seb report: corporate bonds emerge as safer investment choice
TRANSCRIPT
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InvestmentOutlook December piv bkig - ivm gy
ll ch u
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3Investment OutlOOk - december
Contents
Sagy
oio..........................................................................................................................5
Say ...............................................................................................................................6Mao ay ...................................................................................................................8
Pooio oay: Mo Poga.............................. ............ 10
Th: A goa ah o .............................. ................................ .................. 13
Th: Fiig go ha o gi ............................... ................................. ....... 16
Th: Mao io h y o ............................... ............................. 19
CL
Eqii................. ................................ ................................ ................................ .............. 22
Fix io ............................ ................................. ................................ ........................ 26
Hg ............................. ................................ ................................ ......................... 28
Ra a ................................ ................................ ................................ ......................... 30
Pia qiy ................................ ................................ ................................ .................... 32
Cooii ........................... ................................ ................................. ......................... 3
Ci ................................ ................................ ................................ .......................... 36
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4 Investment OutlOOk - december
Thi o po y SEB oai ga aig ioaio ao i i po. Ahogh h o i a o o jg o
ia, SEB wi o ia o ay oiio o iaai, o o ay o whao whih ai o ia o i. i ah i
o, yo ho i poi a h po a h io oai wihi i, o a h io aig o pi opai o o www..
/iai. oaio aig o ax ay o oa a ay o yo iiia ia. Sagy a a oio
aio opai oioy a appi o x pioiiy o i i oaio. Dio o pio oaio hioy ay
oai po q. Aay poy y SEB ay ho poiio i qii o qiy-a i o opai o whih hy poi a o-
aio. Mo ioaio ao SEB i oaio a i aag o oi o i . a o a hp://www../
ppyiga. (i Swih). Hioi o a oh aia i a o gaa o . Th a o yo i o oh
aia i ay ih i o a, a i i o ai ha yo wi g a yo i apia. o a, o a x h iiia ao
i. Wh ih o yo i i ii oia i a oig y, hag i xhag a a i pa h . Yo ao a
y poi o yo i iio a yo ho away oai ai ioaio o aig h. Fo o ioaio pa i
aia h ipi pop o a ioaio oh o a o po, aaia a www... ay yo ho
ai aio o yo iiia ia o yo SEB aio.
i u x: A a o o o aioa Pia Baig of i Lxog, Sigapo a Swiza yo a oig o p i-o o h ax appia i h oi o yo iizhip, i o oii wih p o a ao a aia aaio. SEB o
o poi ay ax poig o oig oi aig ha yo yo poi o ahoii wih ioaio a a wh qi.
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Thi po wa pih o No , .
o a a o ioaio a aayi aaia o No , .
Sagy
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5Investment OutlOOk - december
We live in a changeable world, where previoustruths and natural associations no longer apply.
There is little predictability and investors are very
concerned, which has created a need or resh
strategic thinking in the investment eld. These
and many other questions are discussed in this
issue o Investment Outlook.
W a iig i a i. Th wo i pay o o joi.
Naa apio h a h ay o go o
o og appy o h a x a o. Appay i
o a i i o ow opoa o i y o-
pai wih a a ha go o i y
oi wih wa ax a a iig xpi.
N o ha a pio o aia oi a -
oy pi a oay. W go a o h oi
ii o ayhig ha a ga a qia.
pha i h o, pa o -ioig.
Ba w a aiy, aig i iio
o popo a a piig o i a aiy
pi. o a hi a o p ipiig, i i-
o a h gy, iaio o pai o aiai
i wh a a jpig p a ow i a o oappa ao. Th ip i o h oi i ha oppoi-
i a ao ig o i oay oai a. o o
h ai i hi i o Investment Outlooki
h paia oppoii.
Aoh h ai poi o ai io ao
how o i p o i agy i a way
i oay a i. Wha de acto o a oig h
a? Ba o oaiiy i h pa a, iay
a who gaio o io (who ga hi a i
h ) ha a a goo o qiy i-
.
Wha i aoyig ao pha i h o w a ow i ih o-aia aog a; hy a a ig p o-
gh. o oa pio o ga a piai-
iy, h a igg i w how aio a
po, a aaio o o o i. h p
iaio, o aag agy i a ix o yig o
iii h aag o wa a a iiyig
wh w poia, pi high oaiiy.
o h a oppoii i hi wo, oo, o
i ho o aj. Yay i wa
ipoa o zo i o pa a ogh; oay i i agy
a a o gaig wih goo i oo. a
h ai, w xai o aai i a-
gi a p ga phai o h aia a ii
a . Thi i a g way o iig a
wi poay ai i h poigh a og a xy ow
i a a yi pai, a hy wi o o o a og
i o o.
i ao ipoa o ai ha a w pha wi o a
h o w a goig hogh. A o poi, Eop wi
ha i h igh iio, ih ia a o ai
Eopa Ca Ba a/o o o aag-
poii. Fo a io apoi, h po
o o aay o o. f ha h pahowa a oio i i. Th a ao ha a w
ii oay: h ooi pi i Aia poi hop o
g oay poii, a Aia ooi gowh
i aay giig o poi pi pi. Thi ay o
o poay, i i i a igh po. aaio
, h a aio oppoii. o ia,
h i oo o high aaio. Uiay, ooi
gowh i i h way o o oay po. Poiia
a ow hi, a ha aiaio wi hopy a hi
aio i a poii iio.
Hans PetersonCIO Private Banking
and Global Head o Investment Strategy
iduc
When the fnancial world is out o joint
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6 Investment OutlOOk - december
Say
exctatios*nxt 12 moths
rasoig *Fc h b u vw d d u cc wh c tu isk
equitis 10% 18%
Neutraloutlook in the short term, POSITIVE in the long term. Globally no strained valuations, provided that
growth does not all urther. A decent macro scenario in the US, signicantly weaker in Europe. Emerging market
(EM) economies will show continued robust growth ater a period o infation-ghting. Strong perormance in
Russia, encouraging news headlines rom China. Condence in the EM sphere seems to be returning, thoughsomewhat cautiously.
Fixd icom 6% 7%
Negative towards government bonds in the OECD countries because o todays very low yields and prospects osome yield increases/risk o price declines.POSITIVE towards High Yield bonds, which based on undamentals
in terms o company health and bankruptcy risk have unjustiably wide yield gaps to government securities.
Given somewhat better risk appetite, EM Debt will also appeal to investors, due to the potential or lower yields/
price increases and stronger currencies compared to the developed market (DM) sphere.
Hdg fuds % 5%
positive.Still cautious about Equity L/S and Distressed strategies, but the actions o central banks will create
attractive opportunities or Credit L/S managers. From a portolio standpoint, we view Macro and Trading strate-gies as good diversication mandates.
ral stat 3% %
Neutral.Comparatively stable market perormance. World economic uncertainty and volatile oreignexchange markets are contributing to delays in major real estate transactions. Continued heavy demand
or less risky quality properties.
pivatquity 15% 27%
Neutral.Market turmoil has continued to depress share prices o PE companies; this has resulted in large
discounts to NAV. The market has already priced in continued problems. Fundamentals provide good support
or todays prices.
Commoditis 3% 12%
Neutral.The weak outlook or the OECD countries is hampering good perormance. At present, upturns
in the commodities market are more indicative o greater risk appetite than o an improved growthoutlook. Limited downside or base metals. Gold prices will benet rom the prevailing environment.
Diminishing worries about weather developments will lead to alling prices or agricultural commodities.
Cucis 4 3% %
Neutral. In undamental terms, EM currencies will benet rom interest rate dierentials and continued highgrowth, but greater risk appetite will be needed or appreciation. The USD will strengthen in a bumpy market
that will also be sceptical to the EUR. The yen is regarded as overvalued.
1The 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 metals, precious metal and agricultural commodity categories are equally weighted.4 This opinion reers to the alpha-generating capacity o a oreign exchange trading manager.
XpCD ik D U (X mO)
iOiCL ik D U
(Ovmb , O OCOb , )
Cg i OU XpCD U
Equities
Fixed income *
Hedge funds
Real estate
Private equity
Currencies
Commodities
0%
2%
4%
6%
8%
10%
12%
14%
16%
0% 5% 10% 15% 20% 25% 30%
Expected volatility
Expected
return
Hioia a a a o h oowig ii: Eqii = MSC AC Wo EUR. Fix io = JP Moga Goa GB EUR Hg. Hg = HFRX Goa Hg F
USD. Ra a = SEB PB Ra Ea EUR. Pia qiy = LPX EUR. Cooii = DJ UBS Cooii TR EUR. Ci = BaayHg Cy Ta 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
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 (-- O --)
Equities
Fixedincome
Hedgefunds
Realestate
Privateequity
Commodities
Currencies
Equities 1.00
Fixed income -0.50 1.00
Hedge unds 0.5 -0.30 1.00
Real estate -0.12 0.06 -0.05 1.00
Private equity 0.85 -0.38 0.66 -0.1 1.00
Commodities 0.25 -0.1 0.68 -0.05 0.38 1.00
Currencies -0.19 0.19 0.1 -0.09 -0.0 0.02 1.00
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7Investment OutlOOk - december
Say
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
Equities Fixed income Hedge Real estate
Private equity Commodities Currencies
pFOmC OF DiFF CL iC
R i i i o .Hioia a a a o h oowig ii: Eqii = MSC AC Wo EUR. Fix io = JP Moga Goa
GB EUR Hg. Hg = HFRX Goa Hg F USD. Ra a = SEB PB Ra Ea EUR. Pia qiy =
LPX EUR. Cooii = DJ UBS Cooii TR EUR. Ci = BaayHg Cy Ta USD.
So: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 equity Commodities Currencies
6%
0%
7.5%
0%
0%
20%
30.5%
36%
0% 10% 20% 30% 40%
Cash
Currencies
Commodities
Private equity
Real estate
Hedge funds
Fixed income
Equities
Previous Current
1.5%
2%
0%
0%
0%
17%
79.5%
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
10.5%
4%
4.5%
0%
0%
30%
34%
17%
0% 10% 20% 30% 40%
Cash
Currencies
Commodities
Private equity
Real estate
Hedge funds
Fixed income
Equities
Previous Current
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8
mc u
Worse outlook or the world economy in 2012
Euro zone in recession, but US will cope better
EM sphere will keep growing much aster than
OECD countries
oh, h wo ooi ooo ha o
gooi. Th oig ii i Eop ha aa,
paig oh aia a ooi aiy. Thi
ha piaiy i a ioaig oo aog
hoho a i i ay pa o h wo,
ha ao ii i ai ha aoooi a-
ii, o xap o ooig a iia poio.
Th ag gai hag opa o a w oh ago i
ha h o zo wi poay p i a io i ,whi h US ooy ha po ha xp.
Th i w h ECD oi a h g-
ig a (EM) ph i o gowh yai wi ai
iza, ahogh h EM oi wi ao a y
gai ooi o a h o o o.
Goa ooi gowh x ya wi w ow .
La i , h ooi iaio i h ECD oi
ay ipo owha. By h, poiia a ho ha
a ha o oig oig po. Low
iaio wi a a a i ay ECD oio oi hi zo i a poii o a x
pio. Majo iiai oi wi poay ao ah
o oay qaiai aig.
