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Fund manager raises stake in Swedish banks amid recession concens: "The drop in their valuation has gone too far"

Carnegie Fonder, which has about SEK 70bn under management, is brushing off recession worries and raising its stakes in Swedish banks.

Carnegie Fonder has increased exposure to financial group SEB | Photo: PR / SEB

In an interview, Chief Executive Officer Hans Hedstrom said Stockholm-based Carnegie Fonder is again increasing its exposure to equities after having reduced it in the spring and early summer months. In particular, it recently added in SEB AB and Swedbank AB, following a selloff in the sector related to concerns over the fallout from alleged money laundering scandals at Swedbank and Danske Bank.

"The drop in their valuation has gone too far,” Hedstrom said. “We’re disappointed with Nordea however, from an operative viewpoint. The Nordea share has always been cheap and there is obviously a reason for it.”

Carnegie Fonder also sees potential in “cheap” industrial companies such as Volvo AB, SKF AB and ABB Ltd. “Perhaps not ABB, but Volvo and SKF could easily double in price” he said. “I can understand that they are being disregarded as the state of the economy is uncertain, but those times usually offer good opportunity to go against the trend.

”Global stock markets have been whipsawed over the summer  months on growing concerns over an economic slowdown because of an escalating trade dispute between China and the U.S. Sweden, which relies on exports for almost half its output, has much to lose from a disruption to trade supply chains.

Sweden’s benchmark OMX index is down about 10 percent from a peak in late April. Banks stocks such as SEB, Swedbank and Nordea are down 3 percent, 37 percent and 21 percent so far this year.

Carnegie Fonder’s flagship Carnegie Strategifond has returned 15.5% this year, and delivered annual returns of 8.3 percent over the past five years. Hedstrom said he’s not overly worried about a widespread recession. Although there being “many things to worry about,” neither the U.S. nor China would benefit from growth in the world economy coming to a halt, he said.

“We’ve seen the signs of an economic downturn for a while now,” Hedstrom said. “I think stimulus in China and Germany will have a positive effect on growth figures.” Sectors that Carnegie Fonder is avoiding are biotech and pharmaceuticals as they are “risky and expensive.”

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