will provide good potential or recovery.

ral stat % 5%

NeUtRaL. Tighter fnancing conditions and a continued uncertain economic outlook led to lower transac-

tion activity in early . The co-variation between this asset class and the stock market is diminishing,

creating better conditions. The REIT market will be the most interesting when risk appetite returns.

pivat quity 12% 27%

NeUtRaL.Due to continued macroeconomic and fnancial risks, PE companies can rely to a lesser extent

on undamental actors such as growth and credit availability. Continued high discounts will provide good

potential in the long term, but the ability o managers to generate alpha will be the most important key to

success in the near uture.

commoditis 6% 19%

NeUtRaL/POSitive. Aside rom agricultural commodities, economic developments with a ocus on China will determine the price trend or commodities. Assuming there is a sot landing in China and that global

growth will progress at a reasonable pace, prices o many commodities especially industrial metals have

the potential to rise.

cuis 4 3% %

NeUtRaL. Due to worries about the situation in Spain as well the French and Greek election results, the euro

will probably trade at a somewhat lower level. A recovery in the US economy plus risk appetite will probablyresult in a stronger USD, while urther quantitative easing by the Fed would have a weakening eect.

The orecast reers to the global stock market. 2 The orecast reers to a basket o investment grade and high yield.3 The orecast reers to a basket in which the energy, industrial metal, precious metal and agricultural commodities categories are equally weighted.4 The orecast reers to the alpha-generating capacity o a oreign exchange trading manager.

XpcD ik D U (X mO)

iOicl ik D U

(my , O pil , )

cg i OU XpcD U

Equities

Fixed income

Hedge fundsReal estate

Private equity

Currencies

Commodities

0%

2%

4%

6%

8%

10%

12%

14%

0% 5% 10% 15% 20% 25% 30%

Expected volatility

Expected

return

Hiorica a ar bad o h oowig idic: Eqii = MSC C Word EUR. Fixd ico = JP Morga Goba GB EUR Hdg. Hdg d = HFRX Goba Hdg Fd USD.

Ra a = SEB PB Ra Ea EUR. Pria qiy = LPX EUR. Coodii = DJ UBS Coodii TR EUR. Crrci = BarcayHdg Crrcy Tradr USD.

-5%

0%

5%

10%

15%

20%

25%

2008-11

2009-02

2009-05

2009-08

2009-12

2010-02

2010-05

2010-09

2010-12

2011-02

2011-05

2011-09

2011-12

2012-02

Equities Fixed income Hedge funds Real estate

Private equity Currencies Commodities

Fixed income

Equities

Private equity

Commodities

Real estate

Hedge funds

Currencies

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

0% 5% 10% 15% 20% 25% 30%Historical volatility

Historicalreturn

iOicl cOliO

(my , O pil , )

Equities

Fixedincome

Hedgefunds

Realestate

Private

equity

Commodities

Currencies

Equities 1.00

Fixed income -0. 1.00

Hedge unds 0.59 -0.30 1.00

Real estate -0.12 0.0 -0.05 1.00

Private equit 0.5 -0.3 0. -0.13 1.00

Commodities 0.2 -0.15 0. -0.05 0.3 1.00

Currencies -0.1 0.19 0.1 -0.09 -0.05 0.0 1.00


7/39


Sary

Wig i mOD pOciO

Wig i mOD gOW

Wig i mOD ggiv

Ollig -mO cOliO v. mci WOlD

(U)

-80

-60

-40

-20

0

20

40

60

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Equities Fixed income Hedge Real estate

Private equity Commodities Currencies

pFOmc OF DiFF cl ic

Rr i i i pri .Hiorica a ar bad o h oowig idic: Eqii = MSC C Word EUR. Fixd ico = JP Morga Goba

GB EUR Hdg. Hdg d = HFRX Goba Hdg Fd USD. Ra a = SEB PB Ra Ea EUR. Pria qiy =

LPX EUR. Coodii = DJ UBS Coodii TR EUR. Crrci = BarcayHdg Crrcy Tradr USD.

Sorc: SEB

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

2 00 2 2 00 3 2 00 4 2 00 5 2 00 6 2 00 7 2 00 8 2 00 9 2 01 0 2 01 1

Fixed income Hedge Real estate

Private equi ty Commodi ties Currenc ies

5,5%

0%

3,5%

0%

0%

22%

31%

38%

0% 10% 20% 30% 40%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

2%

2%

0%

0%

0%

23%

73%

0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

13%

4%

2%

0%

0%

32%

32%

17%

0% 10% 20% 30% 40%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current


8/39

8

m u

A winter o rising risk appetite and optimism...

... has been ollowed by a spring o renewed

worries, ocusing on Spain

We still oresee accelerating global growth, but

risks have again increased

Wh h Eropa Cra Ba (ECB) ord i hr yar

oa o ro zo ba hi wir, i wa h caay or a

wa o ri rcd i riig ri appi ad opii.

Sic h, howr, ar worri ha rrd. Th dp-

ig crii i Spai ad h poiica ipa i Grc ha

agai drcord h rio ri ad chag h ro

zo ac, ad cooic iga ro h Uid Sa ha

bco or ixd. Mawhi h rgig ar (EM)

phr i carryig o a cooic o adig, whi prr-

ig airy rapid growh. Thi wi hp ai h word cooy,

b i o ogh o i i. w prdic goba GDP growh o

abo . pr c hi yar ad abo 4 pr c i .

To o x, h ri iaio ha hid i a gai di-

rcio or h pa w oh. dpr orig facia

crii i h ro zo rai h o iy poia driig

orc bhid a rcio i h 4 idriaid cori o

h rgaiaio or Ecooic Coopraio ad Dop

(ECD) a a who. Th ai orc o pid poia i i

ha h US cooy wi r a or ora rcory, wihpoii coagio c o h word cooy. Mawhi

h propc o cary owr iaio wi aow roo or co-

id ry xpaioary oary poicy i ECD cori

ad pa h way or y ir ra c i h EM phr.

h w hu rc oh, US cooic prorac ha b roghy

a w xpcd. Job growh accrad hi pa wir, b

pary d o hioricay war wir wahr. GDP growh,

o rpriigy, owd i h fr qarr o a bi abo

pr c ro pr c i h orh qarr o . W

prdic ha GDP wi icra by . pr c hi yar ad ai ar i . Shor-r ri icd high oi ad pro

pric. Lar hi yar, craiy ay ari d o fca poicy

worri i h r-p o h Nobr 6 pridia c-

io ad d o h bdg ooo. Upoy wi

o hi yar b a i . Nx yar, iaio wi b

igifcay owr, ad ch propc a h door ajar ora hird rod o qaiai aig (QE) i h or o bod

prcha by h Fdra Rr, h US cra ba.

w w u z wr a priod o abiiaio ary i , ar worri

abo ro zo gor fac caad agai, wih a

oc o Spai pbic fac, h poiica iaio i Grc

ad a gooy acrocooic ooo. Thr i a growig ii-

hood ha Spai i Grc, rad ad Porga wi b

orcd o a bai-o. Th w gor o boh Spai

ad ay ha a car poiica oc o ror ad o gig

hir fac dr coro. r ai cario i ha Spai wiha o a bai-o b ha h ro zo wi ay oghr.

Fiacia worri ha cad h cooic ooo i h cr-

rcy io o a. W xpc ora ro zo GDP o dci

by or ha . pr c i ad o grow by ha pr

c i . Dpi hi yar rcio ad worri abo

Spai, h ECB ha rcy raid pai.

b bh Briih GDP boh i h orh qarr o ad h fr

qarr o . Th Uid Kigdo ha h dippd io r-

cio, b w prdic ha i wi b bri. Whi fca ariy

progra ad a wa abor ar ar wighig dow h

cooy, ra adig idicaor ha cibd igifcayic a a. W orca GDP growh o . pr c hi

yar ad or ha . pr c i . Briih iaio wi

xcd h Ba o Egad pr c arg hi yar, b wi

a bow i x yar. Th BoE ha hd rhr qaiai

aig (bod prchaig) pa, ad i y ir ra oo

o rai a . pr c a a i ary 4.

d d u w War iraioa dad i haprig growh i h x-

por-dpd Nordic cooi. , GDP growh wi

b oy abo . pr c i Dar, Fiad ad Swd,

b Norway which ha rog doic dad wi howar growh hi yar ha i . Fairy good cra go-

r fac ad crr acco rp ha gi

A variable world economic climate

Investment OutlOOk - mAY


9/39

9

h Nordic cori aorig roo drig h priod o

cooic crii whr i Erop.

J Japa cooic rcory i coiig, ha o rcorc-

io oowig a yar ara diar ad a xpaioary

fca poicy. W prdic GDP growh xcdig pr c i

ad or ha . pr c i . B hr ar orc

o cocr, aiy i h or o prob wih rgy ppy

ad xpi oi. D o arg id capaciy i h cooy,

daio a gra dci i pric wi pri or h

orh raigh yar, h probaby aig aohr

yar o aig cor pric. Toghr wih a diraby

rog crrcy, hi i a arg or a coid zro ir-

ra poicy or a og i o co, aog wih addiioa

bod prcha by h Ba o Japa.

whia xcdig Japa wi agai b h word a-growig

rgio i . Mo ia cooi accrad a bi ary

i , ad w prdic ha ar growh wi prai drig

h cod ha o hi yar ad i .

Chia GDP grw by or ha 8 pr c i h fr qarr,

a oicab dcraio ro , b hr ar ig ha

cooic growh bood o i ary . W prdic GDP

growh o 8. pr c i ad a bi abo 8. pr c

i . aio ha cood coidraby ic oppig o

a r. W xpc h cra ba o p owrig i

rr rqir or ba, ad w or a Chi yir ra c drig h hird qarr o . W bi

ha h cooic p i dia bood o i h fa

qarr o , wh GDP growh owd o j abo 6 pr

c. W xpc GDP o grow by 7. pr c i ad 7.

pr c x yar. dia iaio ra ha a ighy b

i iy o ri agai i . Thi a oy iid roo or

rhr y ir ra c.

Fu u l La yar ora GDP i Lai rica grw by or ha 4.

pr c. Thi yar a dcraio i iy or h rgio a a

who, whi Brazi i arg cory oo o pd p

a bi copard o a yar. W bi ar growh wi doi-

a o a broad ro ad or GDP growh i Lai

rica o abo 4. pr c. aio i h rgio wi ad

owha hi yar b rai priy high. og Lai

rica aorab acrocooic fgr ar rog rad

baac, a bdg dfci ad pbic db aragig

ha pr c o GDP.

u w w d Ear (ad Cra) Eropa cooi wi grow a dir-

ra i - d o aryig xpor-dpdc ad

dirig dgr o facia ad rad i o h ro zo.

