Newsletter week 47

It’s an open secret that Central Banks the world over devalue their currency in a bid to outcompete other nations. Increasingly, this cur-rency war is fought through indirect measures like QE, in an effort to depreciate the currency instead of resorting to a standard devalu-ation.During recent months, PBOC (People’s Bank of China) has devalued the Yuan. China’s currency devaluation took the world by surprise and according to The Telegraph, it was the biggest currency interven-tion by the PBOC in over two decades. Many were surprised by this decision as most analysts were certain that China was done devaluing its currency. PBOC might continue to surprise the markets in the co-ming months with continued efforts to force the Yuan lower.BOJ (Bank of Japan) and ECB (European Central Bank) have prima-rily relied on QE, cutting rates and verbal interventions, to drive the Yen and EURO lower. BOJ’s and ECB’s official objective is to increase the inflation rate, but so far, this measures has proved to be unsuc-cessful. QE however, seems to be an effective weapon in the global

currency war. The Swedish central bank was forced to act when the EURO started to depreciate and Riksbanken responded by cutting rates and initiating its own QE-program. Recently, Riksbanken’s bo-ard members have resorted to verbal interventions, just like the BOJ and ECB, to force the SEK lower. Unlike most central banks, the Federal Reserve System is planning to tighten monetary policy at the end of this year. The unwillingness of the Fed to participate in the global currency war and counteract the staggering rise in the US dollar has weighed on the US economy. As other central banks seek to depreciate their currencies against the dollar, the US manufacturing sector has suffered as American made products have become less competitive on the global market. For how long will the FED tolerate that the global economy piggyback on the US economy? A currency war only works when a few countries try to depreciate their currency. If everybody tries to devalue or depreciate their currency, nobody will gain substantially in the long term.

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Global currency war

SWEDENSwedish banking system increasingly stableMoody’s raised the outlook for the Swedish banking system from negative to stable. According to their analysis, the measure reflects the positive impact of continued strong economic growth in bank asset quality and profitability. ”We expect that the Swedish operating environment will remain supportive for the development of Swedish banks. We also predicts that GDP growth will ac-celerate to 2.6 percent in 2015 and 2.7 percent in 2016, which is faster than in most other European countries,” remarked Moody’s Giovanni Fontana. Further, they expect that Sweden’s GDP growth will continue, since the domes-tic demand is amplified by low interest rate and the disposable income is rising in Swedish households. The credit rating company also expects that unemploy-ment will fall modestly to 7.6 percent in 2016, compared with 7.9 percent at the end of last year. Elsewhere, it was an-nounced that Ericsson shall enter into a strategic partnership with Cisco. The partnership is expected to generate $ 1 billion in additional sales from 2018 onwards. The partnership is supported by a number of agreements, including a global service partner agreement and a dealership. This was announced by Ericsson in a press release. ”The parti-

es have also agreed to discuss fair and non-discriminatory patent terms and to sign a license agreement for their res-pective patent portfolios, allowing for an allied innovation and security for each organization’s clients. As part of this agreement, Ericsson will receive a license fee from Cisco.” The statement went further to say.

StocksAmerican consumers are holding back on spending.Friday the thirteenth was certainly an unlucky day on Wall Street; the Dow Jones dropped 200points and the NASDAQ fell a little over 1.5%. The decline was mostly driven by weak numbers coming out of the major U.S retailers, as sales rose less than fore-casted. Nordstrom’s report came in well below estimates, and its weakness was widespread. “We’ve seen it across geography. We’ve seen it whether it’s in-store or online. We’ve seen it by category” said Michael Koppel, Nords-trom’s chief financial officer. European equities also closed sharply lower on Friday, as slumping commodity prices and a weak America weighed on in-vestor sentiment. OMX Nordic 40, an index of the biggest and most traded Nordic stocks was down 1.4% and the German DAX closed at minus 0.7% for the day. Looking ahead, there’s now

less than three weeks until the ECB will hold its last policy meeting for the year. European recovery is still sluggish; third quarter GDP for the Euro-zone came in at 0.3%. The weak Euro-zone GDP num-bers signal that a big stimulus of some sort will be announced.

