The Swedish krona have been heavily debated 2023. It is a long uphill battle for the krona after that Stefan Ingves under a long time knocked the currency unconscious under his monetary policy experiment. In addition, it is said that risk-takers in the real estate industry, highly indebted households, a heightened threat level and daily shootings weigh on the image of Sweden. Others argue that things are not quite so bad. If investors only get an accurate picture of the situation, the krona will strengthen. The government, the Riksbank and other official representatives should therefore go abroad and nuance the picture, they say. But is it that simple?
The Swedish krona have been heavily debated 2023. It is a long uphill battle for the krona after that Stefan Ingves under a long time knocked the currency unconscious under his monetary policy experiment. In addition, it is said that risk-takers in the real estate industry, highly indebted households, a heightened threat level and daily shootings weigh on the image of Sweden. Others argue that things are not quite so bad. If investors only get an accurate picture of the situation, the krona will strengthen. The government, the Riksbank and other official representatives should therefore go abroad and nuance the picture, they say. But is it that simple?
“Well, I do not think it matters that much. We are out and meeting investors. I was in London in August, and I will go to New York later this fall. Foreign investors are keeping track, they really do and some of them are actually better aware of the situation here than some investors here”, said the head of the Swedish Riksbank to me at a SNS-breakfast the 22nd of September 2023.
The SNS-panel, including the CEO of the 1st AP-fund Kristin Magnusson Bernard recalled that professional investors and households have abandoned the krona to instead invest in global funds and companies overseas. “AP7 Equity fund has 99% of the placements outside of Sweden” according to their website. Employees at the fund which recently retired and went into pension have even them moved overseas.
Should AP7 and other funds be banned or is there a message here? What does that say about the krona and Sweden as an investment country? At a possible “charm offensive” there is a risk that the counter question from foreign investors will be: If not the state funds of Sweden believe in Sweden, why should we do it?
The market grades the krona and Sweden every second. Stock analysts on the buying side are looking for triggers, some overlooked aspect that can suddenly make a company’s potential be seen in a new way and result in a price increase. From an investment perspective the kronas grade are now “SELL.”
Sweden does not seem to have its own pull, the krona exchange rate is entirely dependent on when the US starts cutting interest rates, which lowers the dollar exchange rate. A small currency needs to have attributes which are attractive regardless of the macro economy, risk will or how other countries interest rates and currencies are moving. The Canadian dollar is a proxy for raw materials, the schweizerfrancen is viewed as a safe-haven currency etc. President Biden’s IRA makes it possible for European companies to benefit from the equivalent of SEK 4 trillion in tax breaks and tax subsidies for green industry in the US. This is something that has attracted EQT’s portfolio companies, among others. What does Sweden have to offer? Higher relative growth? A higher, more attractive interest rate? A less volatile exchange rate?
Ultimately, the question is: why should I buy the krona?