Th orhr par o h rgio icdig Ria ad Poad

wi cop wih h ro crii raiy w, whi o cra

ad pciay ohr par wi b hardr hi. Th Baic ad

h Czch Rpbic wi b aog h di hard hi, whi

Bgaria, Croaia, Roaia, Hgary ad Urai wi b hhard hi, d o raiy rog ro zo baig i.

Drig h hr Baic cori had h high co-

oic growh i h Eropa Uio, b a i h yar h

cooi bga a dcraio ha wa copy id o h

iraioa cycica dowr, pciay i Wr Erop.

Expor wi rai raiy wa drig h coig yar, whi

copio wi grow a a dc pac. Harh ariy poi-

ci ar pa, hogh Laia ad Lihaia wi coi pbic

bdg-ighig hi yar. W prdic Baic GDP icra o

.-. pr c hi yar, ad a i ar i .

h wd r a yar GDP growh o 4 pr c (ard a

prchaig powr parii), w xpc a dcraio o j

abo . pr c hi yar, whi or orca fgr or

idica a accraio o or ha 4 pr c. Th

EM phr wi coi o grow baiay ar ha h

ECD cori, or by ary 6 pr c copard o abo

pr c. W ha rid or orca or h word cooy

argiay pward copard o or Fbrary ia.

Macro ary


China, GDP growth, y/y India, GDP growth, y/y

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2005 2006 2007 2008 2009 2010 2011

Percentyear-on-year

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

mOO cOOmic DcliO

i ci D iDi

Ater a shallow dip in GDP growth during 2/2,

the rate accelerated in China and India, then gradually

slowed rom mid-2 (Q 22 statistics or India

are not yet available). Judging rom recent indicators,

growth rates in the two economies are now approaching

their lows. Our orecast is that growth will successively

speed up starting this summer.

Sorc: Rr EcoWi


10/39


mOD pOciO

hi wriig, h yid o -yar US Trary o wa .84

pr c, argiay owr ha a yar-d (.87), b hi

copario do o how ha yid ro o .7 pr c i

March, h agai. Thi o coicidd wih gr-

ay rogr rica acrocooic aiic i h ary

oh o booig hop o a br rica co-

oic cario, oy o a hor o aay ia ic

ary pri. r o bri wig, Gra og-r or-

ig yid ha a o . pr c. Gobay, gor

bod yid ha cibd ary prcag poi ic yar-

d , accordig o h JP Morga Goba Gor

Bod dx ard i ro.

Sic h r o h yar, cooic orcar ha grad-

ay adjd hir GDP ia pward. W prdic ha

acrocooic daa cao proid h ar wih a ay

pid rpri a bor. r a rog fr qarr or ri

a i gra, w h a grar ri ha h ar

wi b or icd by gai w. For xap, ro

zo worri ha rrd o h poigh, hi i wihSpai i h arrig ro. addiio, or ad or ar

payr ar a hard adig i h Chi cooy which

wod ri a bow o h goba rcory.

For a ow-ri poroio i Modr Procio, i i bcoig

icraigy ipora o oo or ow o rr ha ar

idpd o cooic rd ad ior ri appi.

pri w h rdcd or xpor o high yid corpora

bod o .6 pr c ro 4.6 pr c. hogh h dry-

ig arg ar h a rog copay baac h,

araci yid diria o orig bod ad da

ra (h br o crdi ch a barpci ad

rrcrig) bow hiorica arag hi a ca i

ao ii o ior coci wiig o bar ri.

cario o dciig ri appi ao adry ac

rgig ar bod id i oca crrci. hogh

hir high yid rai araci, i a hay ar capia

wi o a crrci i h US doar, waig EM

crrci a a coqc. W ha h od or pr c

hodig i EM db.

hrwi w ar pig or fxd ico b-poroio poi-

io: pr c i hor-r bod d, ad pr c

i r ada wih poia o gra rr rgard

o h dircio o h fxd ico ar. bo 6 pr c

i id i ragd oa, which ca b dcribd a high

yid bod, b wih oa coara i h copai a

ad oaig ra.

h hdg d b-poroio, w ha icrad or a-

ocaio o h Crdi Log/Shor ragy o 4. pr c, a

ragy ha d o pror w wh h crdi ar

i ogh. Thi poiio hod b iwd i cobiaio wih

or poiio i high yid bod ad ragd oa ad i

aid a oig crdi ri i h poroio. Th hdg db-poroio oa pr c o Modr Procio, wih a

phai o Mar Nra ad Mi-Sragy.

Gi h chag, h Modr Procio poroio hod

b ab o wihad a priod o ar roi, b w wi

oior dop i h crdi ar cary o a

ay rhr adj i or poiio.

Getting read or a new dose o turbulenceRisk in various shapes is back in investors vocabularies. Political events in Europe and elsewhere are

not helping sustain markets. A more reserved attitude towards risk is clearly justied. Since April wehave reduced the cyclical sensitivity o Modern Growth and Modern Aggressive. In Modern

Protection, we have decreased those positions that are most dependent on investors risk appetite.

23%

2%2%

73%

Cash

Currencies

Hedge funds

Fixed income

p

:

md ip


11/39


mOD gOW

Ri a opd h yar rogy ad ro harpy drig

h fr w oh, b ic id-March hy ha b i a

aig rd. w ard i h a Investment Outlook(pb-

ihd Fbrary , ), pri acro daa ro h US ha

b war ha xpcd. Worri abo h ro zo ha

agai icrad hi i ocig o Spai. Looig a-

ward, aiic ro Chia aacrig cor ar iga-

ig owr aciiy, ad ior ar icraigy cocrd

abo a poib hard adig i h Chi cooy.

h who, or iw o h goba cooy ha o chagd

igifcay, b w bi ha h ri o a ora rcio

i h ECD cori ha icrad owha. W ao xpc

rgig ar, pciay i ia, o rai a h growh

gi o h goba cooy ad ha h ECD cori wio achi hir poia growh ra. xpadig cooy

do o, howr, cariy a a riig oc ar. Mo

US cooic growh ow o b pricd io qii, ad

ar ar o joyig h a ppor ro acro daa.

Drig h x qarr, copay-rad w ad ro zo

worri ar iy o b h ai ar-driig acor, aog

wih ay irio by cra ba (aiy h US Fdra

Rr poib ach o QE).

Thi a ha w ha owrd or rr xpcaio

or ri a. Eary i pri w dcrad or o cycicay

ii poiio. qii, w had or xpor o

rgig ar ad icrad or xpor corrpod-

igy o goba qii. hi way, w ar pig h qii

b-poroio a a chagd 7 pr c o Modr Growh

b ar rdcig h rii xpor. Goba qii ow

oa pr c, whi Nordic ad rgig ar qii

oghr oa pr c o Modr Growh.

Bad o aay ia, oc ar aaio ar ra-

oab ad ow ir ra idica ha qii ay cib

or, b prof argi ar hioricay high. Looig

ahad, corpora prof ay b qzd by priy high

oi ad ohr rgy pric, ad w a ri ha highr co

ad owr prof argi ay ay ph dow aa-io. oday cia o ow dryig cooic growh, i

i h pciay ipora b dic o fd copai

ha ar growig.

Gi war goba growh, coodii ar ao dr pr-

r. Wa Chi growh dcra dad or idria

a, or xap, b agricra prodcr appar iy

o joy good har hi yar, wih raiy aorab

wahr orca. Bca o hi ixd ooo, w ha

gray dcrad or coodii xpor, which ow

oa pr c o Modr Growh.

W i or h b ri-adjd rr i corpora db.

Th dryig arg ar h a ba hri

hir baac h, ad copai icraigy choo o

borrow i h bod ar iad o ia ba. Th corpo-

ra db g i growig, whi copai ha rog

baac h. hogh Moody raig agcy raid i

orca or goba crdi (h da ra, or xap

barpci ad rrcrig), i rai bow h pr

c hiorica arag. Mawhi h bod ar i pric-

ig i a da ra o ary 8 pr c. Th yid prad o

gor bod ha adidy arrowd adiy ic

yar-d , b h i i araci. W ar pig

or corpora db xpor a pr c.

h fxd ico b-poroio, howr, w had orrgig ar bod poiio i oca crrci. hogh

hir high yid rai araci, i a hay ar, capia wi

o a crrci i h US doar, wih war EM

crrci a a coqc. h Fd ach a w rod a

qaiai aig i h cod ha o (a w ha or-

cad), h USD i iy o wa, b ab idria daa

ro h US wi owr h probabiiy o w irio. h

og r, h arg i aor o EM db ar i aid, b

i igh o hor-r craiy ad gra ar i

w ha owrd or xpor o . pr c.

Sic h bgiig o , h hdg d b-poroio

ha how iid growh. hogh E Dri ad Mi-

Sragy ha prord aoraby, CT ragi (whr

w ha or arg aocaio) ha o grod. Hdg d

aagr, pciay CT aagr, ha gray od i

hard o gra rr rcy d o icraigy high cor-

raio bw a, a w a rapidy caig rd.

pri w icrad or aocaio o Crdi L/S, which d

o pror w wh h crdi ar gray dci.

Thi poiio hod b i cobiaio wih or arg

xpor o high yid bod.

h who, h Modr Growh poroio i or d-

iy poiiod ha o qarr ago, i ordr o wihada priod o or rb ar. Howr, w ar prpard

o rdc i cycica iiiy or i h ooo or

or a ca driora.

Poroio coary: Modr Progra

13%

32%

17%

4%

2%

32%

Cash

Currencies

Commodities

Hedge funds

Fixed income

Equities


12/39


Poroio coary: Modr Progra

mOD ggiv

Thi yar harp pr i ri a dd i id-March.

Sic h h a ha b i a aig rd. Th VX

oaiiy idx, o iwd a a ar o ior riario, bow i March ad h rbodd o abo

i ary pri. hi wriig, h idx i agai a arod 6.

Hioricay (ic ), h VX ha rachd bow o

a br o occaio, b oday ar i h owr ir-

a ic h facia crii bga. Wiho drawig ay aca-

dic cocio, w ca o ha o ra occaio ic

7 h goba oc ar ha a by or ha pr

c ar h VX hi w ow. a way, ow VX radig ca

h b iwd a h ca bor h or, which i aohr

rao or or or rrd aid oward ri a pr.

hogh or iw o h goba cooy ha o chagdigifcay, ar h rog pr w owrd or rr x-

pcaio or ri a. Eary i pri w dcrad or o

cycicay ii poiio. h qii b-poroio, w

had or xpor o rgig ar ad icrad or

xpor corrpodigy o goba qii. hi way, w

ar pig h b-poroio a a chagd 8 pr c o

Modr ggri b ar rdcig h rii xpor.