Dcl u c h U
Th US ooy ha po ha xp i
oh, ha o hoho aig, hap
gy a og aaig aiiy ow ha i-
i o Japa iia goo a agai oa a
ipio a y h aa ia o a pig. A
ai, w i GDP gowh wi a i h ha
o wiho iig io io. Aog o o o-
a igh aia oiio, qio a ao wha
wi happ o a a poiy, h o zo io
a gooy i aog Aia. Upoy wi
p pwa x ya, a iaio wi ow. W o
GDP gowh o ay p hi ya, ao . p i
a ha . p i .
u z c
Th gowh ooo i h o zo ha y -
aiay wo. Th oig ii a aia a
oi ha ii, h aiy poga a
o ah i ay oi, a ao iiao
pi oiay ow gowh. E i Gay whih
i h ow o a og i h aio wi
o o appa. W i ha a h GPS oi
(G, a, ay, Poga a Spai) xp a wi
p i io x ya, whi h Ga ooy wi
gow y owy. No og- oio o h oig
ii i ii. Mawhi iaio wi a ow ha
i ya. W xp o zo GDP o gow y a i
ao . p hi ya, h a ay . p x
ya a gow y ha p i .
D c hu h bh c
Th o zo ii i hig h Ui Kigo ia ow
xpo a a o hoho a i o-
. Riig poy, g aiy a a high
iaio a o ha p i Sp i ao
hapig Biih pia opio, whih wi a
hi ya a aga i . Nx ya, how, iaio
wi a py, whih i i poi owa h qaia-
i aig y h Ba o Ega. W xp h UK o aoia io, wih GDP gowh i h p ag oh hi
ya a i , a a i ow p i .
dc ddc u wll l w wh
Th Noi oi oi o how oiay
ooi aa g aa, pi o
a ao aa ha ay oh -
gio. Thy a h aag aiy w i , hogh
wo ooi gowh wi a a a o
Eopa ooi wi p i io. Si h Noi
oi ha xi a wih h o zo, how,
hi gowh wi oiay ow x ya. W oaha oa Noi GDP wi ia y . p hi ya,
ha . p i a p i .
Global growth slowdown but no recession
Investment OutlOOk - december
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9
J cuc c
Th Japa ooy wi a y h goa ow-
ow, i h ho , oio oowig h a-
a ia wi ai ooi aiiy. Th wi py
o i poio o, o aio (a ga i i
pi) wi pi. Ba o hi a a iay og
y, h Ba o Japa i iy o oi ig y
i h oig xhag a. A p o GDP, h
oy pi o i y a h ag i h ECD,
ha o a ag p o pia aig hi wi o
a o high i a. w xp Japa GDP o
i y ha . p , whi pi gowh i
p i a a i ao p i .
ld d lw l
Aia gig oi a oiig o hp ai hgoa ooy, ahogh hi gowh wi oo a i o
x ya. Th o zo ii a ow US ooi gowh
wi ow xpo o Aia, hi wi a y
h iaigy ipoa o o ia-gioa a. p
ooi i Maayia wi a o ha ooi
wh h oi a pay a ag o i gowh, i
oia. aio ha ia i o Aia oi,
a ow iaio ig wi ia hoho o-
pio a gi a a oo o ow y a.
Th Chi ooy i ow owig o wa xpo
xpaio, whi high gowh i oi a wi pi.
Faig pi o oo a oh ooii ogh wih
o a ooi gowh wi a o ow iaio
aha. W i ha Chia GDP wi gow y ighy o
ha p hi ya a y o p aay i
a .
Expo ao o a ah a pag o ia GDP,
o ha oy ha goo poia o hg o a wa go-
a ooy. So a, iaio ha oy high ow
ao . p o oa i ha i wi a
ig . W pi GDP gowh o ao . p
oh i a a . p i .
L c wll l cld ll wd
Dpi ga pog ig h pa a i o
oi gowh oiio, Lai Aia ooi a
i y ii o hiig goa ooi wi. Th ow-
ow i h ECD oi wi h ha a a ipa. W
o GDP gowh o ay 4. p i h gio hi
ya, ao . p i a oy a i high i .
Thi ya iaio i Lai Aia ay appoah p
a h ow o ao p i . Togh wih a
ooi ooig, hi a h o oay igh-
ig wi iiih.
l lwdw u
h pa ya, gowig oi a i Ea (i-
ig Ca) Eop ha g aogi xpo a a o-
oi gi, h gio xpaio i ao o wa
a ow gowh i goa a hap i xpo. Highy
xpo-p Hgay, h Czh Rpi a Soaia(wih xpo qia o - p o GDP) a p-
iay a. To o x, gowh wi ao a
o ow apia pig y i, h a-
io i GDP gowh wi a g ha i h o zo.
Exp o Hgay, pi o i oa. A a -
, h o aiy a wi a ha i
W Eop, a hi wi oi a.
Poa, Laia a Uai wi oi hi o-
a g ighig, whi a poiy wi o ighy
iai i Ria, Eoia a Lihaia. Copio
a apia pig a h ho p aiy w a x-po gowh ow. aio wi ai ow i o Ea
Eopa oi, aiy o ag op gap.
lw c wld wh
W oa goa GDP gowh (aj o phaig
pow paii) o 4 p hi ya, j o p i
a ha 4 p i . h x op o
ya, h gowh a wi h ai ow (gowh
ha aag . p i ), h wo ooy
wi o p i a w io. Expaio i h EM ph
wi ai y a h a wih GDP iaig y o
ha p hi ya, a i ao p i a
j o . p i . Th opoig oa
g o h ECD oi a oy ighy ao . p
, j o p a ha p .
Mao ay
Investment OutlOOk - december
China, GDP volume growth India, GDP volume growthSource: Reuters EcoWin
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
2005 2006 2007 2008 2009 2010 2011
Year-on-yea
rpercentagechange
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
OF LDig FO mJO i m COOmi
GDP growth has trended lower in both China and India
since early 2010, but so ar this deceleration is moderate.
The growth rate remains above 9 per cent in China and 7.5per cent in India. Although the risks o a harder landing in
2012 have increased, mainly due to European economic and
sovereign debt problems, our main scenario is still that botheconomies will experience a sot landing next year and then
accelerate somewhat in 2013.
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10 Investment OutlOOk - december
mOD pOCiO
G ha ai a h o h o zo aa,
i gaay gig o opiio o aio o
ay. A a o oi poiia ph aia
oig o yi ao p , whih wa h
a whih a a oh oi w o o appy
o ai-o oa o h Eopa Uio (EU) a h
aioa Moay F (MF). US -ya Tai o a o-ow . p i Sp wh h o
zo ooo wa a i gooi. Si h, Tay yi
ha o a a hi wiig hy a ao p .
Ga -ya o, whih w aig a j ow .
p , a o agai ao . p a ig ha o
a pay a o woi ao h gowh ooo i
Eop ha i h Ui Sa.
Mo Poio, w y o p apia y aoaig
i o a a a aag ha a ga
ga o ooi . Ma woi a ay
ag, how, a gi a owha aig ia a-
hi p p o a a a, iy o.
Si Sp w ha oy a io aj.
h x io -pooio, w ha aj h ha o
ao x io owwa o 4. p
o .. W ha o aio poiio i High Yi
a gig a (EM) oh.
h hg i, w o ha i a-oi-
aag ha goo poia o ga , oh
a aio a a a ow oig o o-
ioa ho a a oa piig i oi o oa
ii igh ow. W ha h aoa p o CiLog/Sho y paig o o o Goa Mao aag
a y aig h po o o -wighig i h x
io -pooio.
h i -pooio, w ha pioy aoa
apia o aag wih i aa i h o-
ig xhag a, hy ha o i g-
aig aiaoy i h pa w qa. Thi i why,
oi wih o iw o i, w a ow hooig oa a o ai i appoah y ig xpo
o Aia i. La i o w pa o y
aag i ao o a Aia x io ha i
i ho aii (- ya) a i oa i (o gai
y xpo a ii i a i). Thi poiio i
gay o ii o i appi i h a, how-
, a w ha h h y a a o
p o h ai 4 p .
A a o yioa a, Mo Poio ha
ao o o go i Ag-Sp, h po-
oio ho a o o a a api pa a i appi
a iqiiy ipo.
Setting our sights on growth
Major market worries and a dose o systemic risk are pointing towards continued turbulent markets.
In our portolios we will generally maintain our cautious approach to risks, but we are choosing
selective growth-oriented exposures. In Modern Protection this implies only minor adjustments, but
in Modern Growth and Modern Aggressive it will mean a larger role or equities, including exposure
to Asia and the Nordic countries.
17%
2%1.5%
79.5%
Cash
Currencies
Hedge funds
Fixed income
plc:
md ip
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11Investment OutlOOk - december
mOD gOW
Th o zo i ha h ai ooig
i aia a hogho iig hi qa.
Ahogh o a a agy a h a a hi
wiig a hy w i a Ag, i ha a aai i
i oh. Mawhi h i ap ha aw
o o x.
Ahogh h VX oaiiy ix, ao a h a ix,
ha oy ai ao h a, h ix ha
i a owwa i h o Ag. Th US
oa, whih i aoh iiao o a oaiiy, o
o ha p agai EM i i Sp,
ha a owha i h, hogh i ha aig
aiy i i-o. Aia i ha po
w, how, wih a o i o ao p iAg.
Mo Gowh w ha ha a i ai i
Ag, wih qiy hoig o p a ah ho-
ig o o ha p , oia y ga aiy
a h a o iiiiy i . Ahogh h a i ay
o aiy, h ga oo ao h
o Eop i o pa ha o qa ago. A ao
a, a o a ha a o ay aai .
Fowa-ooig pi/aig (P/E) aio o qii a
h goa a aoa, a h pa w High
Yi o a go ii i agai ao
ai poi.
h paiig ia, w p o i i a a
ha a ga ga o a ia. Mo
oa pi ha a p a o opay
api x ya, whi h o a i piig i
o ha p . Copoa aa h a hioi-
ay og, how, a High Yi o oo ay -
a. Egig a o oi o aai wih
hi high opo, a i o EM oi hi i ao po-
ia o aig yi (= pi gai). A h og app-
iaio i h oa, h i ao ga poia o xhag
a gai. W ha h gaay ia o x iohoig o . o 4 p o h oa pooio, i-
ig 4. p High Yi a p EM .
h qii -pooio, w ha iy ogh x-
po o a wih h poia o gowh Aia
(4. p ) a h Noi oi ( p ). Ahogh
h gio o o oai ha goa qii,
hy ha how oh goo haaii opa o EM
oi gay. Ahogh i appi wi i h
poa o h a i h ho , hi po-
ia iw o - ya i og, poi w o o
p i a goa io. Toa xpo o qii i MoGowh i ha p , whih a ga a a
oi i poiio.
To ipo h aiiy o h pooio o wah hap ow-
i h a, w ha ia h ha o CTA
hg o p . W ao o ha i a-
oi aag ha goo poia o ga ,
oh a a o a a a ow oig o
oioa ho a a oa piig i oi
o oa ii igh ow. W a ao iaig o aoa-
io o Ci Log/Sho y paig o o o Goa Mao
aag. a, w ha ia h hg -po-
oio o p o Mo Gowh o p ai.
h i -pooio, w ha pioy aoa
apia o aag wih i aa i h o-
ig xhag a, hy ha o i g-
aig aiaoy i h pa w qa. Thi i why,
oi wih o iw o i, w a ow hooig oa a o ai i appoah y ig xpo
o Aia i. La i o w pa o y
aag i ao o a Aia x io ha i
i ho aii (- ya) a i oa i (o gai
y xpo a ii i a i).
h who, o poiio a o o p o o
a poa (a h goa gowh) h pooio
ho a o ga a og a w o o
p i a goa io. Sho- poa i, how,
iy o a i po o h o o poiia a
a h a ow o i appi. Fh aha, w -
h xp aiy a pooio poa.
