Strong Nordic market despite global concerns
The new year began similarly to last year, with good risk appetite and a continued search for returns. But the strong sentiment was abruptly impacted by US-Iran tensions and the coronavirus, which may have an indirect negative effect on companies particularly exposed to China. This also caused global long-term interest rates to widely fall.
The US Fed announced that interest rates levels will be maintained. This was supported by a continued strong labour market, even though the willingness of companies to invest remains weak. The ECB is also maintaining rates and said that it will continue to reinvest maturity for as long as necessary during its asset purchase programme, regardless of the positive or negative movement of rates.
Activity in the local credit market returned quickly after New Year, and the Nordic market showed strength throughout the month despite the global concerns. This was underpinned by strong fund inflows and a shortage of bonds. Margins have therefore continued to be pushed down slightly, and this was even clearer in euro denominated issues where the risk premium is significantly lower than in the Nordics.
January offered relatively high activity levels in the primary market, with names like Swedish investment company M2 Asset Management, the 2019 favourite and the fund’s largest holding Samhällsbyggnadsbolaget (SBB), and Norwegian cruise company Hurtigruten issuing new bonds, all of which we participated in. Otherwise, we have allocated inflows by upping existing holdings, and the majority of individual names contributed to the month’s return. Individual names like SBB and Heimstaden were at the top, and the debt purchasing sector continues to trade strongly, while a few contributed negatively.
The fund’s holding in Melin Medical, which provides payment solutions and debt collection services, was unfortunately adversely impacted by a new Norwegian bill aiming to limit the fees it can charge for the collection of small invoice amounts.
The portfolio returned 0.55 percent in January, which also corresponds to the return for the year to date.