Goba qii ow oa 6 pr c, whi Nordic ad rg-

ig ar qii oghr oa pr c. r hodig o

goba qii ar gray argd oward ich ar

ha ha growh poia i ow-growh cooi,

ch a ia pria copio a w a crai copa-

i i h choogy cor.

Mar worri abo a hard adig i h Chi cooy

ha graday icrad, ao pig prr o coodii.

Wa Chi growh dcra dad or idria a,

or xap, whra agricra prodcr appar iy o

joy good har hi yar, wih raiy aorab wahr

orca. Bca o hi ixd ooo, w ha gray d-

crad or coodii xpor, which ow acco or .

pr c o h poroio.

W i or h b ri-adjd rr i corpora db.

Th dryig arg ar i h a ba

hri hir baac h ad copai icraigy choo

o borrow i h bod ar iad o ia ba. Th corpo-

ra db g i growig, whi copai ha rog ba-

ac h. hogh Moody raig agcy raid i orca

or goba crdi (h da ra, or xap barp-

ci ad rrcrig) o pr c i , hi i i bow

h pr c hiorica arag. Mawhi h bod ar

i xpcig a da ra o abo 8 pr c. Th yid prad

o gor bod ha adidy arrowd adiy ic

yar-d , b h i i araci. W ar pig orcorpora db xpor a pr c.

Sic h bgiig o , h hdg d b-poroio

ha how iid growh. hogh E Dri ad Mi-

Sragy ha prord aoraby, CT ragi (whr

w ha or arg aocaio) ha o grod. Hdg d

aagr, pciay CT aagr, ha gray od

i hard o gra rr rcy d o a icraigy

high corraio bw a, a w a rapidy caig

rd. pri w ao addd h Crdi L/S ragy, which

d o pror w wh h crdi ar gray d-

ci. Thi poiio hod b i cobiaio wih or

arg xpor o high yid bod.

h who, h Modr ggri poroio i or d-

iy poiiod ha o qarr ago, i ordr o wihad a

priod o or rb ar. Howr, w ar prpard o

rdc i cycica iiiy or i h ooo or or a-

ca driora.

3.5%

5.5%

38%

31%

22%

Cash

Commodities

Hedge funds

Fixed income

Equities


13/39

13

h

Today one-sided austerity policies ace

growing resistance and scepticism...

... while measures aimed at promoting growth

have moved to the top o political agendas

There are also recipes in which austerity paves

the way or growth

Th facia dci o h pbic cor i ay o h ECD

idriaid cori ha b dr way or dcad, a

dr-baacig o bdg o ai growh drig ow-

dow ha o b achd by qay arg or-baacig

drig boo priod. Ecooi Joh Mayard Ky fcapp-priig rcip ha h o b oowd o h r.

Gor db i ay cori ha coqy

rdd highr drig h po-war priod, boh i abo

r ad a a prcag o gro doic prodc (GDP).

By h r o h ii, ora gor db i h

ECD cori had grow o abo 6 pr c o GDP. Thir

ico a or bdg baac wr awhi i

h rd, b a ha i h gai fgr wr o p-

ciay arg: - pr c o GDP.

r ha, h iaio word draaicay bca o h

facia ad cooic crii ha bga i 7 d o b-pri orgag prob i h US. Lar hrogh ario

cha i prad i widfr acro h US ad h goba

cooy. Th crii ciad i h prig o . By h,

pbic bdg dfci i h ECD cori had iray

xpodd, a cori wr orcd o ac fca rgcy

progra o rc hir facia y ad idria

cor, ad a a dp rcio cad gor r

o a ad xpdir o cib.

Wihi a w or yar, pbic cor db i h ECD cori

had wo o ary pr c o GDP. Pbic db o hi

agid ad o ajor prob, icdig high bod yid,riig co o dig or ba ad icrad rrici i

ba dig. Ta oghr, a o hi hr cooic growh.

Th prcdd drioraio i pbic fac ad

bdg ariy ar iiab. o ca hi wa

orcd o gor, aiy by h facia ar, hraioa Moary Fd (MF) ad h Eropa Uio

(EU). xchag or ogh bdg ar, ra ro

zo cori ha rcid bai-o oa ro h roia:

h EU, h Eropa Cra Ba (ECB) ad h MF. Mai

dowgrad o ay cori crdiworhi by bod

raig agci ha ao hpd iiy prr or pbic

bdg cooidaio.

uh h Erop, h GPS cori Grc, rad, ay, Porga

ad Spai ha b h oc o aio. B whi

Grc, rad ad Porga wr orcd o appy or bai-oro h EU/MF, ay ad Spai ca i d hir bdg

dfci wih oa i h ordiary fxd ico ar

hogh a high bod yid (SEB orca ha Spai wi oo

d a bai-o, howr). a ca, h cori ha

had o bi o ogh b-ighig. Thy ha ao b

rqird o a p o ipro h cioaiy o hir

cooi ad hir iraioa copii.

Drig h hird qarr o , facia ar worri

cibd py a h orig facia prob o co-

ri i Grc, ay ad Spai caad w gor

oo oo oc i boh ay ad Spai ad h crdi raig

o h US dra gor wa dowgradd.

h wa o hi ar draa, hr wa a ac abi-

io o boo h dig capaciy o h ro zo Eropa

Fiacia Sabiiy Faciiy (EFSF). March ro zo

fac iir rachd agr o a porary fa-

cia frwa o EUR 8 biio. By h d o h ECB

had ao raid ha h ro zo baig y had a

ac d or facia ppor. Th ECB h ord ba a

rod o hr yar oa i Dcbr ad a cod rod i

Fbrary. Th ba borrowd a gro ao o abo EUR

riio ro h ECB.

La yar facia ar roi ao d o a proc or

dopig a w oo or oghr bdg dicipi i h EU.

Austerit or growth or both



14/39

14

Jaary hi rd i a w EU fca copac, rqirig

cori o cap hir pbic dfci a . pr c o GDP

ad pciyig h poibiiy o harp acio agai ho

ha bra hi r.

a coqc o h 7- facia ad cooic

crii ad h accopayig draaic drioraio i pbic

fac, oday cooic poicy adcap i Erop i ow

characrid by:

Record-lowkeyinterestratesandotherformsofmonetary

poicy ppor (ow-ir oa, bod prcha c.)

Sizeablebail-outfunds(theEFSFandtheEuropeanStability

Mchai, or ESM), wih MF oy i h bacgrod

Unusuallystrictbudgetpolicieswhicharesupposedtobe

ighd rhr wih h hp o h fca copac aid

a rdcig raoaby arg ad har pbic bdg

dfci a w a db

Structuralpoliciesaimedatenablingeconomiestofunction

br ad bco or copii

Si ad ppor ro ro zo oary poicy ha

oy aagd o o igh bdg poici o a crai

x. a r, i h pa ix oh h GPS cori

i paricar ha od rapidy dciig GDP, py riig

poy ad growig dico ad ariy-aig

aog hohod ad bi. Drig h wir, h

ora ro zo cooy rd o h bri o rcio.

Th ri o rcio cao b rd o.

Thi dico, pciay i ohr Erop, ha od o-

i h or o doraio i ay ca io, wih

ajor propry daag ad ri cad by rad io, a

w a ia cio, o rcy h pridia cio i

Frac ad h pariaary cio i Grc o May 6.

Frac h righ-o-cr prid, Nicoa Sarozy

who ppord bdgary dicipi ad word coy

wih Gray ric chacor, ga Mr wa d-

ad by h or growh-orid Sociai adr FraoiHoad. Grc, h wo pari aociad wih h harh

bdg poici ad acrifc o h pa yar Pao ad

Nw Docracy rd ajor da, whi pro par-

i o boh h ar ad ar righ achid coidrab

cora cc. r ra ap o or a w go-

r aid, a w cio ha b or J.

ohr xap o h w wid ha ha bg o bow

i h Dch gor crii o a pri. wa riggrd

wh h righ-wig popi Frdo Pary, which had

ppord Pri Miir Mar R ioriy gor-

, rd o accp ariy ar dd o brigh Nhrad bdg dfci bow pr c o GDP by

. Thi icid how ha or o ror fca ordr

ha grad oppoiio i a cory ha ha b

Gray ay i prooig a ariy approach. Wh

ga Mr CDU pary ar rd a daaig o i

h Norh Rhi-Wphaia a cio, hi dorad

ha o Gra appro o ariy.

cd by hi dd o o o i prig ighr

ariy poici, h EU chrd o by h MF ha ao

idicad h poibiiy o adopig a or growh-orid

poicy. rai o b how h ECB which i obioy

worrid ha poiica adr wi ow h pac o ariy

ad ror wi rac o ch a o.

h op poiica o h EU, Eropa Coci Prid

Hra Va Ropy ha od a iora xra EU

i o May aid a pig growh ad job craio

o h Eropa poiica agda.

acica arg or iiiaig EU dicio

o growh ad h codiio or prooig i igh ha a

Th: riy or growh or boh


Spain Italy Portugal Greece1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Householdoptimismi

ndex

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

10

pig OF DicO Wp

OU UOp

rwd dp cooic p, draaicay riig

poy ad ogh pbic bdg cbac

ha poid h ood o hohod i ohr

Erop, pciay Grc. racio ha b

io doraio ad widprad ri.

Sorc: Rr EcoWi


15/39

15

barig o h chag o adrhip i Frac, a w a h

ac ha h cooic growh codiio ar ch wor i

Frac ha i Gray.

Drig h Frch cio capaig, Hoad achd

propoa o rai ax o high ico, wah ad Frch

bi pciay h facia cor b ao o ac

xpaioary fca progra ch a hirig w achr

i h pbic cor ad booig ii wag. h

dirc bw Hoad ad Sarozy i r o hir

abiio or h gor bdg rd or h x co-

p o yar ar airy a o h boo i. Hoad or

hiaicay adoca ig h ax wapo o hri h

dfci, wih h ai o baacig h bdg by 7. Hiory

ao how ha priod o Sociai r i Frac ha o

a poorr bdg dicipi ha wh h poiica righha b i powr.

d w whTh rao why Hoad i rh iwd a a hra

o bdgary dicipi, which ha b h cooic poicy

odar i Erop or o yar, i ha drig h capaig

h proid ha a prid h wod rgoia h w

fca copac. H ar odifd hi, ayig ha h co-

pac b ppd wih oo o proo cooic

growh. h EU hi i oc or oward growh ad i

driig orc, Hoad ay cocd ha Frac igh-

bor ar ryig o hi haway ad ay h or a-

iy accp prioy igd agr.