Pooio oay: Mo Poga
10.5%
34%
17%
4%4.5%
30%
Cash
Currencies
Commodities
Hedge funds
Fixed income
Equities
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8/3/2019 SEB report: Corporate bonds emerge as safer investment choice
11/37
12 Investment OutlOOk - december
Pooio oay: Mo Poga
mOD ggiv
A hi ig ow i Ag, qii oi o a
ig Sp. Sha pi o owy i o,
how, ai hop ha o zo a w oigowa ig a i oio o h o ii. La i
o, hy ay i a pa ha wa poii o h
a, a ai. Th pa o ga a
o o a oo aaio o wi a a poiia oaap
ha a a pa o a oio. Ri appi a h h
poa o aio o a a a a
hag aiy i po o poiia a. oay
a iaio, a pi a aiy ig i y h
poiia aa a a oig i Eop.
Si Ag, o ooi ha i hi goa
gowh oa o owwa. Mawhi opoaaig xpaio o ha ow. Th
iio ha ag i h EM ph (ao p
i h o Jy opa o . p o W
oi). Expaio o Aia opai ha
ow y ao p . Mawhi, US aoooi
iiao ha poi pi pi, a Chia i ap-
pay oig owa a ooi o aig. Ta
ogh, hi i a aio ha poi o oi goa
gowh x ya.
Mo Aggi, a i Mo Gowh, i a Ag w
ha a i ai wih qiy hoig o p
a ah hoig o o ha p , oia y
ga aiy a h a o iiiiy i . Ahogh
h a i ay o aiy, h ga oo
ao h o Eop i o pa ha o qa
ago. A ao a, a o a ha a o ay
aai . Fowa-ooig pi/aig (P/E) aio
o qii a h goa a aoa, a h pa
w High Yi o a go ii i agai
ao ai poi.
A h a ga o aii, w gaay ga o
ia o xpo o a wih h poia o
gowh Aia (. p ) a h Noi oi ( p). Ahogh h gio o o oai ha
goa qii, hy ha gay how oh goo ha-
aii opa o EM oi gay. Ahogh i
appi wi i h poa o h a i
h ho , hi poia iw o - ya i og,
poi w o o p i a goa io. Toa xpo-
o qii i Mo Aggi i p .
High Yi o a p ao wo hi o h x i-
o -pooio, whih ao o p o Mo
Aggi. Mo oa pi ha a p
a o opay api x ya, whi h o a-
i piig i - p . Copoa aa h a
hioiay og, how, a High Yi o oo ay
a. Th aiig o hi o h -pooio
oi o gig a o, whih oi o a-
ai wih hi high opo, a i o EM oi
hi i ao poia o aig yi (= pi gai). A hog appiaio i h oa, h i ao ga poia
o xhag a gai. W a aiaiig o x io
poiio.
To ipo h aiiy o h pooio o wah hap ow-
i h a, w ha ia h ha o CTA
hg o p . hi hg agy,
ay igiay o o aag o aoh, a w ha
h ho o pp o xiig CTA pooio wih
aoh aag who a fiy high i o io
Mo Aggi i po, who i ha a goo a
o a i oo.
Goa i a h oaiiy o h aia y i Eop
a oiig o hap highy-ag i o,
piay pia qiy. Ahogh io o a a
a agai a high , w a hooig o ai o h
ii o gay high i i y aiy ao
h aa h a ig aiiy o a a h iqi-
iy iaio i h a.
Aogh, h Mo Aggi pooio i agai xpo
o a i, o iy ag o gio ha
a xp o i goa gowh i h . R ow
a, how, i pa ao x io, hg
a ooii o a poa.
7.5%
6%
36%
30.5%
20%
Cash
Commodities
Hedge funds
Fixed income
Equities
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8/3/2019 SEB report: Corporate bonds emerge as safer investment choice
12/37
13
h
Reduced cyclicality due to debt reduction
needs
Greater ocus on selectiveness and direct
returns on assets
Bond markets are changing investment
conditions
Th goa ii gi ao o po how i-
agi ho oo i h . o h h
ha ay o a aiy o h x w ya i ha o-
oi pa wi oo a i i ha w ha
ao o ig h pa h a. Liy
o h oi o h i go a
pia aa h a oi high aig , a
wiig o a opio wih oa a poay
owha yiaiy.
W a ai h pa ya i o h pha:
Until2000debtbuild-upandcapitalmarketappreciation.
2000to2006continueddebtbuild-up,butchangesin
aaio = ga oaiiy.
2008(autumn)debtreductionandlowermarketvalua-
io.
Toay w a oig hogh a pha o io, wihoi y ag iaa ha a h a. Th
oaiiy ha w ha oigia o hag i a-
aio, iqiiy a io. Thi oaiiy ha ao
a ay pop o o i o h o a a
a i. W a o o way owa h g o
a gaio o io who o o iw o a a a
o o .
W ha i i a wo wh pow y ha i
o a p a ow. Moay poiy a oh a-
o ha a gi o h ooi y. Low i-
a ha oag oa aig a opio,aig o o y ha i ha ga
ag o a o. Thi ha a ha h o
ipoa aayia paa ha o iiy h -
ig poi o y; o hi ha o, h io
oiy ha o yiay. Mao-i a
aayi wa h ip o . Aoh ao ha hai ig h pa h a i ha o
yi ha aiay a hogho h pio. Thi ha
poay i oh h ooy a a i a poii
iio. Ba yi ha o ow a ow, hi
ha i apia io i (hap o oow) a i
a (ah o high ).
h , h i ia wi i.
a a xy ow. Moay poiy i o a -
i. Si hai ia ow i a o o
ha h a ipa. So a wi poay o ha
h a pia yiaiy o wo i. Thi a ha wwi o h o i i o i
agi.
Rio i i h ECD oi wi pa o yay
i aha, i a wi o a pow a pioy,
aig wi wa h ipa o opio, poy
wi a high a w wi ha owha o oig
ooi poa. o fi o ay y
qii a h wa goo gowh. Gi h
, w o igiay o i i iiyig
h gi gowh h ha i xi a ha ga
a. Thi a ha o qio i iiyig
yia hi wi ipoa o a pay.
Lw d ld wll ch h
Haig o yi a ow a oay wi hag ay hig.
Bo ha a ip, a gao o , wih
aig yi a a xa iig o. pooio, h a-
gy o ig o a a i ha opaaiy
ip. Bo ha oi goo , whi ha
ha poi gowh. Looig aha, hi wi hag. Gi
oay ow yi, o o hoig wi o a
goo. Sagaig yi wi pay - p . Riig yi,
whih wi aiai oo o a, wi poi a gai
. Thi ao a ha h ah o a o o wi o iaigy ipoa. Th ho p-
ay ha ow oaiiy i hi yig a, o a a
o ha a oa.
A global search or returns
Investment OutlOOk - december
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8/3/2019 SEB report: Corporate bonds emerge as safer investment choice
13/37
14
i u hd
Toay w ha a i ia wh aiioa y-
iay i gowh wi o h a ai o o
. Voaiiy i high, a a a h pi o ha i. Ba o h oiio, w ah h oio
ha w gi -high pioiy o h aiiy o aio
a o de acto ga . By hi, w a
i h o o ii, opo a p ah ow.
Gi a ag ah ow a goo ii, w a i p
apia a ao i wih a g o a aio.
Mo i po a ig o a wih h ha-
g o iiyig ig poi i y a aig
how a y wi a h a o a. Gi h iz o
i ooy a h ag qaiy o aa ha i ga,
h Ui Sa ha aay i h poigh. wp o gy io gaig ha io apig
y, h o wi aay hi o h yig a,
ga o gio o whih pa o h y w a i.
h c, w ccu:
. Th -gaig apaiy o a pi a:
ii .
. Th aiiy o hi ii, i yia iiiy .
. Vaio i ao ha ay a a h a o
h a, y i .
4. Ri a i aio o xp (i/wa
aio).
. Ro i h pooio, oaio, iiaio w
o o .
w hll w w u h c?
qu
Eqii wi ai aai a a a a i pooio.Sh ao a h gowh o h yig a, goo
piig (ow aaio), poiiy ia a a o
pay ighy iig pi a ipoa.
B i a ia o a ooi aio, io
wi o o ipoa. Ba w wi iig o a
og pio i a wo ha wi i aig wih ag
po, i wi o o ia o iiy wh a
gowh i. Rgio a ooi o wih goo poia
wi ga . Th i o -
gio wi ao ay a hag. i oia o
ii o a gio io h agoi: Thosewithrapidgrowthindemand,currencieswithgood
poia a iig poiiy.
ThosethatwillbasicallygrowatthepaceofglobalGDP.
Thosewithmajordebtproblemsthatwillaectdemand.
Thi aayi a i oghy h igh iio, i w
wih o oi o gi -a iig, w
y h haaii o h aio qii. W h
opai ha ha goo aa h, a a
a pay a ii p o ooi y.
Th opai ho ao ha a a ii hioy.
A a iaio, w a SEB Eia o a Soho-
i opai o . Th a ow how opai i
whih yia o ii a ga a ii.
Th: A goa ah o
Investment OutlOOk - december
COMPANY Direct return (%)
2011*
Historical return (%) Market
capitalisation
(SEK m)*
2010 2009 2008
l2 . . . . ,7
l .7 . 4.4 4. ,
. . . . ,
Zc . . 4. . ,
cu . . 4. 4. ,7
& muz . 4. 4. . ,
C . . . . ,
l . . . 4. ,
ig D pObbL DiC U
First, we made a list o companies on the OMX
Stockholm exchange with positive recommenda-
tions plus high, resilient dividend levels. Next, we
added the criterion o a 3.9 per cent minimum
expected dividend. We eliminated companies that
have cancelled dividends within the past three
years. Finally, we kept only companies with a mar-
ket capitalisation above SEK 10 billion.
* Market capitalisations on November 18, 2011.
Source: SEB Enskilda
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14/37
15
aoh aig, w oo a opai ha ha g-
a a i o a a p aay o h
pa a ( h ha ow). Th ha ao how h
a a o h opai a iia ha h hapi o hi yp o opay o ha h o a-
a a who, o o h iia w piy o a goo -
a i.
bd
Bo a h ai -a i, go-
o ha o h o hi aai a yi
ha a. Nh, opoa o a ha ow
o io h poigh o aio ao.
o h ig hag i Eop oay i ha o a o
a i hi aa h. Thi a ha o-pai wi ia hi oowig iy ia o a.
Th Eopa opoa o a wi o xay i
h Noh Aia o. iw o opoa o
i p i h Fix io io a i Investment
Outlook. H w wi oy o o h a hag ha
wi a opoa o a wohwhi o o i
o ay ya o o. W ha y i qi a
o i opoa o, piay i h High Yi g.
Thi ha gi aa xpi o how hi a a
wo. a i ha opoa o ha goo i
haaii, poi w pai hahy iiaio.
ucud d
W a ig o a o i i whih o
a pa i i a i o o
opay-pi i i h i. Thi wi a o-o o o i i h , wih h aio yp
o haig i iqiii a o o h
qiig og o-i pio. Pig ogh a a o
o i o way o ig i. i a aai i-
i o a. Th pooio ig a a a ha-
i o aig h hoig i o o ia xpo
a h xp o iqiiy. o h ppa o
o i hi apia o a gi pio.
l
Ra a a a x way o oaiig a -
i a pooio, whih ay ao i o iaioopaio. piip, h i away h po o
iqiiy h, a io xp o o i hi apia
o o i. B i xhag, hy gai goo a haa-
ii. Ra a i a a io whih ag iiioa
io p h o hi apia i o o h a
o hi pooio. i ipoa o o ha iia pop-
i gay poi o a ha oia
popi. hag i hi a i ha h
o i ah ii, a ho ha xi a o y
i aiy a.
