February was an eventful month with extensive news coverage across various areas. Bond funds continued to perform positively overall during the month, with the Nordic corporate bond market holding up the best, partly due to many Nordic bonds having variable interest rates and higher underlying yields in the Nordic region. For the stock markets, it was two steps forward and one step back. The month started in line with January with continued gains and improved sentiment. However, the climate changed when the “northern winds” arrived in the form of persistently high US inflation, particularly in the services sector, which could be sustained by a strong labor market.
Summary of market focus during the month:
Continued interest rate hikes in sight
The inflation rate refuses to give in, dimming hopes that the interest rate hiking cycle will soon be over this time. Hawkish central banks, with the US Federal Reserve raising its benchmark interest rate by 0.25 percentage points and the European Central Bank (ECB) and the Riksbank both increasing rates by 0.50 percentage points, are focused on fighting inflation until the inflation target is achieved.
Global economy continues to perform strongly
The global economy is holding up surprisingly well, and many indicators now suggest that the expected economic downturn may be delayed or even avoided. This is confirmed, among other things, by the strong labor market, which shows few signs of slowing down. While this development is fundamentally positive, the flip side of the coin is that inflation is persisting more strongly than expected.
Varied company reporting for the fourth quarter of 2022
The reporting period for the fourth quarter is largely completed, and the outcomes have been varied. Reports from real estate companies have been in focus, and the prevailing trend is that valuations of companies’ portfolios have declined due to higher required returns, although the declines have been somewhat limited by higher management results (rental income/cash flow).
Development of fixed income funds
After a strong start to the month, rising interest rates caused bond prices to retreat in the international credit market, but the Nordic corporate bond market held up better. Real estate company reports have been in focus, and companies have been active in taking measures to strengthen their balance sheets. For example, Castellum announced a new issuance of SEK 10 billion, Balder conducted a convertible issuance of EUR 480 million, and Heimstaden Bostad raised SEK 4.5 billion to buy back outstanding bonds. Corem announced the sale of 17 properties in the Stockholm area for SEK 949 million, and SBB announced that it is evaluating an IPO of its subsidiary Sveafastigheter, which owns residential properties. The above transactions are just a few examples of recent activities and serve as evidence that companies are prepared to take strong action to defend their credit ratings and secure their financing. Primary market activity was strong during the month, and in addition to SGL, we participated in new issuances by Volvo Cars, Billerud, and Nordnet, among others.
All funds benefited from the strong sentiment in the market. Simplicity Likviditet and Simplicity Företagsobligationer increased by 0.45% and 1.13% respectively, while Simplicity Global Corporate Bond and Simplicity High Yield rose by 0.27% and 1.64% respectively. Despite recent gains, yields remain at high levels in all funds.
Development of equity funds
The developments in the bond markets posed a challenging month for interest-sensitive stocks such as real estate, while banks performed positively. Simplicity Norden and Simplicity Sverige increased by 1.7% and 1.3% respectively, largely thanks to a high weight in banks such as Nordea, Swedbank, Danske Bank, SEB, DNB, and Sydbank, all of which increased by more than 5% during the month. The latter is also one of the largest holdings in Simplicity Småbolag Global, which also benefited from an overweight position in the banking sector.
The continued strong retail sector in the US was reflected in the quarterly report of Loomis, a holding in Simplicity Norden, Simplicity Sverige, and Simplicity Småbolag Sverige. The company increased its sales and earnings in the last quarter and achieved organic growth of 11.8%. The stock rose by 9%. IT company Addnode is also included in all three domestic market funds. The stock saw a significant increase in February as the company reported new revenue and earnings records for the fourth quarter, while demand remained strong across several customer segments.
However, the rocket stock of the month was in Simplicity Green Impact. South Korean company Ecopro, which develops technologies and materials for renewable energy, batteries, and air purification, rose by over 130% during the month after reporting continued strong growth at the end of January.
Simplicity Norden increased by 1.7% and Simplicity Sverige by 1.3%. Simplicity Småbolag Sverige rose by 0.7%, while Simplicity Fastigheter and Simplicity Green Impact declined by 6.6% and 1.9% respectively. Simplicity Småbolag Global performed best with an increase of 2.1%.Tillbaka till Nyheter