Hoad poiica agda i acay coradicory, ic

bdg cooidaio bad argy o ax hi i dircy co-

rary o hi growh-booig abiio. Thi i bca h ax

brd i Frac i arady a a ha dobdy ha-

pr cooic xpaio ad copii. Toa axaio

o abor i qia o 8. pr c o GDP i Frac co-

pard o ha 7 pr c i Gray, whi oa idirc

ax ao o ary pr c ad j or pr c o

GDP, rpciy.

Th dirc i axaio ha obioy acd Frchcopii i r o i abor co, which ha

ri 8 pr c i Frac ic , copard o pr c

i Gray. Co icra i Frac ar h o pciay

ar bhid ho o o GPS cori. U Frch bi-

ar ord ar br copii codiio by cig

ax ad ipig rcra ror, i i dic o

how h ro zo ca ay oghr i h og r.

Srcra ror ha proo growh a praaioa

ad aioa ar bcoig h oc o cooic po-

icy dba i Erop, ow ha h ro ad h a o o-

idd ariy ar ar icraigy big qiod.

Pbic cor b-ighig, which i rh cary,

i h iy o graday b rchd o or a ogr p-

riod. For xap, ay rcy had ario pad ax

icra, rpacig a pad a-addd ax hi wih c

i gor oay.

ccordig o Hoad a, a growh copac

hod icd ) achig Erobod o fac irarc-

r projc, ) argr rorc ad dig capaciy or

h Eropa Ba, ) irodcio o a facia

raacio ax (Tobi ax) ad 4) or ci iiaio

o EU rcra d. Hoad gai ppor or a growh

copac, a idicaio ar ha h ay w abai ro pr-

ig h i o rgoiaig h fca copac.

Hoad ha ao appad o h ECB o pay a or aci

ro i prooig cooic growh. Worh oig i ha or

o i, h MF ha rcodd a icra i h ECBiaio arg ro oday fgr o j bow pr c.

Thi wod ab h ECB o proid rhr i ia i

rf ra ad prhap ao by orig bod i h cod-

ary ar (ia i Scrii Mar Progra, SMP).

Srcra ror a cocp coy aociad wih growh

ar priariy aid a iproig h cioaiy o ar-

or good ad ric a w a prodcio acor ad

icraig xpor o copiio. Th objci i o rai

og-r prodciiy op pr hor word hrby

booig h growh poia o a cooy.

ogid ogh bdg ariy ar, Spai ad ay

ha achd poici aid a aig hir abor ar

cio br ad or ciy. For xap, Spaih

copai ha r ajor bi rra ca or a-

iy xrica h ro coci agr ad c

poy worig hor.



gmy by F b cOmpiiv

PortugalIreland

Italy

GreeceSpainGermany

France

Source: OECD

YEAR 00 01 02 03 04 05 06 07 08 09 10 11

90

100

110

120

130

140

150

90

100

110

120

130

140

150

Over the past decade, German unit labour costs have risen by a

modest 5 per cent, compared to nearly 3 per cent in France and

35-45 per cent in the GIIPS countries. I the euro zone is to stay

together long-term, these dierences must narrow. In addition to

budget consolidation, this will require measures that enable econo-

mies to unction better and become more competitive.


16/39

16

So ar, ogoig dicio aog poiicia ad cooi

ha oy cocrd h choic bw ariy ad

growh. B hr ar acay xap o how ariy poiciha pad h way or ad go had i had wih i-

crad cooic growh. ccordig o h aiiar Kyia

hory, bdg ariy ia highr ax ad/or c i gor-

xpdir ad o owr GDP growh. Thi i chagd

by h Gra choo (German Council o Economic Experts,

1981), which arg ha ighr bdg poicy ocig o

rdcd xpdir hod b iwd a a pri or xpa-

io rahr ha rcio, ic owr pbic cor dad

a roo or pria cor xpaio.

Lar boh horica approach wr cobid, ad xpc-

aio wr aigd a cra ro (Hellwig/Neumann, 1987,Economic Policy in Germany: Was there a turnaround?).

Th dirc ipac o bdg ariy i o cor gai i

r o growh (Ky). B i ariy i prcid a par

o a crdib progra or rorig ordr o gor f-

ac ad i xpcd o ay owr h pbic cor

har o GDP, xpcaio o r owr ax ay ia

pria dad oday (h Gra choo).

Eidc ha ariy ar ha d o ar growh ca

b od i a w-ow aayi o Daih ad rih bdg

cooidaio ha occrrd i h 8 (Giavazzi/Pagano,

1990, Can Severe Fiscal Contractions Be Expansionary? Tales

o Two Small European Countries). hogh pbic pdig

wa c ad ax wr draaicay raid i Dar, pri-

a copio ro igifcay i h wa o a harp p-

r i cor cofdc, which aog ohr hig wa

a rpo o xpcaio o owr r ax. rad,

howr, pria copio cocrry wih ariy

ar, appary bca hohod cod oy argi-

ay o aig ico wih cor oa ad rdcd

aig, which h Da cod do o a ch grar x.

Gi h abo bacgrod, h y a or Eropa poii-

ca adr hod h b o cra cofdc ad poii

xpcaio aog hohod ad bi, i ordr ogra dad or copio ad capia pdig. Th

oo ad hod or achiig hi ha arady b d-

cribd xiy, b o ari:

Thestill-necessaryrestorationofordertopublicnances

ocig o pdig c, o ax hi b prcid

a crdib ad cc i h og r by hohod

ad bi, ad b ppd wih oo ha

ipro cooic growh ad copii.

Ofteneconomicallypainfulactionsmustbeunderstoodand

ppord by h ciizry, ad boh h brd ad bfo h poici b aocad i a way ha i prcid

a air; h docraic dfci dci igifcay.

TheremustbeconsensusattheEUlevelespeciallybe-

w Mr ad Hoad, Mroad abo h co-

oic poicy agda. Thr b cariy abo wha a

ad objci EU iiio icdig h ECB hod ha,

ad hr b hiaig ppor or bdg dicipi

ar (h fca copac) a w a growh-prooio

ar (h growh copac).

B ar ha ay cooicay dirab ad

ho ha ar poiicay aib ar o cor o o -

iry copaib. Th wid ow bowig i h poiica word

ad aog o cooi, oghr wih growig ari-

y-aig, ay ry w ad o a grar oc o aig pb-

ic b-ighig rqir copd wih o a oc

o og-r growh prooio ror ha i dirab. Nor,

prhap, wi rcip rood i h 8 ha a gra a i-

pac o h cooic iro o or crr dcad.



Cory or zo Pbic dig/% o

GDP, 2011

Pria aig/% o

GDP, 2011

Ero zo -.1 +3.

Gray -1.0 +5.9

Nhrad -. +12.5

Bgi -3. +3.2

Frac -5.2 +2.9

ay -3.9 +0.

Spai -.5 +.5

Porga -.2 -3.Grc -9.1 +0.5

rad -13.1 +13.

W pOil FO DUcD piv vig i FOUD W cOFiDc ic

Most euro zone countries have initiated tough public belt-

tightening, aimed at reducing their large budget decits.

While their public sectors are uniormly in the red, most

countries except Portugal show positive saving in the

private sector (households and businesses). I economic

policy were capable o creating condence and greater

optimism among households and businesses, many coun-

tries thus have major potential to reduce their private sav-

ing, thereby boosting consumption and capital spending.

Sorc: Eroa


17/39

17

h

Are high margins a proit bubble?

The business sector and companies have

changed

Distinguish between structural and cyclical

luctuations

Th opraig argi o Nordic id copai ha ad-

iy rdd pward or a a h pa yar. Thi par

i gray aiiar boh i h Swdih bi cor ad

i ay pac iraioay. i a prof bbb? d i i

rady o br?

igy high poia profabiiy dci, i ca o a

rrio o h arag argi or h pa yar co-

bid wih xpcd ow growh i Erop ad coid high

coodiy pric ad ay obrr o iiiy awr

y o h abo qio. i worh rcaig, howr, ha

a ary a h i o h Lha Brohr crah (a

8) ad h wa arig rd ha oowd dircy

arward, ay pop drw h a cocio. Tha i

arod, i oy oo i bor h copai o h

Nadaq MX Socho xchag achid w rcord-high

argi. Thi rapid rcory wa o oy a cio o aggr-

i cooic i poici, which ha ow rachd hir

d. W bi ha h raiy i or copx ad ha hr

ar rcra chag ha xpai why a rr o hiorica

arag argi hod o b a or grad.

u Thr ar ay way o ar h profabiiy o copa-

i. Prof argi ar how arg a copay prof i i

raio o i a r, whi rr o capia poyd

ar prof i raio o h capia ha ha b i-

d i ordr o gra qia rr. Thoricay, high

prof hod arac w i o a idry i-

craig copiio, phig dow pric ad caig prof-

abiiy o orai agai. B high rr o capia i whaarac w capia, o h argi o a. For xap i

a ra a copay, a baiay argr har o r

d o b pr prof (o jiy a i) ha i r

o a whoar. h a way, h xi co, ri adi rqird o dop a w pharacica rqir hi

prodc o rr highr argi ha a w oohpa.

Nordic id copai ha gray iprod hir opra-

ig argi i h pa wo dcad, b o corrpodig

icra i iib i rr. Rr o boh capia poyd

ad qiy how a idway o, wih cycica ca-

io cad by chagig cooic codiio.

Sa o ha bco or capia-ii, h r-

qirig highr argi o aiai h a profabiiy. w

oo or coy a baac h, i i pciay appar

ha h qaiy o iagib a ha icrad draai-

cay. raio o a, iagib a ha dobd i

yar ad or ha qipd i yar. agib a

co pary ro capiaid rarch ad dop i-, b goodwi origiaig ro ario rrcrig

raacio ao o rc h ac ha a corpora grop

Is the upturn in listed compan margins a bubble?


mgi iig, bU U O QUiy

kp FlUcUig i m g

5

7

9

11

13

15

17

19

21

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012E

Operating margin (EBIT)

Return on equity

Operating margins have been rising or a long time, but do not

refect a margin bubble. Meanwhile return on equity has fuctu-

ated, signalling more capital-intensive sales. The chart shows the

aggregate return on equity and operating margin at Nordic listed

companies in per cent.

Sorc: SEB Eida


18/39

18

ow aab iagib a which wod ha b

coy o obai i hy cod ha b bi p orgai-

cay iad o ia acqiiio.