Th: A goa ah o
Investment OutlOOk - december
COmpi Wi ig DiC U v FLUCUD L mk
0%
3%
5%
8%
10%
13%
15%
18%
20%
Ekornes
Kesko
Sanoma
Fortum
Veidekke
Uponor
Kemira
Castellum
SCA
Holmen
Fabege
Peab
StoraEnso
Wrtsil
NCC
Skanska
UPM
Min Avg Max
Directret
urn(%)
0.28
0.35 0.360.37
0.39
0.460.48 0.48
0.510.53
0.59 0.59 0.60.64 0.65
0.74
0.5
1
0
0.2
0.4
0.6
0.8
1
1.2
Ekornes
Kesko
Sanoma
Fortum
Veidekke
Uponor
Kemira
Castellum
SCA
Holmen
Fabege
Peab
StoraEnso
Wartsila
NCC
Skanska
VINX30Index
Beta
Equallyweighted
portfolio
When we list those companies that have provided yearly direct returns o at least 3 per cent during the past decade (right-hand chart)
we see that virtually all o them have had a beta value below 1, i.e. their share prices have uctuated less than the exchange as a whole.
This is a good example o exactly the combination we want to achieve in return-based investments: stable income ows at low risk.
So: R EoWi, SEB
So: R EoWi, SEB
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8/3/2019 SEB report: Corporate bonds emerge as safer investment choice
15/37
16
h
Great uncertainty and sharp price movements
mean good potential or those who dare toleave the herd
Investors seek assets they perceive as sae;
this creates buying opportunities in turn-
around situations
Undeserved price declines create value
pockets with attractive risk/return ratios
giy ai i i h, aiiy i h
ii o h a. Voaiiy pi aio ia
wh h o a o if o a.
Goaiaio ao oi o h aio, i
i ha a a ooi a a o wo o
ighy ogh, o o wo. ya, h
i o/i o ha o a oo way o iig h
haio o aia a pay. o o i h,
ih io o o o a yp o i ha ay aio
i o i. Pi o i a a, pay a i i a-
oa o a i pi o ai io,
oi ao a h ooway g ow wh
yo i yig o xi a h a i. Thi a apia
ow ha a oi o oy a o aa.
Vaaio h o o aai i ay pa. Thihaio ao a goo poia o ho who a o
paa h o h h a go agai h .
H w wi y o o h ao o h oi
xagga pi o a y o iiy i
o whih h i- aio appa xa aai, pi
h ai iaio.
w xl dwu
Th oppoii ha o i h wa o i aio a
iig aiy ha wo ai xpaaio. Fi, ai
yp o a o po i i o aiy
a oh wo, o i i iqiiy how ay ii o a iy, aiiy (aia) a h piaiiy o
aig gowh/ apia ow. H ai pi
ai, whih o o h o i. So,
o a g ay y a y api i; h ay o a, o, a a
o opai. ao ay ha ai h o
o o h i o qiy ow o i, pi a o
h ai o o haaii, wiho aig io ao
ha aa ay ha hag. Aoh ay ha
aayi apaiy i ipy ifi o paa h wha
o h ha. Thi a o h g o wha w a
a po i ha ha y ow
aaio. No h wo y. ay a, a
ow aaio ay ji. A io i a o
iiy h i w wha i a wha
i o.
w o o oo pa i oai i, i i
a ha aog oh hig, io o paia
apia. Thy o hoig i pipha a i ao
o wha hy ga a ho a. Thi o
ag aia a, h a Noh Aia o, i
ag a a xpo o apia aay p a
ag ha o a a ha i a. (Fo xap,
Aia io gay ow a ag pag o h
MX Soho xhag ha Sw ow i US o a-
.) W a i o hi pa o h a ha
h US oa o gh wh oaiiy i a ha
Aia xhag a op po aog h woo a hi ya.
Aoh pa i ha i a oa i
o a hoig, o i ag a a w,
ao i i wih a o a hioy. Coi i
Swiza a a i go a i aoiaio i
h a. Japa ao o , aog wih o a-
ha, gay ow a a opai.
o o a h aaag o h , w o
oy o iiy whih a a h o i ai
i a ha h ha h ga poia o i wh
i appi . W ao hi ao wh i ap-
pi a . Piig ig poi i i away
Finding gold that doesnt glitter
Investment OutlOOk - december
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8/3/2019 SEB report: Corporate bonds emerge as safer investment choice
16/37
17
iy. A p, i og- oio o Eop
po appa o h o ipoa aay o h a
peripeteia, a h ig poi i a i a G aa.
Th o way o iiyig oppoii ai h pai-
ig aiy i o aay whih o h a ha ha
a ha o o o aa ao, a oiio
aay ioa, a whih o ha y wp
aog i h pi i. Aog h a, h ga po-
ia ay o.
h xap i Noi qii, piay opa
o qii wh i Eop. i o piig ha o-
Noi Eopa qii ha gay h, oi-
ig h po i pa o h gio. No-Noi Eop
wi ggig o a og i wih h o ag a i, a a ag popoio o i wa poa
i iy ji. A oioy h po o h
oi wi a h o ogy poig ooi
o h Noi oi, j a wa o-Noi Eopa
a wi h xpo o Noi opai. B aig
i i ha h ha o Noi xpo i o gig
a ha aiy ia, a xpo o o-Noi
Eopa opai ha a a a a y, i
i if o aa ao why Noi opai
a a agoy ha a o ha a oa Eopa ix
( ha). Th i o jiaio o agig ha o h
who, Noi o a ha a ag o yi-
a opai ha a iy o o y a y
ia aiy ao gowh. B i i ao poi o
p ha h Noi gio i ig pih a o
h aiy a iz o i o xhag (io a
ig o hoig i a pipha a).
Lag-ha-aag pi i ha ao a o
a i h wo gig ooi, piay i Aia,
hogh h oi o ha h a gowh
a a ooi. Th ip xpaaio o h ai
wa o Aia o a i h oi hioia
a o o iaiiy a oaiiy, oi wih h
a iz o ay o hi o a. Thi ag i
giig o o haa, how. Aoh xpaaio
ay ha i ai i, a o o o wa
o pay xa o gowh, whih ay a oo xpaaio
o a po ha ai a g a a
aiy i i.
gwh d
A Goa Sah y how ha ho Eopa opa-
i ha ha h high xp aig gowh i hx w ya a, i piip, ig a oay wiho
a pi opa o h o h a. Hioiay,
opai ha a xp o how aig gowh o
o ha p o h x h ya (iig h
ya) ha a a a pi o 4- i o-
pa o h o h a i o pi/aig aio.
Wh h a ha a a P/E aio o , h opa-
i ha a a P/E aio o -. Toay h opai
a aig a P/E aio o j o , i i wih h a
aag a o o a hioia ow. Raoa xpaa-
io a ha i appi o ow h a
o (ai) x po a ha h a ha
i o i aay oa. Thi aaio aoay
ay, o o, oai ih wh h ha o h
opai po ha aag o hi aig
oa wo. ay ao ha h piaiiy
o oa i wo ha o a og i (i i ga), o
i o a h aiy wa pi poa o h
Th: Fiig go ha o gi
Investment OutlOOk - december
USA, CBOE, Volatility Index (VIX)Nordic countries, OMX, VINX, 30 IndexEmerging Markets, MSCI, USD IndexUS, Standard & Poors, 500 Composite Index Source: Reuters EcoWin
Dec
2010 2011
Feb Mar Apr May Jun Jul Aug Sep Oct
Percent
15.0
17.5
20.0
22.5
25.0
27.530.0
32.5
35.0
37.5
Index
70
75
80
85
90
95
100
105
110
UCiy U mLL mk mO
Repatriation o capital has beneted the larger American
stock market and created outows rom the smaller stock
exchanges o the Nordic countries and Asia.
Europe, STOXX, Financials, Index, EURNordic Countries, OMX, Financials, Index, EURWorld, MSCI, All Countries Index (LOC) Source: Reuters EcoWin
Dec
2010 2011
Feb Mar Apr May Jun Jul Aug Sep Oct Nov60
70
80
90
100
110
120
Index
60
70
80
90
100
110
120
UOp bk v b LUmpD Og
Companies in the Nordic nancial sector (mainly banks)
have seen their share prices all almost as much as those o
their colleagues elsewhere in Europe despite clearly lower
exposure to crisis-plagued countries and more stable nancial
positions.
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8/3/2019 SEB report: Corporate bonds emerge as safer investment choice
17/37
18
Th: Fiig go ha o gi
ha ay ji. B wh a i agoy o po-
ia gowh opai i a a i hi aig wi o
high ha h a i ga, h xpio
a o ha pi i. So xapigh opai wih aa ppo o hi a-
ig oa, h a ag xpo o gig a o
po aiiy i gaig aig.
Th a aoig (o o a ag i) a appi
o h a i Aia. Sa aio i gowh o
xpo p a a high ha o oi
opio, op wih ga aia aiiy, iia
ha a a gop h a igh aig high -
iiiy a h high aaio opa o oh oi
ha wa pioy ji.
h xap o a o whih h a ha phap
o i paaig h wha o h ha ay
Noi a, who ha ha a a h a ho
o hi o-Noi Eopa oag, hogh hy
a a o a h a x y h Eopa
ii ( ha) a apiai ha hi o-Noi
Eopa oag a appaig oiaio. Li
pia qiy (PE) opai ha ao ha hi y h
paiig aia a aiy. Thy a ig a
a ag io o a a (NAV) ha ig pi-
o i, xp i h i o h oowig
h Lha Boh ah. Ahogh h aia iaio
ao qay ai, h a y w iiaioha h wi a p a io a h ya ago. Th
aia aiiy o PE opai i ao aiay high,
whih ay ao iia ha io o NAV ay xag-
ga, a a a oo a o a i appi
( ao h Pia qiy io).
h yld h h c
Fiay, i h Lha Boh ah, w ha ha a
o o poii ai owa opoa o, p-
iay i h High Yi g. ag ha ha
o i, h i ha pai i h a
ag a h o a, a ow i. Thi oia-
io ay a ha hi a pi a ig
ow a i ig p. Low i o oaiy a ha High Yi gai go ha
qii ig a p pha. W ha i how h
pi o i a ha o o ig h pa
wo a oowig pio wh h VX oaiiy ix
ha i ao o 4. Sh high oaiiy ay
iia ga a aiy a oii wih ag -
o, whih o ao p yig oppoii (ai-
ioay o qii). i ao how ha o a
a a gop, w oh a a p i oaiiy, ha i
a po w, ao ha High Yi i ha
i a ha x o oh a a, oh
i o aag a aiiy.
vlu c c l
Th a po o o o y h, a h
pi o ow-a a a a, o o, i aiy
pi. B a y ow aaio aoay p-
o o o hio agai ow, whi
h pi poia ho goo. Epiay aai i
h a ha o g o aiiaio ho aoay
f o a h i o poi aiy goo
.
Cclu: Tho who i ha h a wi ay
o a o oa aio ho a a oo a Noiqii gay, Aia qiy a phap ao
a High Yi o . Aia qii a go po-
iay appa aai a ig qa. Fo ho
who a ig a po i a wh h aio
w i a xp i xa aoa, Noi
a ha, pia qiy opai a qii wih o-
a high gowh op wih ag xpo o gig
a o hioiay a aig appa o piay
aai.
Investment OutlOOk - december
DATES SINCE THE S WHENTHE VIX BROKE THE 4 LEVEL
Equities Governmentbonds
Corporate bonds withlower credit ratings (HY)
Commodities
4, 1998 31.7% 5.1% 5.0% 5.2%
, 21 2001 13% 7.4% 2.8% 9.8%
uu 2, 2002 7.3% 5.0% 25.7% 21.9%
Oc 3, 2008 6.8% 13.9% 23.7% 21.7%
Ju 9, 2009 25.7% 7.4% 52.0% 20.6%
m 7, 2010 15.3% 10.3% 14.7% 24.1%
vg U 10.1% 1.8% 19.7% 10.0%
When volatility has risen, it has usually been accompanied by positive market perormance not so surprising in itsel.
Worth noting, however, is that High Yield bonds exceeded both equities and commodities in the recovery phases, bothon average and in terms o the best/worst period.
