Portfolio Manager comment Coeli Likviditetsstrategi November 2019
Likviditetsstrategi advanced during November with 0.08 percent. Since year-end, the NAV per share has consequently increased by 1.08 percent. November was generally a strong month for risky assets, as well for corporate bonds. Some macro statistics now indicates how the economic downturn will not necessarily be as severe as expected. In the Nordic region, there was high activity in the primary market with relatively many new issues. The market is supported by large inflows to corporate bond funds, among other things, the Swedish Securities Dealers Association reported inflows of more than SEK 5 billion during October, which is a record figure.
Hemfosa Fastigheter was one of the major contributors as its bonds appreciated after Samhällsbyggnadsbolaget i Norden presented a bid for the company. If the acquisition goes through it will result in a stronger credit profile for the merged company than Hemfosa had as a standalone entity; in addition, Samhällsbyggnadsbolaget has an official investment grade rating. There are clear benefits to this merger as a larger company is created, which can result in more efficient management and, in the long run, lower financing costs.
The consumer credit company 4Finance also made a positive return contribution after the company presented its quarterly report which showed lower net interest income, but profit before tax was stable thanks to lower costs. The solvency ratio was reported somewhat higher, thanks to a good liquidity situation, the company has continued to repurchase bonds maturing in 2022. The Norwegian credit management company B2 Holding was also found on the winners’ list after presenting a quarterly report without any negative surprises and with forecasts of how leverage will be reduced in the coming year.
On the negative side one found Marine Harvest, whose bonds fell somewhat after the sector was pressed by a proposal for higher taxes for aquaculture companies in Norway. As a group, covered bonds made a smaller negative contribution due to rising market interest rates.
During the month, changes were made to the Fund’s exposure to real estate companies, divestments were made of bonds from Kungsleden, Sagax and Hemfosa, and FastPartner and Heimstaden Bostad were added to the portfolio. A new investment was made in the Norwegian IT company Crayon, a global reseller and software consultant. Crayon is appreciated for its attractive position in a rapidly growing market favored by a strong digitalization trend. The Swedish airport operator Swedavia was also given a place in the portfolio when the company for the first time issued subordinated bonds.
During the month of November, it was time for the newly appointed ECB chief Christine Lagarde to give her first monetary policy speech. Lagarde pointed out, like her predecessor, that the Eurozone needs a new policy mix, where fiscal policy needs to support monetary policy measures. Thus, ECB continues to insist that higher government spending and tax reliefs should apply to the Eurozone countries. Regarding financial data, the Eurozone PMI, which has been below 50 (the break point between growth and contraction) since February, was noted at 46.9 in November, which was higher than both the previous month and analysts’ estimates. Manufacturing activity in the Eurozone noted declining activity for the 10th consecutive month.
The US-China trade conflict entered a new phase when President Donald Trump signed the new Hong Kong bill. In short, the bill is aimed at supporting democracy and human rights in Hong Kong, as well as allowing the United States to impose sanctions on those who are considered guilty of violating those rights. Not unexpectedly, the US-China relationship seems to have worsened and the planned tariff hikes on December 15th are now approaching without new progress on a trade deal. On a slightly more positive note, the US private consumption is seeing continued growth. During the month third quarter GDP figures were revised upwards and figures for durable consumer goods showed the highest order figures since the trade war started last year.
Swedish GDP figures showed growth in the third quarter of 0.3 percent, compared to the second quarter, with analysts’ expectations at 0.2 percent. The main contributor was exports, which increased by 1.4 percent, net exports increased by 0.3 percent. Swedish household consumption increased by 0.4 percent during the quarter.
During the month, the Nordic and European credit markets had slightly falling credit spreads in the Investment grade and the high-yield segment. Stibor 3-month was noted at 0.06 percent at the end of the month, after being above 0.0 percent throughout November. The Swedish 10-year government bond was noted above 0.0 percent for the first time since July and was by the end of the month quoted at 0.0 percent. Most other 10-year government bonds showed a negative trend with higher interest rates, with the U.K’s 10-year government bond being the exception with a modest fall of 0,01 percentage points.
|Performance in Share Class Currency||1 Mth||YTD||3 yrs||Since incep|
DISCLAIMER. The information provided here does not constitute professional financial advice. Past performance is not a guarantee of future returns. The price of the investment may go up or down and an investor may not get back the amount originally invested. The key investor information document (KIID) and prospectus are available at www.coeli.se.