Rarch ad dop a w a o acor ch a

radar, dig ad cor raio ar o gra igi-

icac i o cor. Barrir o w copiio or ar

poiio ar ao ry ipora. Sizab i ar r-

qird i h ara. E hogh hy ar iagib, h

i o cor ao proid a rr. W bi

ha h draaic icra i h prcag o iagib a-

i baac h rc hir icrad iporac o

copai i rc dcad.

w d h Wh copai dcrib h abo raoraio, hy rary

do o wih a phioophica approach. Howr, w ca fd

ro ior praio abo how copai ha

ocd ad hod coi o oc o high-argi prodc,

or ric ad ar-ar a. Thy a or o x-pad i ar g whr h copay gra or

cor a, whi phaig o ow-argi prodc.

Faiiar xap ar Swd arg hic aacrr,

which hid away ro h xry copii pagr

car idry whr i wa a ar payr o bco o

o h arg goba payr i hay rc. arg idria

barig aacrr ha carrid o h a id o dra-aic chag i i prodc rag ad pricig poicy. a

idria cogora ha b raord ro a ar

o ip copo wih o-xi owar co o

a gobay adig ppir o adacd arig choogy,

i which owar i h ai prodc. rbbr ad paic

aacrr ha rapidy hid i prodc rag away ro

high-o prodc or xry pric-ii cor

oward prodc icorporaig ay pa ad cor

cagori ha priorii qaiy ad diry arac highr.

For ay yar, Swd arg copror aacrr

ha d a addd, rgy aig ad ric a a

arg ahad o pric. Nro copai ha dr-go raoraio i hi dircio.

d fu Th arag argi i h Nordic cori i ao acd by

hi i h rai iz o dir cor. For xap, h

hah car cor ha grow owha ar ha arag.

ohr cor wih raiy high argi ad high capia

iiy ad who iporac ha gray icrad i h

Nordic rgio, hrby hpig boo h arag argi, i

h oi idry.

h x

addiio o h abo-dcribd rcra chag, a

br o acor ca b xpcd o ic argi i

h ar r. Margi o copai o h Nadaq MX

Socho owha i h fr qarr o co-

pard o a yar arir, b i i ipora o diigih b-

w cycica caio ad rcra chag. wod b

highy rarab i h rcio whr i Erop had o

ipacd argi hi yar. For h yar, w xpc ar-

gi o hri by o prcag poi i Swd, b a ary

a o o hi dowr wi b rcord.

Facor ch a xchag ra ad coodiy pric ao a-

c argi i h hor r, b o away i h way hah praiig prcpio wod idica. For xap, highr

coodiy pric i rc yar ha coicidd wih br

argi a chaica girig copai ad ic ra.


Th: h pr i id copay argi a bbb?

cOmpi v ivD vily i

igibl

0

5

10

15

20

25

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012E

The above bar chart shows the intangible assets o Nordic listed

companies as a percentage o sales.

Sorc: SEB Eida


19/39

19

h

Bond yields are probably past their low point

Government bonds are no longer risk-ree

High yield, EM bonds and high-dividend shares

are attracting investors

Log-r gor bod i h ECD cori ha

hioricay dd o o i -yar cyc. Drig h pa

yar, yid o gor bod ha a ad bod

pric ha ri. Th prcdig -yar priod, i cora,

wa characrid by riig bod yid ad aig bod

pric. d bor ha, w had yar o aig yid ad

riig pric. h -yar cycica par pri, w ar ooiy o r a og priod wh gor bod yid i

h Wr word wi rd pward. d hr ar ay idi-

caio ha hi wi b h ca.

a coqc o h a facia crii, yid o go-

r bod wih boh hor ad og arii ha b

qzd dow o arifciay ow . W ar ig whahapp wh iia cra ba ha owrd hir

y ir ra oward zro. Thy ha ao achd iz-

ab i pacag, icdig ai gor bod

prcha. B h aiio i oary poicy wapo iow argy xhad, ad bod yid ar probaby pa hir

ow hi i arod.

p d qu h a i a gor bod yid ha od

dowward, orig db ha icrad harpy. J or

yar ago, h oa qaiy o bod qad 8 pr c o

word GDP. By ha fgr had cibd o pr c o

word GDP. bo a, gor db ha icrad.

For a og i, hi icrad db brd pad oicd

i crdi agci bod raig. B a grar oc o cory

ri ad h owdg ha a cory ca go barp

ha cad h raig agci o ac. h pa yar, h

crdi qaiy o h word ora pbic cor db ha

draaicay word. Thi rd bco car i w oo

a a h pbic cor bod o h cori i h word

wih h arg pbic db. Ui , abo ha o h

goba pbic bod ppy carrid h op crdi raig, .

pr, oy prc o h oa ppy carri hi raig.

W ar i a iaio whr o Wr gor ar

borrowig a rcord-chap ra, whi hir ora crdi

qaiy ha r b wor. jifab qio i: For how

og wi ior accp zro rr o h capia hy do h db-ridd borrowr?

d d rao or byig gor bod ha b ha

hioricay, hy ha rd a a good or o procio i

ior poroio. h pa wo dcad, hr ha b

a gai corraio bw qii ad bod; ha i,

wh qii ha a i a, bod ha ri ad

ic ra. id ro prrig h a o capia drig

priod o aig oc ar, gor bod ha ao

b a good i i h, ic bod pric ha

ri. Thi xpai why a i ragy o 6 pr cqii ad 4 pr c bod ha hioricay grad

a cary highr ri-adjd rr ha h oc ar

In search o lost returns


-y cycl FO gOvm bOD

10-year yield, US 10-year yield, SwedenSource: Reuters EcoWin

1 90 0 191 0 1 92 0 193 0 19 40 19 50 1 960 1 97 0 1 98 0 19 90 20 00 20 100.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

Percent

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

Government bond yields have historically tended to move in

3-year cycles. There are many indications that yields have bot-

tomed out this time around and that we are moving into a long

period o rising yields.


20/39

20

ao. B h roo or coid dci i yid ro o-

day i pracicay o-xi. d i a i

cia whr ra-r yid ar gai i ay ca, h

dirifcaio bf ar iy o b a. ad hr i a

car ri ha gor bod wi corib gaiy o

h rr o h poroio a hir araci wa.

l xu, h u yp o facia ar payr ha radiioay hod a

arg prcag o gor bod i pio d. Th

ai rao why gor bod wih og arii ha

b araci o h i ha rgaory ahorii rqir

i irac copai o ach h arii o hir a-

wih ho o hir iabiii. ohr car adaagi ha ch bod ha b iwd a ri-r, wih i

irac copai garaig a crai rr o capi-

a. pricip, h owr h yid, h or capia i ir-

ac copai cr or h yid o add p o h

ao hy ha proid o pay ior.

Today xry ow yid a i dic or i irac

copai (h ai pria pio d hic i Swd

ad whr) o hir obigaio o pior, i

r o rr rqir. i ao worh aig whhr

gor bod ar ri-r. Pio d h fd

h i ohig o a igh po. Thy wod d ordc h prcag o gor bod i hir poroio

o achi h proid rr, whi rgaio rqir a

arg xpor o hi a ca. rgaio bco or

xib, i irr ar iy o rdc hir xpor o go-

r bod.

h who, gor bod id by Wr cori

appar o b a araci a ca. Thr ar ay idi-

caio ha h pa yar priod o aig yid ha co

o a d. Rciig o rr o a ay b coidrd

accpab or hor priod wh h ar i paicig ad

ior wih o par hir capia owhr whi awai-

ig br i. B i h og r, i i o aiab.

i h probaby ry a ar o i bor h ior

coiy choo o draicay rdc i gor bod

aocaio. Thi wod ad o aig bod pric ad h ri-

ig yid.

i h hh uor o rciig ay rr ro gor bod

ar archig or fxd ico crii wih br poia

rr. Corpora bod ha bco popar, icraigy

o rpacig gor bod i ior poroio. Wha

arac ior i ha corpora bod yid, pciay i

h high yid g (copai wih ow crdiworhi

accordig o raig agci) ar baiay br ha h

yid o gor crii. Th yid gap bw hwo ha widd d o h facia crii. Whra corpora

bod ar radd a abo h a yid a bor h fa-

cia crii, gor bod yid oday ar ar owr.

Copard o h hradbar fac o ay ECD co-

ri, copai ao dora igifcay br o-

cy. a aggrga , copai dir arg prof ad

ha awhi c co ad bi p a arg iqidiy br

o aoid prob i h bi iaio driora.

m d hh d d w d

ohr fxd ico a ca ha icraigy aracior i rgig ar (EM) bod. Hr oo, yid ar

o a par wih pr-facia crii ad ar ow w abo

yid i ECD cori. Thi i dpi h ac ha Wr

cori gray ha baiay argr bdg dfci ad

ch hair gor db. ra gor db i

ECD cori i cibig oward pr c o GDP, whi

i rgig ar i i aig oward pr c o GDP. Th

rao why yid o EM bod ar rh o high ar

ha EM phr iaio i coparaiy high ad h ar

ha hioricay coidrd i riir o d oy o EM co-

ri. d i o ca, a crai ri pri ca b jifd

by argr ocia ad poiica ri ha i h W, b w b-

i ha h ri ar gray pricd oo high.


%

1994 96 98 00 02 04 06 08 10 12

10

20

30

40

50

10

20

30

40

50

%

Year

Th: arch o o rr

Sorc: BS, Eroa, Boobrg, SEB

FW cOUi Wi Op cDi ig

The credit quality o the worlds overall public sector debts has

worsened dramatically in the past year. The share o countries with

the highest sovereign bond credit rating has allen rom 5 to 3

per cent since 2. The curve shows the share o AAA-rated public

bonds as a percentage o total government bonds in circulation.


21/39

21

Wh byig EM bod, h ior ao gai xpor o

EM crrci. iad wo hird o oa rr co

ro h crrcy c, whi o hird co ro h yid

o h i. Looig ahad, o idicaio ar haEM crrci wi p rdig pward i raio o ECD

crrci. B crrcy xpor ao a ha, i r o

adard diaio, h i i riir. Th oa ri or

EM bod i h owha argr ha or high yid bod.