CommoditiesOversupply still the main problem in the oil market.Fridays´s trade once again showed red numbers in the oil price. The Brent oil fell by almost 1,4 per cent to 40,70 dol-lars per barrel and the WTI- oil dropped 2,5 per cent to 40, 70 dollars per bar-rel. These drops mean that American oil has fallen more than 8 per cent this week alone. The main reason behind this is the impending concern of overs-upply in the oil market. According to a report from the IEA that was released on Friday, the world has not had this much over supply of oil at this time of the year for 80 years. In an interview with Bloomberg News,Michael Corcelli, chief of investments at Alexander Alter-native Capital in Miami warned that if unchecked, oil is bound to reach a six year low. Gold ended the week with a 0,2 per cent drop in value as it neared a five year- low. This decline is fuelled to an appreciating dollar and the Fed sig-nalling an interest rate hike in Decem-ber.

Bonds and Forex Anomalies and the current market state of the weirdometer.Market expectations of the FED initia-ting a rate hike increased this month, strengthening the US dollar as US tre-asury yields surged. Interestingly eno-ugh, US swap rates (popular derivati-ves that track government bond yields) have fallen below treasury yield levels. Also, swap spreads - the difference between the swap rate and the trea-sury yield of the same maturity - have plummeted to historically low levels, even hitting negative territory. Accor-ding to market logic, swap rates ought to be higher than treasury yields to compensate for the extra exposure to risk. What could explain this anomaly? Some analysts believe this pattern has its genesis in the tighter regulations and the higher capital requirements that have been instituted post-Lehman and the financial crisis. At the current state of affairs, one might surmise that the VIX Index would appear less volati-le in this environment but that has not been the case. In august this year, the VIX hit 168.75, seeming to be a particu-larly high figure due to the fact that the Lehman Brothers collapse squeezed the VIX up to a, then unheard of, level of 134.87. The approaching Federal Re-serve meeting will probably add more volatility in the market. Since a rate hike

by the Fed is heavily priced in, a deci-sion to not hike could severely hurt in-vestor confidence.

MACRO EVENTS WEEK 47Monday: Japan: GDP Growth Rate QoQ Prel Q3Euro Area: Inflation Rate YoY Final OCT and ECB President Draghi SpeechBrazil: Federal Tax Revenues OCT

Tuesday:United States: Inflation Rate YoY OCT,Manufacturing Production YoY OCT, Industrial Production YoY OCT and Fo-reign Bond Investment SEP

Wednesday: China: House Price Index YoY OCTUnited States: FOMC Minutes

Thursday: Japan: Balance of Trade OCT and BoJ In-terest Rate DecisionSweden: Unemployment Rate OCTBrazil: Unemployment Rate OCTUnited States: Fed Fischer Speech

Friday: Japan: BoJ Monthly ReportEuro Area: ECB President Draghi SpeechUnited States: Fed Bullard Speech

SPOT PRICES and one week change OMXS30 1476,21 -3,26%NASDAQ 100 4927,88 -4.25%S&P – 500 2 023,04 -3,62%DAX 30 10 708,40 -2,54%NIKKEI 19 596,91 +1,72%HANG SENG 22369,14 -2,06%Gold spot 1083,30 -0,01%Crude Oil (Brent) 45,80 -5,00%USD/SEK 8,67 -0,57%EUR/USD 1,08 +0,10%

WRITERSTomas NylénDavid IngmanCarl DalerstedtMark Thiong’oMatilda AnderssonEmma EgnellOlof Svanemur

Technical analysts:Emil EsbjörnssonJohan Lövstrand

Enzymatica expands to Spain and Fin-landEnzymatica has partnered with Esteve, a leading pharmaceutical company in Spain, for their exclusive rights to sell, market and distribute ColdZyme to pharmacies in Spain and Andorra start-ing in January 2016. “The agreement with Esteve is a first step in our strat-egy to expand outside the Nordic re-gion” says Fredrik Lindberg, CEO of En-zymatica. Esteve is covering more than 21,000 pharmacies and Spain is one of the five largest markets for OTC cold and flu products within the EU. Earli-er in the week Enzymatica also signed a distribution agreement with Tamro to sell ColdZyme in Finland, starting mid-November. Tamro is part of Phoe-nix Group, Europe’s largest distributor of pharmaceutical products. Enzymati-ca estimates that the total value of the non-prescription cold and flu market in Finnish pharmacies amounts to 375 msek. Enzymatica’s revenues for 2014 were 26 msek and with these expan-sions there seems to be high growth opportunities for the company.