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19
h
The most likely scenario is a continued slow,
choppy upturn in the OECD countries...
...which will bring modest growth in the value
o risk assets
In a worse or better scenario, the outlook or
returns will be substantially dierent
Th a goa io wa pipio a wa op
wih h wo aia ii i gaio. Th oy
ha a i i- wa iiiay api pay a -
io o h pio p i h ooi p
i h ha oh ow a hoppy. Th ao o
hi ggih w i i ai i h a Invest-ment Outlook(pih Sp , ). o
ipoa oio w:
Duringthepast40years,upturnsthatfollowedrecessions
i h ECD oi a y pai
ha gay ggih. Uyig h -ay
io wa h -pi a a ii i h US.
Commonfactorsbehindsuchsluggishnesshavebeen1)
h wa o h hoig a, ) ha hoho a
i ha ia hi aig / hi
i a ) ai jo pop ha ha ha-p opio. Thi i ao, h ha ao a
ga o g-ighig i ay oi.
Theupturnshavebeencharacterisedbyampleproduction
apaiy i o oh ao a a apia. Thi ha
o ow o a pi p, paig h way o ow i
a. Th p ha h o oi o og pio.
Jgig o hioy a , h a ay
iiaio ha h o iy ao aio o h x
w ya i a oi ow, hoppy ooi p i h
ECD oi a a who ( a io i h o zoig ), wih ow iaio. W a aigig a p
poaiiy o hi ai aio.
A pa o ooi gowh w ow h
ighy ha 4 p aay o h goa ooy
i aay o piay a. Mo ha h pioa ii i aio pa o h wo i h a-
hogh o iiaiaio i h a h y (Ro
Bao & Jo Ua, Maoooi Ci i ,
Brookings Papers on Economic Activity, ).
m u c
Coo aoooi a i h gowh -
io ha ) o a gowh ha h hioia
aag, ) ow iaio, ) wa ao a, o wih
iig poy a 4) ow o owha iig ho
pi. Aoh oo ao ha h xi o
aia i o aio i i h o a, i haig o, i h oig xhag a whih p-
po h a ha h a p aia ii wi
ao a i ipi o h ooy o ay ya o o.
Hioy ao ay how ha ig pio o ooi
gowh whih i igiay ow ha , o q-
iy i ha ow a o o ha
high ha hi hioia aag. Dig h po-
wa pio, qii goay ha ao p
aay i ow-gowh pha, opa o ao p
o aag. Copoig g o o i ha
ao 4 p a . p .
How, o ao a a i hi pi o i-
. Th xi o iaio i o h ao. Low
gowh op wih iig iaio ha a piay
aoa oiaio o aia a, ig i )
h ow o qiy i ha oa, )
ow o o ha oa a ) gai
o oy a ii.
US aii i h i- how ha i pio wh
h ao io ha haai y a oia-
io o ow gowh a high iaio, qii ha pai a-
ag aa o - p , i pio o high gowha ow iaio o ha p .
Macro environment the key to returns
Investment OutlOOk - december
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19/37
20
i duh w OCD d m
Coiig h wi gap w oiio i h ECD
oi a h gig a (EM) ph, i i ow
ao ipoa o iigih w hi pop oh i
o gowh a i . Whi ay ECD
oi h a ay, Spai, Fa a Japa a g-
gig wih ajo gowh po ha appa o og-,
h i a a gowh ooo i h EM oi a
Chia, ia, oia, Agia a Ria.
Hioiay, oo, h ECD oi piay i W
Eop ha pio o y ow gowh o o
ha h EM ph. Th pi o a wo-p wo oo-
y ay h o a ig h x - ya.
Cclu: Ou c l lw, ch whd lw h OCD cu wh hh
wh d d h m h.
Hioy how ha pio o ow gowh p y -
io a y aia i i h o ha
ay haai y ow o qiy i-
ha h hioia aag, whi ig h pio
o ha poi ao-aag . Aoh ao
ha ho a io ao i ha qii (a oh
i a) ha ay i high i a ow-
iaio ao io ha i a high-iaio o. Fo
a io, i i ao ia o pay h o h a
aoooi oiio a pop i h EM ph
ha i h ECD oi.
l c
Gi h high o ooi a aia aiy
ow paiig, h i ao ao o oi how aai
aio igh oo.
fcl c ha h o w
iw a o poa i a p, ghi io
i h o zo a a o aia ii ha ha
goa oagio , wih oh h ECD oi a
h wo ooy ippig io io. Aoig o h
aioa Moay F (MF) iio, a goa -
io o wh wo ooi gowh op ow p
. Th i o aio, piay i h ECD oi,
ao ia igiay i hi aio, o whih w a a-
igig a p poaiiy.
, o h oh ha, h aag o Eopa go-
aia po po xpy o, a h
a i a h Aia a Chi ooi x
xpaio, hi igh a o ul
c ha i o ai aio, wih gaay aaig
GDP gowh oh goay a i h ECD oi o h
x op o ya. Poaiiy: p .
Uc h l
Wha, h, igh h hyh o h aai oo-
i aio? Th g o aiy wo pay a ajo
o, a i h aia a o o h a o
aiy i h VX oaiiy ix (opio pi o h S&P
qii ix i h US).
Dig p haai y ow ooi gowh o-
owig io a y aia i i h
p, whih ga i i- h VX ix ha ay
a gaay. B ha ha o hi i ao.
Boh i h pig o a i a , h VX
ix oa. ha ao how ajo aio o w
o w a i o oaiiy ai h oaiiy, o o pa.
Th ai a ha h oig ii i
Eop, iig i o a, qio a aoUS a poiy a hoppy ooi poa.
xap o a ajo gai aa o i Ag-
Sp, wh woi ao Eopa a US go
a, a US io a a ha aig i Chia aa
a h a i. Th VX ix oa o 4 i high
i h p aia a ya .
h viX h lc d c
Wh h VX ix i, hi iia ga ooi a
aia woi. Th p i h ix oiaiy oii
wih aig pi o qii a oh i a, whih ao
ipa gowh hogh aio ha.
Investment OutlOOk - december
Th: Mao io h y o
UUULLy vOLiL
Source: Reuters EcoWin
1992 1995 1998 2001 2004 2007 2010
0
10
20
30
40
50
60
70
80
90
Percent
0
10
20
30
40
50
60
70
80
90
The VIX volatility index which reects nancial market
instability has usually allen during economic upturns, but this
pattern has not applied during the current recovery. Instead the
index climbed sharply both in the spring o 2010 and in the late
summer o 2011. The main reason is recurring worries about
European government nances.
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21
a aiy ay a hoho o ho
o o yig apia goo a a i o po-
po apia pig iio, hy owig gowh.
Moig o ao h ooy o Eopa go- a o US a poiy ay h aiy o
-ig. h x ag, ow gowh wo wo
go aia oiio, h aig o woi,
aig hoho a i o hi op-
io a apia pig, a o o.
i ho a oio i o h ooy i ia
aiy ao go a a/o h ooy
qy o h x op o ya i
a iig o oay aig VX ix i hi wo
io h iio i i ao a a o a
oi wih o gai aai aio.
vuu ccl d c
h a way hogh i h oppoi iio poii
a o go a a/o h ooy
igh aiy a a h VX ix o ga-
ay a. Th oo aog hoho a i wo
h ipo, opio wo ia a o apia
pig wo o. Thi wo oo gowh a ipo
go a, o opii a i p -
a, a o o. A io i wo h o h
iig o i o o aoa aai aio.
A aia a ao h wo a goai a wo-
ogh, oh gai a poii a iay
ai wowi ia aia ha. Thi a ha
a aaig aa i h G ooy a poii i-
iay a o oy aia a, hoho a
i i Eop, ao ho i ay oh pa o h
wo. h a way, piigy og Aia oo-
i g a iiay ha a poii ipa i aia
a o h oh i o h go, aig hoho
a i h o xpi a ipo.
u l c
A gai aio o goa io a aiaii wo i o jg ha a ipa o a
a ii o h pio o o ay :
py aig i a pi a iig go o
pi. Th a o ipoa i, how. Fi, a
goa io i iy o a p a h a o (wo
GDP . p i ), i h ooi poiy
ooi i ay py i pa o h ECD. So, h
i ow igiay oo o high go o
pi. aiio, h o o ay po oi ha
-a a i a. Th oiio o High Yi
o ( h Fix io io) a ao igiay
oay ha i , o i hi aio h o
ho po aiy w opa o ay oh i a.
A o aoa aio, wih gaay aaig
gowh, wo a o a aoa pio o i i.
Aa o qiy i, o xap, ho
p a a o a pa wih h po-wa aag ( p), whi o o i o oi wo poay
ow ha h hioia aag (. p ). High Yi
o wo poi oh a high ao a o a
i-aj , whi i i h oig o
o o po oi (h a a) ay phap
i pi pi.
Cclu: cu uc wll w c
; dcl wll ld c.
a wo aio, h pa i a a wo
ii o h a aia ii. Ri a a o, how-, iy o a a h i a a h, piay o High
Yi o, a h oo o pi ia o go
o i o oi i ow ay a.
a aio, i a wo a i ay
a ho a o poi qa o high ha
hioia aag. hi aio, oo, High Yi o ap-
pa aai i oh ao a ai . Bo o
ai po oi ay po o jo i h pa.
Th: Mao io h y o
Investment OutlOOk - december
US, GDP volume growth, year-on-yearUS, Dow Jones industrial sharesUS, Merrill Lynch, High Yield index, USD
World, Dow Jones Commodity Price Index, USDUS, yields on 10-year TreasuriesUS, consumer prices, year-on-year
Source: Reuters EcoWin
71 74 77 80 83 86 89 92 95 98 01 04 07 10
Index
25
50
100
200
400
800
1600
3200
6400
12800
25600
Percent
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
mCO ky O U O
Economic uctuations and other changes in the macro envi-
ronment or example the trend towards lower ination since
the early 1980s strongly inuence returns on assets. Govern-
ment bonds have been avoured by alling ination, reectedin gradually lower yields/rising market prices, but such risk as-
sets as equities and High Yield bonds also benet rom lower
ination. Commodities were a airly boring investment or
a long time, but over the past decade they have occasionally
ofered excellent returns. High Yield bonds usually lose lessvalue during recessions than do equities and commodities.
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22
Asian and Nordic stock markets should recover
lost ground
No strained valuations in historical terms,
despite stock market rally
While sticking to our long-term positive view o
equities, we are more deensive in the short
term
Aoig o Wiipia, a hi i a oy ha -
p, io a xi a h ai ,
ia oo h a a high o aiipaio, a-
high xpaio, aiy, axiy, p (a)
xi a h i a h o-p o ipo-a ioaio.
Th oa a wi aay ha po h iiaiy
w h hi g a h wo o aia
a. Ry, wh w hi w igh o o a
oai a a o o h woo, h ha a
y owa oi pi, aig h a i
a i o iio. Eooi, aia a poiia oi
ha h o ah ha h xpio ig h pa
w qa.
o a Investment Outlook(pih Sp ,) w ag i ao o io hoig o o hi
qiy xpo a hay a i ig a -
. Ma ha a aaiay oh o h oio o
a goa gowh a a gowig a o yi i
(api i aia iiio oow y a iqiiy
qz). Aoig o o o, a w ioig
aiy aih gowh i wo GDP o ao . p , whi
ooi o aag w xpig a o opiii
gowh aio o .-4. p o h oig oh.
A a oq o hi ipay, w a ha i/-
wa aio ao aiaiig qiy xpo a
ha poiy iio, pay goa, wo hopy
iiia a o o aiy p . By h o
Sp a iaig i i a poig paag o-
io o Eopa poiiia a o g a ooho i h
a. A h oh o a EU i o o -,
poiiia ag o xpa h Eopa Fiaia Saiiy
Faiiy (EFSF) a a p o apiai Eopa a
a G . Ma a qi ogy
a o ajo qiy ii o p - p
o h oh.