Boh high yid ad EM bod ar ri a by ar. Thy

hod h aiy b copard o qii, o o radiioa

fxd ico i. h pa - yar, h rd o

high yid ad EM bod aaio ha achd ha o qii,

b oaiiy (ri) ha b ar owr. Th wo high-yidig

a ha h hioricay ord a igifcay highr ri-

adjd rr ha h oc ar. Sic h corraio b-w high yid ad EM bod i coparaiy ow, i i ada-

ago o i i a cobiaio o h wo a ca.

hddd qu h arch or rr, high-diidd qii ar aohr

araci arai. Copay har ha ca dir dii-

dd yid ha xcd og-r gor bod yid by

a good argi hod gray b coidrd worh byig.

pr, diidd yid or ch copai ar gr-

ay or ha wic a high a -yar gor bod

yid ad i ay ca igifcay or. ba o high

diidd-yidig qii ay h b a good arai, b

ior hod b awar ha h pric o o qi-i ar gray ry arg.


Th: arch o o rr

Government bonds Investment grade High yield EM debt Equities

0%

2%

4%

6%

8%

10%

US10-year

Treasurynoteyield

USinvestmentgrade

UShighyield

Eurozonehighyield

Emergingmarket

bonds

USequities

Eurozoneequities

Eurozone10-year

governmentbondyield

Eurozone

investmentgrade

ivO likly O k ig U

The chart shows direct yields on dierent asset classes beore the nancial crisis (in colour), along with current levels

(in white). All indications are that investor preerences are shiting away rom government bonds o OECD countries

to riskier asset classes in search o better returns. The returns on high yield bonds and EM debt are still attractive

compared to their pre-crisis levels.

Copay Cory Diidd yid,

2012 orca

T2 Swd 12.2

NCC Swd .3

TiaSora* Swd .5

UPM Fiad .2

For Fiad 5.5

Sora Eo Swd .3So-Ni Dar 5.

Fabg Swd 5.3

Scria* Swd .1

Mo* Fiad .1

Hhaai Fiad .0

*Drig h pa oh, SEB ha prord corpora facaig or hi copay.

Sorc: Rr EcoWi


22/39

22

Forestland investments complement

traditional portolios

Major price dierences between Baltic Sea

countries

World population is growing, while orestland

is shrinking

Drig priod o ogoig facia ar rbc, hr

i a grar d or arai i o diriy ro

riy a i radiioa poroio. Ucraiy abo ro

zo abiiy, goba growh ad rgy pric rd ad

poaoy o arai ha ar or prdicab. dcribd bow, orad i a a wih highy prdicab

rr, owr ri ha qii ad a gai corraio o

ario iiar orc o rr.

w iw orad a a i, w hi abo po-

ia rr ro hi ad: h corcia a o or

prodc ad h a o ohr a ch a hig, fhig

ad rcraio. For prodc grow adiy ad idpd-

y o cooic cyc. Tha o odr orry hod,

ddicad aagr ad br irarcr, i i air ha

r o ra orad a a i.

r h pa 4 yar, Swdih orad ha adiy

ri i a a a aa ra o .8 pr c. Drig h

pa dcad, aid gra aciiy, Swdih orad pric

ha dobd. Copard o aa rr o qii ad

coodii, w ha Swdih orad ha o oy

proidd ry good rr b ao owr ri ad ha b

a prc dirifcaio a. Fro h 7 i oday,

orad ha had a gai corraio wih qii (-.)

a w a coodii (-.).

Th char ad ab o h righ ira h idxd pric

rd or Swdih orad, h rrd Gra dx

(FGX) o h Swdih oc ar ad h Dow Jo UBS

Coodiy Spo dx (SEK). hr ha how rog

growh drig h priod, ad a co oo a orad idi-

ca ha i ha h ow oaiiy ad a appary ga-

i corraio wih h ohr. w rpac h FGX wihh US-bad S&P Copoi dx i SEK (aa ra

. pr c), h char wod ao how Swdih orad

payig h high rr o h hr a ca.

rao or h rog pric icra o Swdih or-

ad i h pric prorac o or prodc ibr ad

pp wood. Coodiy pric ay ary i h hor r d

10

100

1000

10000

1971

1975

1979

1983

1987

1991

1995

1999

2003

2007

2011

Index

Forestland Equ it ies Commodities

Over the past 4 years, Swedish orestland has provided an aver-

age annual return o more than per cent, with ar smaller fuc-

tuations than the stock market, according to a study by Thomas

Lusth o LRF Konsult. Forestland investments have shown a very

avourable correlation with both equities and commodities.

h

Green investment diversies a portolio


pic D, FOlD v O mk

Sorc: LRF Ko, Rr EcoWi

Corraio

For-

ad

Eqii Coodii

Forad 1

Eqii -0.152 1

Coodii -0.090 0.13 1

g aa rr (%)

Sadard diaio*,%

Sharp raio**

10. 1. .

1. 2.3 20.3

0.50 0. 0.33

* Cacad ig aa daa, 4 arig poi.

**Ri-r ir .%.


23/39

23

o ch acor a ppy, dad, ar rd, qaiy di-

rc ad gographic dirc. r h pa 4 yar,

pric o h o coo or prodc (ibr ad pp

wood) ha how arag aa pric icra o . ad.6 pr c, rpciy (ard i SEK pr cbic r).

To xpai h gap i h pric rd or orad ad or

prodc, w oo a o acor or arch or yic

chag. Th fr cagory icd rcraioa ad a a-

. Th cod icd h growig dad aog facia

ior or ab, prdicab rr. W ca ao ha

h drgaio o h Swdih crdi ar ha occrrd i

h id-8 xpadd h ppy o iab capia.

addiio, w hod a io acco a w or prod-

c bioa ad i riig a. Thr ar o ghyi ri howig h pric rd, ic hi coodiy wa

prioy r procd idriay. Prhap bioa ha

a grar ic o h orad pric rd ha w oc

bid. For xap, daa ro h Swdih Ergy gcy

how ha h har o wood-bad i h ix o ari-

a brd a Swdih diric haig pa icrad ro

.87 pr c i 8 o 8.7 pr c i 7.

rc yar h pric rd or Swdih orad ha

coid pward, ahogh o owdow ad rgioa

dirc ha b dicrib. i poib o idiy h

characriic o orad a a i, hogh a owriiia ha i Swd?

Th ac ha ibr, pp wood ad bioa ar radd i

boh US doar ad ro i h iraioa ara a i

worh h rob o arch. Poia ior ay bf

ro dyig opporii i h cori arod h Baic

Sa, whr h yp o r ad oi codiio ar iiar o

ho i Swd. Thr i hay dad ro Nordic proc-

ig pa or or prodc ro a o h Baic cori.

Swd ipord or ha SEK 4 biio worh o

or prodc ro acro h Baic Sa, aig Swd h

orh arg iporr ar Fiad, Gray ad Norway.

b u wdWih oi qaii iiar o ohr Swd, orad

pric i Laia, or xap, ar - pr c bow ho

i Swd. a i, orad i h Baic cori

ca h b coidrd ry araci, owig i ca b

aagd ig h a hod ad yp o r a i

Swd. Bad o hi arg, w xpc ihr a icra

i h a o orad i h Baic or a owr pric i-

cra or Swdih orad.

addiioa acor ha aor iig i orad i

a argr cox i h goba rgy iaio ad h dba

o aiab rgy orc. Thr ar car ici or

grar o arai rgy orc, wih bioa payig

a y ro. goba rgy poicy, hr ar ipora arg

or rpacig oi wih rwab o. For prodc

wi iiaby arac or ad or aio, pciay

ho ha ha hioricay b o h ad ar ig

ad hiig r. Mor ad or bioa i big prodcd

ro ig wa. Nor i hr ay ajor dirc bw

cori i hi cox gobay, a og a h orad i

d i ch a way ha a oca acory ca proc ra

prodc cagori.

Gi a ady dcra i goba or ara ad a growig

popaio, orad proid a good i oppor-

iy: a i wih high rr ha rdc oa ri i

a poroio. Mawhi i i a gr i ha proid

aohr id o aiacio a w.

br o Swdih proioa ior ha arady di-

cord h poia i ohr cori arod h Baic Sa.

Laia, or xap, Swdih ior coi a izab

grop o orad owr.


Th: Gr i dirif a poroio

FO cOmmODii v FOlD

10,00

100,00

1000,00

10000,00

1968

1972

1976

1980

1984

1988

1992

1995

1999

2003

2007

2011

Index

Forestland Timber Pulp wood

The chart above and the table below illustrate the indexed price

trend or Swedish orestland, timber and pulp wood on a loga-

rithmic scale. During the rst 2 years, the curves fowed with

each other. Ater that the correlation decreased.

Corraio

For-

ad

Tibr Pp

wood

For-

ad

1

Tibr 0.12 1

Pp

wood

0.01 0.592 1

g aa

rr (%)

10.1 5.9 5.

Sadarddiaio*, %

1.0 15.2 13.

*Cacad ig aa daa, 4 arig poi

Sorc: LRF Ko


24/39

24

A mild dip ollowed by new expansion

Companies well positioned or the uture

Large relative potential or cyclical sectors

Prof or Nordic id copai ar xpcd o grow by a-

o pr c i . Earig or copai o h Nadaq

MX Socho xchag hod a by ao 6 pr c,

b rcord prof ar xpcd i Cophag ad o, whi

Noia wi wigh dow h Hii xchag. a r,

rr o qiy or copai i Swd wi b 4. pr c

i Swd, copard o a arag o .6 pr c i h pa

yar. Th corrpodig fgr or h ohr Nordic co-

ri ar .7 ad 4.6 pr c rpciy. Tha o a ighy

or aorab acrocooic iaio, rr o qiy ixpcd o ipro a ary a o a airy ora 4.8 pr

c i Swd ad .8 pr c i h ohr Nordic cori.

Howr, ar aaio ar abo pr c bow h

-yar arag, idicaig h ar ha arady dicod

igifcay owr growh i prof goig orward ha i i i

wih or acrocooic orca.

Fir-qarr rpor cofr ha h yar bga baicay a

xpcd. h 4 arg- ad id-cap copai o h

MX Socho xchag ha had id rpor prior o hi

pbicaio goig o pr, 46 rpord br ha xpcd

arig ad rpord wor ha xpcd arig. a aggrga , prof wr pr c abo or orca

ad dow 4 pr c copard o h a priod o .

Th gra pid rpri wr idria ad ba.

dria ao or chagd or ighy br ar

codiio i h idia r. h pa oh, w

ha adjd or arig orca or pward by 8 pr

c or ba ad 4 pr c or idria. Th icra

i projcd arig y o or owr arig orca

or co opraor, or prodc ad rai.

c w dW xpc wa cooic growh or h orab r

i Wr cori, b rbaiaio ad idriaiaio i

rgig cooi wi coi. Tha i o a w dop-

, b i i cra chag or id copai. Sa

growh or idria copai ha og b dri by ar-

oid Erop ad Norh rica. Th igh arg i-

dria o h MX Socho xchag, which oghr ac-

co or ha h ar capiaiaio o h MXS, ha

grad abo 8 pr c o hir a growh i ar

oid Erop ad Norh rica ic . ia (icdig

caia) ao acco or a 44 pr c o a growh.

ohr word, i i criica o h growh o id copai

ha rgig ar cooi coi o xpad by -6

pr c aay. h ohr had, xry wa growh

i h ro zo i ray o a w phoo ha hy

d o adj o.

