Handelsbanken Norge (A1 NOK)

Fund performance was positive during the quarter and the fund rose 1.4% in SEK. The period was marked by quite a bit of turbulence in the market due to weaker economic data from the US, further uncertainty in Europe, an unexpected rate hike in Japan, significant geopolitical unrest as well as the forthcoming election in the US. On the other side, we saw the beginning of a global synchronization of monetary policy easing, with the US at the forefront. At the close of the period, China also joined with a massive stimulus package to support the world’s second largest economy. With the exception of China, these factors have benefited a defensive positioning on the equity markets overall, which was also evident in Norway. Equities such as Gjensidige, Entra, Orkla and Telenor contributed positively. The last three rose close to 20%, which is unusual for such large companies. The seafood sector, which also lies within the defensive category but is seasonally weaker, yielded around zero on average, although there were variations. Banks and financials, which lean towards the cyclical side, had a similar performance. Pure cyclical sectors such as the materials sector posted weakness, with the end of September as the exception when the Chinese stimulus measures were implemented. Examples of companies within this category include Yara and Norsk Hydro. Several companies within the capital products sector continued to struggle, such as Autostore. Nordic Semiconductor’s capital market day showed similar challenges within their industrial segment. The technology sector had mixed results. However in Norway, Crayon continued to deliver strong results for the third quarter in a row and also received support from acquisition rumors of its Swiss competitor SoftwareOne. Equities such as Austevoll, Sparebanken Nord-Norge, Crayon, Sats, Link Mobility, Schibsted and Höegh Autoliners continued to contribute positively to returns, while Autostore, Orkla, Entra, Gjensidige, Elopak and Norconsult had a negative impact.

We are currently retaining the majority of our positions in the fund but are increasing our exposure to the seafood sector. Ensuring that the defensive market strategy holds will be crucial for year-end or whether cyclical equities take control. In order for cyclical equities to take over, the lower interest rates would need to have a more rapid effect to maintain and gradually improve GDP growth and market sentiment. Accordingly, we are placing particular focus on macroeconomics.