A a oq o iig qiy a, ipii x-
paio o gowh i wo GDP a a . p (wih h
S&P a ). h ai ooi ha ow
hi xpaio, hy aowig h gap. W a ow
wih a o aiioa appoah o qiy a aaio,
wh gowh i h o a i. hi aio
w i p o o ia i, a w a ha i i oo
ay o wi o h ogoig iaio i Eop a ha h
gowh ooo i qi ai.
A thriller unolds
qu
Investment OutlOOk - december
LOW vLUiO O O bUy QUii
0
10
20
30
40
50
60
70
80
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Next 12 months P/E Next 12 months P/BV Price
One actor that avours equities is todays historically low market
valuations. The chart illustrates the ratio o Swedish market capi-
talisation to expected earnings (P/E) and to book value (P/BV). At
present these are well below their 10-year historical averages. We
see similar tendencies in Norway and in Europe generally, but the
picture is more neutral in the US, where the ratios are currently
close to their historical averages.
So: Fa
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23
So a a o a y ig
iw o h pah o aia a. Whi o
ha ai i ay o, o o h o iia i
paa i h EU aia go
o yi ha i hapy a a y w ao
p . Thi i o a aia a wi qi aio
y h Eopa Ca Ba (ECB) a EFSF o ig yi
ow.
Fao ha ao qii i pi/oo a
(P/BV) aio a pi/aig (P/E) aio w ow -
ya hioia aag. Thi i i og oa o h pi-
ig aio i h a wo ajo qiy a ow i
a . Th opoa o i ao i a og poi-
io, wih hahy aa h a xiiiy, aig
i w qipp o xp . Thi qa poha gay o a o i, wih 4 p o
Noi opai haig x SEB Eia ia
o aig o i a ax (EBT) y o ha p
. A hi wiig, h Q poii/gai pi aio ha
o a a ., h high i h hi qa o .
Fiaia a a y haig i a y i o /
i o o. Th a ha o qiy a ha o
i a yhoi a a i o hagig o i-
o o iiy hi qiy xpo. Th a oa o
o h Eopa oig ii ha ohaow
aa ao ha a i oiio o
a oy ppi, h a gowh, i a
oay poiy. Th i o qi oio o h o zo
ii, a woi ao oig i Eop a iy o
a aia a o i o i. How, o ai
aio i ha h goa oy wi oi a ha h
o poj wi i h hag i ow a. Eay
oay a ia haai y ih ooig h
aao o pig oh o h a pa i iy
o hi o a ia wh io iaigy o o -
aa iiio w h o a o i
oi.
Ou c dl cu u
i o Investment Outlook, w ha a a
qaiai o ai a apig h pi o i-
o a. Ba h o a o aayi
apa a hopy ai o oow, w ha ow ho-
o hi o io a a o
oo. i ipoa o poi o, how, ha a o i a
aia ipiaio o aiy a wi ap a o
a aio. ho oqy o ga a a
ao h, iw a a oo o iig how w
h a a wha w i wi i i.
Th awo o h o i ha w ao ha w
i wi h o, a o h a ia w
o . Eah ao wi aig a o a o i
poii o gai oiio o h o a i ahpi oy. Th o wi ay o - o +. Thi i
ao, w i ha h oowig ao a ga
i poia o aio o a: gDp wh,
lc, fcl lc, fcl l, lu
d cuc.
gDp wh oa i h wo ha gaay ow-
, a SEB oa i o xpio. W o oa
goa gowh ig h oig ya o j ao p .
Thi i ow ha h . p o a
ha pai i o. How, h gowh gap w
gig a (EM) a op a (DM) oi
i i xp o wi, a hi i ohig w i
h a wi pay aio o.
m lc ai igiay w gio. Th
wo appa o ii i wo, wih aiy high i-
a i h EM ph a a-oo oay poiy i
h ECD oi. Fo h o a, a xpaioay
oay poiy i pa, i ao p o wh
yo o o. h ECD oi, y i a a
iy o ai a oay xy ow ig h
oa . Thi i i wi poay ia h
Eqii
Investment OutlOOk - december
0%
1%
2%
3%
4%
5%
6%
7%
2012 2013
OECD
Emerging markets
gOW pOpC b i m p
In the West, gigantic debt mountains are likely to weigh
down GDP growth or many years to come. In emerging
market (EM) countries, especially in Asia, the prospects
are brighter. Investors will probably pay attention to this
growth gap.
So: R
EoWi/SEB
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24
ooy a i appi, a h a i h i
o aiio i h i a wapo. Th a
i iy o poiiy pi y y i a ha
a pa ao zo, i hi i aay a o ga,a h i a a ipoi. How, h
i oo o h qaiai aig (QE) o. Fo x-
ap, w i ha h US Fa R wi ah i
hi h o (QE) i i-, whih i iy o h
o a. o gig a oi, how,
h i a wapo i y oa wih a aiio.
R iaio p i h EM ph i ow ao ayig
h gowo o a a o p o i-
oi oay poii wih a goo oi. Th aiiy
o ai oi o hapy ow h pi o oy i
iy o ia, piay i a ia wh goa ooi
gowh i w ow .
Th poia o ooi i ia a poiy ao a-
i igiay w i pa o h wo. ay
- W oi, go a ig
o o igh hi a poii o p aay oa-
ig i o gowig a. Thy ha i
a-ahig aiy paag i api io, a
a ai a igig oo a iy o
hap ooi gowh o ay ya o o. Epiay
i gig Aia, how, h iaio i h oppoi; go-
a ay o x oo a i ooi
aiiy a.
Fcl l i a ao ha i iy o aa io
o a o. i o ha ay igi-
ay w oi, awhi w o o i
ha hi i ig i oay a pi. Wh h
a i o/i o haio a, h a o h
US, Japa a h UK whih a i a o ay h a
a iy o p ig o oy xai y io,
a aia aiiy wi hp gi hi aoaio y gio.
Cuc a a aia wih a i-
io o a i apoi. Aog oh hig, a
wa y ay gh a oy opii
a i a. B i ay a, oay opai a ogoai ha i i if o ow wh hi poio
o a a a oa. Th h oig y i h
o ia a io ao h i o
o ho who i i oig qii. A og y
hy oi poiiy o oa , whi a wa
y oi gaiy. oay a
ia, io a high-o, iqi i
h a h US oa, Japa y a Swi a. Aig
ha h wi o qi oio o Eopa po, h
iqiiy ap i iy o oi oiaig h oig
xhag a. h a iaio i oh Eop
ay a ow, o aa ao wi haga. Thi wi poay ooiy-oia, EM
a Noi i.
d d h dc
o iia ha Aia o a ha goo po-
ia o po w i a og- ppi. Th gio
i iy o x high gowh xpaio, h gowh
gap w Aia a h DM oi ho agai o
io o. a iy o aa y h a-
iy high gowh ha Aia o, aig o apia iow
a iig ha pi. Fho, aiy a a o
aig oo pi a y i a hi, ai high ia-
io p i Aia ha ow g o a. h iaio
oi aog i pah, phaig pow wi
ia i h gio a h oi wi ao ha a op-
poiy o p o aooai oay poii.
aiio Aia, y Chia, a oa h wo
ag a p; i gay ow a h i oo
o ah ag aia i paag.
Eqii
Investment OutlOOk - december
Russia
Brazil
Chna Source: Reuters EcoWin
2005 2006 2007 2008 2009 2010 2011
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
CPIinflation,
%y
ear-on-year
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
iFLiO pU WiLL i m
p
Ination is about to all in many EM countries, giving
their central banks room to cut key interest rates and
thus probably stimulate growth and equity prices in the
EM sphere.
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8/3/2019 SEB report: Corporate bonds emerge as safer investment choice
24/37
25
Th a ao ay iiaio ha Aia i wi
appia i h . Aog oh hig, og Aia
i wi a ipoa oo o aig wih h o-
o a iaa ha ha i p w W a
Ea. A o Aia oi ho ao ha a poii
ai owa ig hi y appia, i hi
wi hp a iaio p. o o, Aia i p-
y Chia a ia, a Chia wi h o i
o i o.
Th Noi oi ha aio iiaii wih Aia. Thi
gowh a i aiy a a h ow , hi
aia aiiy i goo. Thy ao ha o oo o o-
ay a a i poii. Aoh iiaiy w
Aia a h Noi oi i ha ajo io i iw
h gio a pipha a. Th o a- o o h pa ix oh ha a a
pay o hi hoig i ia a a ia
hi hi a o highy iqi o a. A
o EM o a a w a h Noi a h how
ag ha pi ow ha aa wo jiy
(i h ag o - p ), whi US o xhag
ha ho ao zo. No a h EM o Noi oi
pag y iia gowh g a gigai o-
ai. a a ia wh io a iaigy
xaiig h aa i w oi, a
o jiay p o a a iy o
gai o o go.
u z c ul u u
Th o zo o h ow o poi i o
o. Ahogh h pop a i i h oh
a oh pa o h o zo, o ai aio i ha
h gio a a who i ha o a io (aig GDP).
A oiaio o poiia iaiiy, a ighig a
a i i io wi ih ooi
gowh o h o a. No qi x i a ha ih.
R poiia oi ha o i aig
woi a. a hy ha a h wa o a
oo y io wiho og poiia ooiaio.
Looig aha, h o zo aa i iy o oia
y poiia o ha oi pa a oi
p h a, i wi poay o i o a
i a ophi pa i ip. A ph a oo ay oiig i, aig o oag
i h ii aag po. A a , a ooi-
a aio y poiia a i opioy iig. Th
o poj i pay ahig o go o a
o, a h wi poay ay if hag aha.
Fo a qii ppi, h o zo h o o ap-
pa o a gio o i i.
Eqii
Investment OutlOOk - december
COUNTRY/
REGION
Growth Monetary
policy
Fiscal policy Financial
stability
Valuations Currencies Total
Ch
u 7
dc 7
bzl
J - -
U - -
id -
u z - -
OU giOL m mODL
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8/3/2019 SEB report: Corporate bonds emerge as safer investment choice
25/37
26
HY still tempting i risk appetite improves
Dierent monetary policy tactics in OECD and
EM spheres...
...and divergent outlooks or their government
bond yields
Risk appetite will continue to steer High Yield
prices
Th wo a a a ii io wo a. Th
ECD a i haai y o-ow y i a,
a i o a ai qaiai aig (QE) po-
ga. Si ay , h gig a (EM) a
ha gagig i gaa oay ighig h a
hiig y i a ig a ig ha o
o ah h o i ighig y.
Th wiy ig poiy iio wiy i-
g aoooi io. h ECD oi,
io i a oig po ha oia,
whi h EM ph ha haai y high ooi
aiiy, ohaig i a go a
ha h ECD oi. Looig i o ya a oay, w
o ai hag i oay poiy ai: i h
ECD a ha i h EM a.
W i ha a a i ajo iiai oi h Ui Sa, Japa a h Ui Kigo wi i
o hi zo i a poii i a a ay 4. Th
Eopa Ca Ba (ECB) whih ai i y a i wo
p hi ya a h i agai i ay No i i-
y o i a a o o a hi wi. Th ECB
o i i a wapo wi i oh y h
i o io a ay ow iaio a y h oi-
oig o h Eopa oig aa.
Th agi ooi poa o ay ECD oi
ay ao jiy o qaiai aig, aiy i h o
o go a (i o a) ogag o pha.Fo a a, h ppo o QE i o y o ahi ow
o yi a hy ao hp ai ooi gowh.