Tha o high growh i ia, Lai rica ad rica/h

Midd Ea, xpor o h gographic ara oday i wic

a arg a a h r o h ii.

Th iaio i iiar or Fiih idria, whi oi a

h o oc xchag dpd o xpaio i h

rgig cooi. Th Cophag oc xchag, wih

i arg xpor o h hah car cor, ha a copy

dir prof.

Europe

North America

South America

Others

Asia /

Oceania

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

mgig mk biD cOpO

l ic

The chart shows where the growth came rom by region in the

years -2 or the eight largest industrials on the Nasdaq

OMX Stockholm exchange.

undramatic of-ear or companies

d qu


Sorc: a rpor o BB, Erico, a Laa, a Copco,

Sadi, Scaia, SKF ad Voo.


25/39

25

c h Th char bow how a idx o h rai pric rd or

Nordic id copai diidd io wo grop o qii

cycica ad di. Wh cycica qii pror br,

h idx cib, b wh di qii ha h br

pric rd, h idx a.

Th cycica grop icd idria, T, or prodc, co-

odiy ad oi copai. Th di grop icd ab

copai ad ho o ii o caio i h coo-

y, ch a co opraor, ood procor ad hah car.

r h pa yar, cycica ad di qii o h

Nordic xchag ha radd i a car ira i--i o

aohr. W ar ow oc agai arig h boo or pric

o cycica copard o di qii. Th rai dow-id or cycica qii i ha pr c i h ira

whi h pid i qa o pr c.

For ara rao, cycica qii d o b raiy

war i i o roi. For iac, car ow ca b

i h char i cocio wih h Nordic baig crii

i h ary , h ia facia crii a h d o h

a dcad, j ar h / rrori aac i , ad

o rcy ar h Lha Brohr coap.

Sic h, h idx ha a oward h boo rpady

i cojcio wih oig cocr abo h ro crii.

Drig priod o aid or caaig worri, ior

d o op or ab, a har i copai wih iid

dpdc o h gra cooic rd, prraby i

cobiaio wih a high diidd yid which a i arac-

i aaio appar.

Th abo cio criria ar ib, b h prrc

or h di qii ha og b o rog ha

hir rai poia or pric apprciaio appar iid.

or ai cario or cooic growh i Erop hi yar

ad x pay o, ior prrc or di qi-

i wi dcra, a a copard o h crr iaio.

Mawhi, i i ipora o o ha h raiy wapric rd or cycica i o rad o wa growh i ar-

ig. dria ad ba ood o a pid rpri i

fr qarr rpor, ad h cor wih h high prof-

abiiy hioricay ar idria ad coodii.

Sa ad ab i i h aori ior ragy, b b

prpard or hi o chag qicy, wih cycica h haig

gra poia.

Nordic qii


40

50

60

70

80

90

100

110

120

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Index: cyclical compared to defensive equities

lg pOil D limiD liv

DOWiD FO cyclicl

The chart shows the index o cyclical equities compared

to deensive equities. It is clear rom this that compared

to deensive equities, cyclical equities are currently trad-

ing at levels we have only experienced ve times in the

past 2 years. In other words, cyclicals should have an

advantage once market worries have subsided.

Sorc: SEB Eida


26/39

26

Banks are leading the markets, both on the

up- and downswings

We continue to avour exposure to emerging

markets (BRICs) and the US rather than Europe

We are somewhat concerned that equity

markets have become addicted to iscal stimulus

r a ry rog prorac drig h fr qarr o hi

yar, ar ha rd a owha or cooidaig

pha. h pa w w, hadwid ha oy co

ro war cooic daa i boh h US ad Chia, co-

pd wih riig bod yid i boh Spai ad ay. Th ow o

br ha xpcd fgr ro h US abor ar haad (hopy porariy), whi Chia aw h Mari/

HSBC prchaig aagr idx (PM) aig bow h

h hrhod bw growh ad rra) or h

ixh coci oh.

Th word oc ar bga h yar rogy, ad o

o h ajor xchag ha dird poii rr o

ar. i i ha b a choppy rid ad a coid ca

o ri-o ad ri-o. ar o da, howr, h US ad

Chia ha prord b, gaiig 7-8 pr c, whi ra

dopd ar ha ri abo pr c. No xpc-

dy, h bigg aggard ha b Erop, wih dci o

abo pr c o ar hi yar (i oca crrci). B h

picr or Erop i o o ixd prorac, wih Gray

big h arg gair. W fd o o h or i oh-

r Erop, o cor, whr oc ar ha gray

dird a gai prorac. idicad i h a

Investment Outlook(pbihd Fbrary , ) w xpc

h ro zo o coi rggig wih chag rad o

ariy ar ad h ac o growh propc. Thi ry

ch rai or hypohi.

W i bi ha boh h US ad rgig ar wi

coi o or araci i opporii or

ior ha ar ab ad wiig o wahr priod o i-crad oaiiy (grar pric caio). Looig a cor

prorac i Erop, i i worh oig ha h baig ad

facia cor i ow adig h ar boh o h p- ad

dowwig. Th ac ha hi i a highy ragd cor

wi o cor icra i ar ba (pric o a

a coqc o ar o). ddig o hi i h

co i bw orig db ad ba baac h.

Throgh h Eropa Cra Ba LTR progra

(hr yar oa a pr c ir), ro zo ba ha

icrad hir xpor o orig db (facig bod

prcha a 6 pr c yid wih a pr c dig co

i a good i) ad ar hc or rab

o priod o icrad oaiiy i h ro zo db ar.

vu w w h Vaaio i o ar ar w bow hir hiorica

pricig boh i r o pric/arig ad pric/boo a

raio. Thi i pciay r or h ro zo, b h BRC

ar ao radig a dicod o arag hioric pric-

ig. og h BRC, h Ria oc ar ad o a

h chap ard ig h abo ip, b hi hab h ca ic bor h facia crii o 8.

Capitalism the dualit o prot and loss

g qu


Euro zone USJapanChina India

Source: Reuters EcoWin

January2012

February March April May

-5

0

5

10

15

20

25

Percent

-5

0

5

10

15

20

25

UO ZO Db cii lv i mk

The worst stock market perormance so ar during 22 is in theeuro zone, where prices have allen a ew per cent. Other markets

are up 5- per cent. But in the euro zone, perormance varies

sharply: share prices in Germany are up around per cent, while

in Spain they have allen about 22 per cent.


27/39

27

Th rog prorac o h S&P ha id US qii

o approachig hir hiorica arag, crry a P/E

ad P/B .. pora o o i ha ahogh w by o a

xpc r arig o drop, crr arig ia ar

bad o prof argi co o h rcord i 7.

Th high argi ar a coqc o frc co cig i

h arah o h facia crii, cobid wih choogi-

ca adac, owr corpora ax ra ad ow dig co,

ad ar o iy o ri draaicay ro crr .

Chag i ia or arig i h S&P idx ha

oy b ighy gai or h pa oh, whi -

ia or Eropa arig ha co dow baiay

drig h a priod. Th ipid growh xpcaio i h

arig ia or ad ar, howr, o ha di-

r bw h wo ar (8 ad 4 pr c or Eropaqii, ad pr c or US qii) idicaig ha a-

hogh Eropa qii ar pricd a a chapr ip ha

hir US corpar, ior ar crry big o growh

ra i boh ar dopig airy iiar.

W bi ha h orig db crii wi coi o cr-

a ajor chag or Eropa qii ad rai r o

or prio ragy o aorig US ad rgig ar

qiy xpor a oppod o Eropa.

W dd uu

h coig yar, goba qiy ar wi rach o oro hrhod ro which w wi agai xpric good rr

a a coqc o og ad ab cooic growh. W ar

fr bir i capiai ad i abiiy o cra cooic

growh. Howr, wih capiai ao co h oio o o.

Capiai i bad o h daiy o boh pid ad dowid,

prof ad o. o cao ha o wiho h ohr.

m d hh h dEcooic o i o a prob or ociy i i i iid o a

paricar idiida. ay b a chag i i i rad o i-

g copai. Whr cooic o bco a ajor prob-

i wh i i rad o ir cor or cori,

which or h yar ha bco cooicay oo big o ai.

Thi i h crr iaio i par o Erop. Whi h US

ha rcapiaid i facia cor (h dra bdg i

rai o b da wih, hc a yar dowgrad ro

h raig), Eropa prob cori ad hir rpc-

i facia cor crry ac ai db dragig.

Th ii, whhr hy ar idiida cori or arg

ba, wi a o poi d o ac o ad wi d o

b rcapiaid. Looig a h ao o i big d

io boh Eropa cooi ad h facia ar, b

i by h MF, wahy orig a or h ECB hrogh iLTR progra, i i obio ha poiica adr ar doig

ryhig i hir powr o aoid a gai ar rd.

Th ai o hi hg ao o cooic i i, o

cor, o a h raiio ro a coracig cooy

o a xpadig cooy a ooh a poib. Sohow

hi away o b h ai cario or ba ca or

cooi. L hop hy ar righ.

Fro a poroio aagr prpci, howr ryig o

baac ri ad rward opiay hr i rao o adop

a caio aid i h coig oh. Spcaio rad

o rcra rfacig o boh cori ad facia ii-

io i o o b gcd. W hror rai caio

oward hi a ca. Capia prraio wi r b-

co odad.

Goba qii


5

10

15

20

25

30

35

40

45

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

600

800

1 000

1 200

1 400

1 600

1 800

2 000

2 200

P/E next 12 months

P/B next 12 months (LHS)

Index level (RHS)

UOp vlUiO iOicl lOW

American equities have perormed relatively strongly in the past year, leading to company valuations that are currently at levels around their

historical average. Euro zone companies, however, are trading at well below their historical average in terms o P/E and P/B ratio, which is a

consequence o signicantly poorer stock market perormance in the region.

5

10

15

20

25

30

35

100

200

300

400

500

600

700

P/E next 12 months

P/B next 12 months (LHS)

Index level (RHS)

1996

1997

1998

1999

2000

2001

2002

2004

2003

2005

2006

2012

2011

2010

2009

2008

2007

US aaio, S&P

Sorc: Fac Sorc: Fac

Ero zo aaio,EroSTXX Fixd


28/39

28

Central banks accumulating low-octane securities

Yields on short-term government securities will

remain low or a long time...

