Almost two years ago, I wrote a piece entitled: Seriously Scandi, and ‘noir’. I had noticed a disconnect between the socialist utopia we had been fed with moves in financial markets. I predicted that the Swedish krona, which was already very weak against the euro, would weaken a lot more, which it has done, comfortably meeting our target. This week the Financial Times reported that an independent investigation had found Danske Bank’s Estonia branch had been laundering Russian money from 2007 to 2015, to the tune of up to $30bn (£23bn) in a single year; not so squeaky clean.
It’s ironic, as on international scores Scandinavia has consistently rated highly on standards of living, economic competitiveness, transparency and negligible corruption. While income inequality in Sweden is low (Gini coefficient 25.2 in 2015), wealth inequality is on the increase, the top 10 per cent owning between 60 and 70 per cent of the country’s assets. However, this is not a key issue in Sunday’s general election, where migration, healthcare and education are the top three.
For the first time in a century there is a distinct chance that the ruling centre-left Social Democrats, currently led by Stefan Löfven, might not govern. Support for their Green Party coalition partners has grown, following this summer’s terrible wildfires – even inside the Arctic Circle. The Moderate Party is polling at 19.4 per cent but the real upset is the far-right Social Democrats at 18.7 per cent. Its leader, Jimmie Akesson, has tried distancing the party from its neo-Nazi roots, but the issue means other parties will not join forces with them.
Implied option volatility on calls on the euro against the Swedish krona have been consistently dearer than equivalent puts, and has increased steadily this year. Summer’s consolidation around our original target of 10.40 krona per euro should kick off another rally to 11.00 krona per euro, soon; we cannot rule out a rush to 2009’s record high at 11.78.
Benchmark Kingdom of Sweden 10-year sovereign bonds yield just 50 basis points, the mean of the last three years and not far off 2016’s record low of zero. Perhaps not surprising as the Riksbank key deposit rate has been negative since 2014, and is currently the lowest in the world at minus 1.25 per cent. None of this looks set to change soon and is not a sign of a healthy economy.
Stockholm’s stock exchange has been eagerly anticipating the rumoured listing of Volvo, the automaker rescued in 2010 by China’s Geely. The initial public offering is estimated to be worth between US$16bn and US$30bn, many times the $1.8bn Geely paid for it, making the nearly 100-year old Gothenburg automaker the largest IPO since Telia (telecoms) in 2000. This industrial city, along with Malmo and Trollhattan, has been targeted by fire-bombs and rampaging, mainly in the gritty suburbs, causing the prime minister, on Sveriges Radio P1, to exclaim, "what the f**k are you doing?"
As for the index of the 30 most active Stockholm shares, which include many familiar names and various banks, technically the chart looks bullish. Trading just under 2015’s record high, it has had ample time to get used to trading above the interim peak reached in 2007 at 1,320. With a value this week of 1,664, it sounds suspiciously like a Strasburg-based beer brand.