Th US Fa R (F) ah i o o
qaiai aig (QE) iiay a h oap o
Lha Boh i Sp . Ro wo (QE) ao a i hi pa . Righ ow h F
i gag i paio Twi, whih io ig USD
4 iio woh o ho- go ii i i
aa h whi yig a qa ao o og-
go o (wih - ya aii). W ao
o h poiiiy ha o i ha opp wiig a h
o J , h F wi ah QE a h y o-
gag o i o o hp ai h hoig a.
o h Ba o Ega (BoE) i o ai h
iig o i o pha y GBP iio o GBP
iio. Ao a oh ago, h Ba o Japa (BoJ) iai ii pha y JPY iio, a h oa ao
o h pha ogh wih ig o h Japa
i o ow a p o JPY iio. Boh o h
a a a xp o a h QE aio i
Fxd c
Investment OutlOOk - december
m i CULmiig
Brazil, key interest rate (SELIC)China, key interest rate (0-1 year lending rate)
India, key interest rate (repo rate)Russia, key interest rate (refi rate)
Source: Reuters EcoWin
2003 2004 2005 2006 2007 2008 2009 2010 2011
2.5
5.0
7.5
10.0
12.5
15.0
17.5
20.0
22.5
25.0
27.5
Per
cent
2.5
5.0
7.5
10.0
12.5
15.0
17.5
20.0
22.5
25.0
27.5
Key interest rate hikes in the BRIC countries (Brazil, Russia, India
and China) appear to be ending, and Brazils central bank has
already lowered its rate twice this year. In both China and Russia,
the next step is likely to be a rate cut, while there is greater un-
certainty about how the Reserve Bank o India will use its interest
rate weapon.
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26/37
27
Fix io
h oig ya. h a o h ECB, QE o aiy
pha o oig o o o oi wi
a y h ao a h apaiy o h
Eopa Fiaia Saiiy Faiiy (EFSF).
Whi a a i h ECD oi a iggig -
p io hi i o oo, h i wi oo ip
o a hi o aiioa oay poiy aig (y i
a ) i ay EM oi. Th ao i ha pioy
oha ooi a ow gaay ooig a ha
o a pi p wi oo a. Aog h BRC o-
i, Bazi ha aay ow i y i a wi hi
ya. ia hi i y a i o, iga ha hi
ay a h o i hiig y. ai piio i
ha ig , ay EM a a wi oow h xa-
p o Bazi a i a.
Th ooo o go o yi i h ECD o-
i a h EM ph i ao ig. ECD iaio wi
i ow a a o a a a ag
y o go o, o h oh ha pi
o ig a oo. Togh wih h po-
p o gaay iig i appi i a hi oig
ya whih ay a io i i go-
o hi iay poi owa owha high
ECD go o yi i . h EM oi,
pi o i a a a, oy a a a
aay aig, iaio i owig a go o a
pig o io i i appi ia. Cclu:
EM D i a a o aai x io i ha
ECD go o.
h yld y ll l
Copoa o piaiy High Yi ai a aai
x io aai, piay i hi yi ha
i (pi ha a) o h ig aia a
aa i Ag-Sp. Ahogh opoa o yi
ha qy a owha, hy a i highy ap-
paig. Ky ao ha wi i h poa o h
opoa o a a ) yi gap (pa) agai go-
o, ) h hah o h o-iig opaya ) ga i appi i aia a.
Thi qa aia oi a h yi gap w
opoa a go o o wi. Fo xap i
h US, pa o HY o w o pag poi
o o ha . Si h h gap ha aow o ao .
poi i ipi ha h a i piig i h wo
opoa a ha ho ow paiig.
Piig i h High Yi g ao a ha ao
- p o HY-iig opai wi go ap. B
h a apy i oi wih a aio i whih
h US a h wo qiy i io a w io, whih
o o i o o a. Dig h ooi a
aia ii o a h ha o , h a-
py a ah ao p . oay o o a-
pio a io o i , i wo h
a i ha h ay p o o - ya ago.Mawhi HY-iig opai ao h wo a i a
aia hap ow ha ig ha io.
Th a goa apy aii o High Yi-iig
opai i . p (-oh g), a
oa o h aig agy Mooy o h oig
oh a .4-. p (h aag i i 4. p
). Si h giig o , oy HY-iig o-
pai i i h goa ix (, i) ha go
ap, qia o . p .
A o h hah o opai i h High Yi o, hpoii pi p i h i o Investment Outlook
pih o Sp , i hag: a goo a-
ig , aiay ow i, a oiay
high pag o iqi a i aa h a x-
aii o opay o oa pooio.
W h o ha ga i appi wi ai h
piay ao aig HY a poa. h pai-
ig aio i a poay i-y owow, a i
goa gowh gaay gh ig a a i
i pig wih o ai aio, i i HY
o a oh i a wi poay po ha
i i ECD go o. A hi wo
oi wih h a pa i Mah .
Investment OutlOOk - december
ig yiLD bOD OUpFOmig QUii
Standard & Poors, 500 Composite, Index,CBOT, Dow Jones CBOT Treasury IndexMerrill Lynch, High Yield Master Index
Source: Reuters EcoWin
Dec
2010 2011
Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Index
87.5
90.0
92.5
95.0
97.5
100.0
102.5
105.0
107.5
110.0
112.5
Last spring the nancial market mood was decent. US equities
and High Yield bonds thus beat government bond investments.
But since then there have been major shits, with dramatic
price declines on risk assets in August-September ollowed by a
strongly positive October rebound. Since then choppiness has
predominated. Investment ranking so ar in 2011: 1st Government
bonds, 2nd High Yield and 3rd equities.
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28
Tough market or hedge unds generally...
...but ixed income mandates in an interesting
position
Macro/Trading still a good diversication
Si h a i o Investment Outlook(pih
Sp , ), hg poa ha ai
wa. Maiy o h o zo ii, ao ix ao
aii o h Ui Sa a a o a ha aig i
Chia, h HFRX Goa Hg F x i EUR o .4 p
ig h hi qa a ha o . p o a
ig .
A ajo agi a howig gai i hgiig o h ya, wih Mao a CTA oig h
i ai , wih a ow o p . Th p-
oa o h Eqiy Hg agy ha h wo,
ow .4 p i h pa i oh. Ahogh o
ipoa iio o a o piip ha a
y o zo poiia a wih h ai o aiiig
a ay oig h oo o h ii, h x w
oh a iy o haai y aiy a
.
Exay a i h pio Investment Outlook, w a hooig
o ii h hg a io o ai agi:
EquityLong/Short
RelativeValue
EventDrivenandDistressed
MacroandTrading
qu L/h
Ma oiio o Eqiy Log/Sho ha ai
xpioay if. Coy gagig h iio o h
a wo ha qi oy piig h o
o poiia a a h a aio o h, whih
i a ipoi a. No a-a agi i
piay w; h ow wa . p o h qa.
Uaiy a high oaiiy a iy o oi oia-
ig h a, ahogh h a ajo aa qaia-
i i w opai. Qaiy opai ay
o giy aai o a aaio ppi,whi opai p o ooi gowh ay
o y a, whih i i a oppoii
o Log/Sho aag. B i oa aiy wi
a o xpo, o i o pi a
iy o ahi aig . W oi o ha a
aio ai owa Eqiy L/S ig h a
oig qa.
l vlu
Rai Va aag i x io i go a
ah goo a i Jy, whi Ag a Sp poi-
a o ix pi. Figh o a go ii
a hg aio i i appi haai h p-
io. Maag wih a gai ooo po owha
, a aag who a aiy w og a
ho poiio w a o ga poii y a-
ig wih ow, aoooi w a hia haio
i a i way.
Th aio o a a ig h qa a i h
wi a aai i oppoii o
x io agi. h US, paio Twi ga i
Sp o h ppo o pig og- yi ow.
Thi ay i io owa h ho o h yi
, whih o a a oa a High Yi opiay aai. So aaio w x ig h
qa; o xap, CDS pa pi i a apy
o p o io a o i Sp. Looig
aha, h wi poay ajo p poia o o
wh h i aoa w ao h o ii. W a
poii owa Rai Va ig h x qa.
D d Dd
Fo E Di agi, h hi qa wa o o h
wo o a. Th HFRX Di o .4 p a HFRX
E Di o . p , whi Mg Aiag oy
4. p . a, i wa h wo qa i h Aia aia ii.
Operation Twist benefting Relative Value
d ud
Investment OutlOOk - december
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28/37
29
Ahogh h o opoa oi o -
a, a w pi i h a Investment Outlook, i wa
wi-ow o a pi ha a o o
h o. Di how ii o h oa ig Jy, o o wiha h oi
p ig Ag a Sp. A aag ow
h i i hi pooio, popa hoig i paia w
j o ipopoioay ag ow.
Copai oi o ha high ah a gay
og aa h. Dig a ooi ow, aio
opai wi poay high hogh o-
poa a. Thi i iy o a o a aoa i
ia o E Di agi i h , oay
i h o zo wi poay hap aiiy i
h a . E Di a Di a o agiw o a p.
mc d d
h who, Mao a CTA w h -poig
agi ig h hi qa, wih a ow o . p
. A ig pio qa, h w ajo i
w aag a hi pi woig aa. Mo
ay gai aag h i h a
o aig oy ig h qa, piay ho who
ha h o zo a hi h ig h i aio i
Ag.
h who, CTA a Syai Mao how poii
ig h qa, h oo h i w
oia. A aoaio wa ia, wih x io
hoig aoig o h ag oiio wh i a- w o o i h a.
A p, h i/oppoiy aio oo owha i
o h giig o h qa. Say gai a-
ag wi pay o ow hi oiio ha a
wi o i hi iio, whi o opiii o wi
a ia poaiiy o ig igh. Ga aiy a
igiay i a ppio ho a goo
poia o gaig .
CTA a Syai Mao a iw y o o a
a oo o pooio iiaio ha i xp o pow wh oh a a a haig ify. Hoig i
x io ii a h ig ag poiio o o
aag, whih i i igi a i o aia o i
h a iaio ipo i h og , i a-
ag a ow poiio a i o aioy hy a
a i a i hi aio. Mao a Taig ai o
hoi aog hg agi i h a .
Investment OutlOOk - december
Hg
STRATEGY INDEX PERFORMANCE %
Oct-Nov Q3 2011 YTD
(Nov 10)
2010
gll d FX gll d Fud . 6.45 -. 5.19
qu d FX qu d . -. 17.63 8.92
l vlu FX l vlu . 5.42 3.51 7.65
D FX D . 6.78 3.94 1.98
mc FX mc -. 0.85 3.72 1.73
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29/37
30 Investment OutlOOk - december
Stable activity in a cautious environment
Flight to quality remains a theme
Continued uncertainty, not a good time or
illiquid investments
Th goa a a a ha h p w ig h
a aia a aa, ahogh a i
hogh h hi qa o o ay h a a
a a io o o owha o aio.
h a i o Investment Outlook(pih Sp
, ), w poi o a o ha w iga-
ig hi ia a aio. Dig h a , waw oh a a owa igh o a hao a
a o qaiy popi o whi ii oay
a o ao a h iio i h a a a
ha wa gig a a o ga wo ooi -
aiy a a igiay o oai oig xhag a-
. Ra a a ipy oo o i o o. Ba
o h , h wa y ao o owha o
aio owa hi a a ig h o qa.
How, h hi qa o owha ha
a, a aa ow how ha h wa aiy a
o oy o oh i o h Aai ao i h Ea.l dl cu u d c
Th o o i i aaio i h goa
a a a o y p ig h hi qa
opa o h a pio o a ya. Jo Lag Laa
a a a a po how ha o a qa-o-
qa ai, aiiy i h Ui Sa a y og
gowh i h o qa. Mawhi aaio o
o i oh Eop a Aia. Ya-o-ya, aiiy o i a
gio.