... while government bond yields will rise or

several reasons

High yield bonds and EM debt still the best

alternatives or ixed-income investors

Mo aay ad facia ar payr agr ha h

adig cra ba i h ECD idriaid cori

h US Fdra Rr, h Eropa Cra Ba (ECB),

h Ba o Egad (BoE) ad h Ba o Japa (BoJ)

wi aiai hir zro-ir ra poicy or a a aw or yar. h US, h Fdra p Mar

Coi (FMC) cocr wih hi orca, proiig o

p ir ra chagd a -. pr c a a i

h a o 4.

or coioa oary poicy ar aiy

gor bod prcha h r cario i o a

car. hidigh, ch ar i rc yar ha d o a

riab xpoio i h baac h o h ajor cra

ba, wih a baooig o a hrogh gor bod

prcha ad growh i iabiii rcig h facia y-

icraig cai o h cra ba. Thi ri i db

i qia o a xpaio i h oary ba (papr

oy, coi, ba rr wih h cra ba).

Howr, i ordr or h oy ppy i a cooy o grow,

corcia ba d o hir rr wih h cra

ba a a bai or dig o hohod ad copai or

copio ad i. Tha wod g h crdi i-

pir roig. y h wod coioa oary poicy

ar dir hir iaory c o h cooy.

Th ar, h bod prcha poicy ha aiy bfd h

cooy hrogh igifcay owr gor bod yid

ha wod ohrwi ha b h ca. Cra bah ha a dirc ipac o j o h hor-r yid

which i ora b a aog h yid cr, which i

crad by charig h yid o crii wih dir

arii. Erop h ECB wo hr yar oa o ba

oaig EUR riio (gro) i addiio o rdcig h rio ac facig prob i h baig y ha ao

hpd owr bod yid a ba ha, aog ohr hig,

prchad gor bod ro hir ow cory wih

oy borrowd ro h ECB.

Whi h oy ppy i h ro zo ha icrad oy

argiay or h pa yar or o, h oy ppy i h

US i growig a a r ar ra. Th Fd coioa

poicy i h bgiig o ha broadr poii c o

h cooy. ohr ig o hi wa proidd by h Fd

o rc qarry Sior Loa cr piio Sry,

which idicad ha ba ha ad hir dig r,whi dad or boh cor ad corpora oa i grow-

ig o a broad ro acro h cory.

Th ag i h i ro h Fd o rc FMC

ig i March ao dcrad h iihood o w i-

ar hrogh bod prcha, a a i h idi-

a r. March oy a w FMC br hogh ha

w i ar igh b cary i h cooy

o o ad/or iaio g c bow pr c.

Howr, a xpcdy wa abor ar cobid wih

priy ow iaio xpcaio ad propc o a ar

or ar facia poicy ar h US pridia c-

io i Nobr cod ad o h qio o w i

ar big p bac o h agda.

Drig h prig, h ECB ha o igad ay chag i i

oary poicy, hogh hr ha b a obio ri

o rcio i h crrcy io ad cocr abo Spai

fac ha caad. Th ECB prid, Mario Draghi, ha

iad rirad ha i i ow p o crii-pagd cori

h o ro hir gor fac prob

ad ha h ECB d i o dy h og-r c

o h hr yar oa. r-ach o h ECB Scrii

Mar Progra (SMP), which io h prcha ogor db i codary ar, do o iy

a pr. Th rf ra ha raid a pr c ic i wa

Fxd



29/39

29

Fixd ico

a owrd a i ad w xpc i o rai a ha

or h x cop o yar.

Th ECB acio ar doiad by a ar ha poiica ad-r wi a p o h pac o ariy ad ror, b

h qio i how og h ECB ca ic o hi poiio.

Th poii c o h hr yar oa ar waig, ad

ba dig oc agai r h ri o waig. Spai

prob caa, prhap i ad wih growig cocr

abo ay fac, h ECB ay poiby r i bod

prcha i h codary ar.

h UK, iaio ha og xcdd h BoE pr c

arg. B i h ra o pric icra a bow ha

arg i , ay rhr i pa i iy o rai

o h h, jdgig ro h i o h ba MoaryPoicy Coi ig i pri. ha ca, h BoE wi

o icra i o gor bod prcha ro h

crr GBP biio, ad h y ir ra wi rai a

. pr c a a i ary 4.

Th Ba o Japa ha ad arg prcha o crii

(rary bi ad bod, b ao corpora bod ad ETF),

ad i ary May aocd i wod xpad ch prcha

by JP riio o JP 7 riio a i arg or x r.

Gi h propc o coid daio (gray aig

pric), h arg ao o ac i h cooy ad ry

raid gor fac, rhr oary aig ca-

o b rd o. Japa y ir ra i gray xpcd

o rai arod . pr c or ay yar.

Th cra ba ha accad arg qaii o go-

r bod id by haiy idbd borrowr, which

ha hpd rdc h araci o h ir o

fxd ico ior. paricar, a a r o Fd bod

prcha, yid o US gor crii o a ari-

i p o yar ar owr ha iaio; i ohr word, ra

ir ra ar gai. Thi i i harp cora o h ary

8. Bac h, h yid o US Trary bi wa 7-8 pr

c i ra r, whi h ra yid o -yar US Trary

o a i pa wa pr c.

igh o a hi, i i dic o ay ohr dircio ha

p or gor bod yid i h US ad i h cor

cori o Erop or h x w yar. hr acor o

coidr ar h rcac o o cra ba o coi

hir bod prcha o ppor pric ( abo), h gra

d or bod i ad h propc o dc ri app-

i, which ha ay o aord gor bod.

g u a arai, corpora bod pciay high yid

ad rgig ar bod (EM db) or fxd ico

ior ar grar poia rr ha gor bodi ECD cori.

ay way, h facia iaio o copai i br

ha ha o ay ECD cori. Th rporig priod j

dd wa doiad by rpriigy argr prof ad high

a, aog ohr r, whi copai ha rgh-

d hir baac h i rc yar hrogh rdcd db,

ogr arii o bod oa ad icrad iqidiy.

Frhror, h prcag o barpci aog high

yid copai gobay i March wa oy . pr c,

cacad or a w-oh priod, ad h crdi raig

agcy Moody orca or Dcbr i pr c,

copard o a arag o pr c ic 8. Th crr

yid gap bw corpora ad gor bod ao

idica ha h ar i acorig i a igifcay highr

barpcy ra ha i iy.

Thr i h roo or a hriig yid gap ad owr corpo-

ra bod yid, wih accopayig poia pric gai or

fxd ico ior.


ChinaRussia

IndiaBrazil

USSource: Reuters EcoWin

Jul2010

S ep N ov Jan

2011

Mar May Ju l Sep No v Jan

2012

Mar May

Percent

1

2

3

4

5

6

7

8

9

10

11

12

13

yilD gp Ugg gOOD

ivm liv

Yields on -year government bonds in the BRIC coun-

tries Brazil, Russia, India and China are signicantly

higher than yields on similar US treasuries, even though

public sector budget decits and current account bal-

ances are ar better in the BRIC countries with the

exception o India than in the US. This along with the

prospect o interest rate cuts and stronger currencies

are arguments or buying bonds issued by the BRICs and

other EM countries.


30/39

30

Political uncertainty is shaking hedge unds

Managers are trying to be aster on their eet

Imbalances between and within asset classes

point toward Relative Value

Hdg d had a good ar o h yar, b h rd ic

h a i o Investment Outlook(pbihd Fbrary ,

) ha d o o o x. So o h ragi

ha rd o i wr h o ha ard b drig

h fr qarr. Th wig bw ri o ad ri o

wr r a oaiiy ad corraio dcrad. Th

HFRX Goba Hdg Fd dx (i EUR) dd h qarr p

. pr c, wih o o hi ri coig hrogh h d o

Fbrary. Ri a wr bord by a cobiaio o i-prod acrocooic idicaor, rdcd ar o a ro zo

coap ad ry aorab oary codiio. wa o a

cop rpri ha h ragi wih h high ar

xpor prord b.

Propc or h ar r ha bco ighy or

ixd. h gai ro, w ha h ro zo pcr

haig h c oc agai, hi i wih h oc o

Spai. Th Frch pridia cio crad o cr-

aiy, ad h US rcory ay b war ha prioy

hopd. h poii ro, or ad or obrr ar

rig o a hard adig or Chia, whi aohr poii

acor i ha hr i ow acay a rcr i pac or hro zo o p o fr. Si, hr i rwd cocr

abo oig poiica craiy, which cod gi ri

o choppi i h ar ad a i dic o gra

r or h x w oh.

i prio i o Investment Outlook, w ha cho o

diid h hdg d ar io or ai ragi:

EquityLog/Shor

RelativeValue

EventDrivenandDistressed

MacroandTrading

qu l/hTh fr qarr o wa h b or hi ragy ic h

hird qarr o . Th harp pr i h oc ar

wa dri by acrocooic acor ad iqidiy. US adGra aiic howd pid rpri whi h Ero-

pa Cra Ba Log-Tr Rfacig praio (LTR)

prodcd a ri o iqidiy, iiaig h ri o paic-

idcd iqidiy r aog ro zo ba.

hi id o iro, aagr wih a high xpor

o qii po by ar h b prorac. For h a

rao, hdg d ha prord wor a yar ha b

ho wih h b prorac hi yar ad ic ra.

Mo L/S aagr d o ha a boo-p oc, b i i

hard o arg ha copay daa ha b a ajor

drir hr. Prorac ha iad b dri by broadr

ar xpor rahr ha oy by qiy pic. or ai

Eqiy Log/Shor ragy, Log Biad ad Variab N ha

how h rog prorac. Excp or a w aagr,

Mar Nra ha had a ogh i, which d o a dci o

.6 pr c or HFRX Eqiy Mar Nra drig h qarr.

r a rog ar o h yar, US acrocooic daa ch

a h prchaig aagr idx ad abor ar aiic

ha rcy how wa. Dpi h LTR c,

hr i oc agai oig cocr i Erop, hi i wih

h oc o Spai. Ecio r i Frac (wih i w

prid, Fraoi Hoad) ad Grc (whr a oa o i

pari xcdd h hr pr c hrhod o r paria-) wi o iy ad o grar craiy i h coig

oh. Maagr wih a ra abiiy o gra rr by go-

Documents

SEB report: Selected bonds good choice in difficult markets