Eop how ai aiiy pi aaig oig po, pay o ay aaio o h
o qa, i wa oagig o a ha gowh
wa i poii opa o oh h a qa a a ya
ai. Aia, a op w ix; i h wa
o i aa ia ai hi ya, Japa ao o
a ag popoio o poii gowh. Chia ao how a
oi xpaio i aiiy, pi h ighig a-
a ig h ya. Aaia h wa ow
aiiy, how, a Sigapo wi a hap i i
aaio o ig h hi qa.
Real estate market holding up well
l
USDb
illion
0
10
20
30
40
50
60
70
80
90
100
2007Q
1
2007Q
2
2007Q
3
2007Q
4
2008Q
1
2008Q
2
2008Q
3
2008Q
4
2009Q
1
2009Q
2
2009Q
3
2009Q
4
2010Q
1
2010Q
2
2010Q
3
2010Q
4
2011Q
1
2011Q
2
2011Q
3
Americas EMEA Asia Pacific
L ivm iCD i
UOp
Europe recorded greater activity in the real estate
market during the third quarter o 2011. Activity
remained high despite escalating sovereign debt
problems, partly because a number o delayed
transactions rom the second quarter closed in the
third. One positive surprise was that volume never-
theless rose both quarter-on-quarter and year-on-year. EMEA = Europe, Middle East and Arica.
So: Jo Lag Laa
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31
l l lc
Th a a ha ao ii ig h a.
Boh aiiy a ha gay a. W
h og a poa i Aia, wh a
o of iig i paia oi o gow, whih ao
ph p i ay pa. How, h w
i owa a owow i a i h aia
ii o Hog Kog a Sigapo, wh o-
wha. Eop, oh aig aiiy a o i-
way. Th a o a i ajo Ga ii ai
og. h UK, Loo o a a wa ha. Th
wo aiiy wa o i h US, wh a o a
oi o a ig h hi qa. R, how, h
p w pi aig a. So pa, h a Sa
Faio a Nw Yo, ao po high .
Cud cuu ud wd
Ahogh h goa a a a a a who h p w
ig h a, i ha oioy ay a y
a . Th i aio ha a pay-
how ig h a i i i pa. o
a ig iy qaiy popi a a i o -
iy ai wih h i pi i h o h a,
ahogh h a oa xpio. a, h o i o
wha i a io i wiig o a, ah ha o wha
i i poi o ahi.
A o h owa aaio aig a og i o
op, w a po ha i i oiig. Coi oa-
iiy i h oig xhag a a woig oppoi-
i o oa aig whih ay ao y w ioa
h i h ia a ao why a a
i oi o a og o op, a a a-
jo a.
B w wo i o poi o ha a a aaio,
pi h ay, a i ig o. A opii a
a h igh po: h ay pai-i igh o
qaiy ha w aw ai i h a ha a o. Thi i i h a ha yi qi o qaiy pop-
i a o og hiig a h. Mawhi w a ig
o i i h i pi i owha ii a,
iig h US. Thi i a iga ha o io ha -
g o o pwa o h i a i h a a a,
i i i oo ay o i whh hi wi a ho-
o h giig o a ao.
h llqud
Eooi aa ha ay wa ig h
a, h a i aio ag i ao o
a a a a a a. Coi a gio wih apoo ppy hoag ha awhi ha
ooi gowh, h a Aia ao pa o h US a
Eop, ho a o how a oi aoa
i . A og a yi qi i h a
ai a a , aaio o xiig pop-
i ho i aog wih a io. B a w ha
io pioy, h a i a o o qio a
ao h poa a hah o h oa ooy.
paia, aw o qio a o h poiia aga
wi ha a ipa o h ooy.
Th i popy a i igiay o iiqi ha
h a o qii, x io i a o-
oii. F aag piaiig i h a a a
h o a io o oi hi apia o a og pi-
o. Fo hi ao, a a w a i i a y ai
aia a iaio, i i if o jiy hi yp o
i. A p, w a h hooig o ai o h
ii i h pi ha o a.
Ra a
Investment OutlOOk - december
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31/37
32
Financial turmoil and economic uncertainty
keeping PE company market prices depressed
Continued decent earnings growth in portolio
companies, stronger nances = stable NAV
Large discounts to NAV indicate that the market
is pricing in continued problems, good support
or share prices rom undamentals
A w ow, i h a Investment Outlook(pih
Sp , ), aia ha oi.
Eopa a o po ha o i-
aigy appa. Mawhi h goa ooi haaay i pi pi. Ahogh Eop i i o
i oig owa a io, iga o aiy a
gowh a oig o h Ui Sa, a h Chi
ooy o aig i a oy ahio. A
aai pi i o i a ig Ag, hi
pi ha o iway o i o a ighy pwa.
Pia qiy (PE) ha po aiy w i
oh. Si h a Investment Outlook, h SEB Li
Pia Eqiy F ha i y . p , wih ag -aio aog h way. How, pia qiy ha a y
o ha p hi ya, aig i o o h a
a wih h ag i. Th qio i whh
hi ow i ji, ifi o xagga. o
a i i xagga, poi ha h wo (a
Eop) i o o i way owa a ajo aia ow
a/o a pio o a io.
L dcu v
Thi ya pi i o pia qiy o o opo
o ow i h a a (NAV) o PE opai.
h oay, NAV o ig h ha. Th hi qa- po o w a ao igaig a NAV o
h opai. Faig ha pi a a NAV a
iaig io o NAV. Piiay ia iia
ha h aag io o NAV i ow ao 4 p .
Wih h xpio o a w oh igh a h Lha
Boh ah, h a h high io w ha
iig h o a ah o h ay
.
i o o aa ha h io a iaig i hi
pha. Th a i xpig PE opai o wi ow
h a o hi pooio opai i h wa o
ga owwa iio o gowh a aig oa.
Ba o h ow gowh apio, PE opai
oo h qi i hi aaio o, whih
ao ow NAV. Th a io hi, wih aig ha
pi a a oq.
How, h a ao o i ha h pi i
(whih ha o h iig io) ay xagga.
NAV ai aiaoy ig h pa qa pay
a h yig i gay po
w. Rpo o Aia opai i paia how
oi goo aiiy i hi opaio a agy a
aig xpaio. Rpo NAV o Eopa opaii ao agy a, w a ig o owow i
aig gowh.
p qu
Investment OutlOOk - december
Risk aversion creates overreaction
UDvDLy LUmpD Og Wi FiCiL
60
70
80
90
100
110
120
2010-12-31
2011-01-14
2011-01-28
2011-02-11
2011-02-25
2011-03-11
2011-03-25
2011-04-08
2011-04-22
2011-05-06
2011-05-20
2011-06-03
2011-06-17
2011-07-01
2011-07-15
2011-07-29
2011-08-12
2011-08-26
2011-09-09
2011-09-23
2011-10-07
2011-10-21
2011-11-04
Equities: MSCI World Index
Private equity: LPX 50 Index
S&P Global 1200 Financials
It seems reasonable that the shares o listed PE companies have
perormed worse than the stock market average, given their
higher leveraging and larger dependence on nancial stability.But price declines as large as the hard-pressed nancial sector
seem like an overreaction.
So: R EoWi
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33
o a, NAV ha ai aiaoy a ai
po NAV wa oo oaiy. May PE opai
ha po hi pooio opai a o, hogh
i ay a iig po ji iig hi aaiopwa. Togh wih go pi o ow iqiiy
(o opai ha po ag poio o hi ho-
ig a p o ia NAV), hi ha poi a ag
aaio hio. Ao iaig hi i h a ha ay o
h pooio opay i ha o a i
a ay i o a pi o p o p
o po NAV. Thi ay a a pay o h o
aig opay a.
d ul h c
Th a ha h io ha i a aig NAV.
W ia ha h a ha pi i po ow i
h ag o p . Th i a a oaio w
aig ha pi a aig NAV. Thy o i h a i-
io, hi a aiohip a h iz o h o-
ha ai aaiay. Th ga aiy ha
pai ao ooi gowh (whih o o ao
a h a o opai, po ipi a o o)
a i if, i o ipoi, o aw xa oio.
B i o a, h ha pi i a owha
xagga.
Ao aig a if i ha PE opai a
p o oh ioig aia a (o a-
i o o pooio opai) a ig a(a o oowig a o a o oh ig).
Wh h a a wa, h o a o
ow PE opay aaio. Thi ay pay xpai h ag
ha pi i.
A o h ig iaio, i i ipoa o o ha PE
opai ha woig aiy wih hi i
h a aia ah. Thy ha ow hi oa oow-
ig a agy x h aii o hi oaig
. P ipy, h wa o po ha opai
a a ya o o ago o gigai ha w aig
ha iay o, ahogh o a
ha ii hi aiiy o pooio opai(xi). h xi a a o io a i
a popo, h a ao o aj i aaio
o PE opai aoigy. Thi i o aoa i
i, h i a i o xaggaio. Th p a o
h po o a i i o a h
og i i popo, i gowh i hi ay a
a paiay o y iig a ga y opay
po.
Aoh ao o a io ao i whh h a ay
ha xagga h i i PE opai. Th qaiy o hi
pooio opai i gay high ha ay o
o i. Dpi high agig i ay a, h
pio y p io a h a aia ah
ai w ii oy ao . p o pooio o-
pai w ap a ha i. Th ajo hag ha
h goa ooy a aia y a aig aay
ha a a ipa o h PE o. Ba o aia
a , ho- oa o aaio
a o o a o hy ha a ha o ah hi ipi-
. Thi ao a og- oa ay ai.
i a, how, ha h o h i ha aay
pi i.
Si PE opai a igiay qipp oay,wih o a a a oai aaio, h
i- aio appa aai. a aio xp h
o piii o a, h ag o h i appa
o ii ha i oh high-i i, whi h po-
ia o oy ho ah goo. Th i, how, a
poia o wa poa i h ho , gi h
a i o o og- o h a-
ag ha i aig h Eopa aia y.
Investment OutlOOk - december
Pia qiy
-60
-50
-40
-30
-20
-10
0
10
2003 2004 2005 2006 2007 2008
H1
2008
H2
2009
H1
2009
H2
2010
H1
2010
H2
2011
H1
2011
H2
-60
-50
-40
-30
-20
-10
0
10
Listed private equity
Secondary market
Lg DiCOU FO LiD p
COmpi
Discounts to NAV have widened as prices o listed
PE companies have allen. Preliminary estimates
show discounts o around 40-45 per cent, on a
par with earlier records (except or a ew quarters
ater the Lehman Brothers crash). The discounts
on secondaries are signicantly smaller; the most
value can be ound among listed companies.
So: Thopo Fiaia, JPMoga, SEB
-
8/3/2019 SEB report: Corporate bonds emerge as safer investment choice
33/37
34 Investment OutlOOk - december
World economy will provide support or prices
Limited downside or metal prices
Falling agri-commodity prices as worries about
production disruptions recede
Dig h o a , ooiy pi h p
aiy w i pi o ga aiy a woi ao
ooi gowh. a a ay a, how,
a o ooii y a a aig
pi. i pi h ai a ao USD
p a (B).
Dpi y aaig o ao op i
oh Eop a hi ipa o goa ooi gowh,
oi pi ha ai a o ao USD /a. A
igh ppy/a iaio o oh i a haig oi
i pig pi p. Thi iaio wi poay o a, ow
ha h Aia a ig hi haig ao wih
ia a o gy. aiio, Chia ha hi
y ogh, aig o a hoag o hyoi pow ha
i ig o y ig i gao . Low Eopa
oi o, y a o o i-ya ow, a po-
iig h ppo o oi pi.
Dop i h Mi Ea a Noh Aia (MENA)
hi pa ya igiy ha h gio ow ha ay ya o
hag aha. Thi wi poay o a iy paipo; ia, o i o i wi