FXI puts algorithm to useFX International has created a fund to-gether with London based Coppin Col-lins for currency trading using the trad-ing system Genova FX. FXI will obtain the rights to Genova FX and its currency

algorithm through an acquisition after an offset issue of stock. FXI will serve as a fund advisor and receive revenue based on capital and return of the fund. The fund is based on the Cayman Is-lands to primarily attract U.S and UK in-stitutional investors. CEO Lars Eriksson estimates the yearly revenue for FXI from the fund to 20-35 msek, although a discount of fund fees is normally ap-plied to the initial investments. For FXI this would be a real boost to their rev-enues which amounted to 0,19 msek in 2014. FXI has notably increased by more than 2700 percent this year.

Black Earth Farming missing expecta-tionsThe Russian agricultural company Black Earth Farming Ltd. released its report for the third quarter of the year on Friday. The report did not meet the markets’ expectations as the net profit went down more than 50 per cent since last year. The sales volume was down almost 30 per cent compared to last year and the revenue was down 40 per cent. The company’s CEO Richard War-burton says in the quarterly report that the poor result is due to low prices of corn and wheat in hard currency terms. Warburton continues discussing poten-tial risks and names the on going situ-ation in Ukraine as one. The company is not directly impacted by the conflict

it is indirectly exposed to changes in its operating and financial environment. The share plummed 8.67 per cent to 3.37 SEK compared to 52-week high on 4.99.

Lucara CEO: No need to change sales forecast.The Africa-based diamond mine com-pany Lucara Diamond made a special sale of diamonds on the 12th of No-vember in Gaborone, the capital of Bo-tswana. The thirteen different items, which varied in size with the biggest one at 336 carats to a smaller, pink di-amond of 8 carats, gave the company a total income of 29.7 million dollar. The figure was not in line with the markets expectations and the stock price fell approximately 9.35 per cent on Friday. Though the negative reaction from the market company CEO William Lamb stayed positive and is not worried that the company will meet its expectations for 2015 on 200-220 million dollars. The company has 12 million dollars left for to meet its target and one more special sale opportunity with a accumulated size of 90 000 carats. Together with the release of the sale numbers Lucara an-nounced that they have found two new grand diamonds on 348 and 255 carats respectively.

HomeMaid is currently in a long-term uptrend and a further upward movement is expected. Earlier this year, there were signs of a consolidation phase, but the stoke broke out of a rectangle formation which gave positive indications. MACD has just crossed the signal line from below which indicates a positive momentum in the stock. It also broke a strong resistance level at 9.5 SEK, which signals a further rise. Although some reactions downward are expected after the spike on Friday. The closest sup-port is found at 9.5 SEK and there are no resistance levels. A stop-loss is tentatively set just below this level. We are technically positive to HomeMaid in the medium term.

OMX Stockholm 30 has after a prolonged upswing last year turned down and been traded for the last six months in a falling trend in which the volume decreased slightly during the downturn. This can give indications that the rate of decline is starting to slow down. The index is tra-ded at the moment in the upper part within the trend channel, and with a MACD that just broken through the signal line, indications are given that a decline within the trend channel is to wait. The index has support at 1400 points and a stop loss is set tentatively slightly below this level. The resistance level is around 1520 points. The technical view of the OMX Stockholm 30 is negative in the medium term.

FormPipe Software broke out of its downtrend earlier this month. This indicates a slowdown in the previous decline and could mean a beginning of a more horizontal move-ment of the stock. It broke the resistance level consisting of the trend channel roof, but closing nearby an another strong resistance at 8.7 SEK which could result in a short-term downward movement. MACD is currently just above the signal line and starts to move up from the zero line, which indicates a more positive momentum. The closest support is at 7.7 SEK and the closest resistance is found at 8.7 SEK. We recommend a stop loss just below the sup-port level of 7.7 SEK. We are technically neutral to Form-Pipe Software in the medium term.

Interfox Resources just broke out of the roof of its long-term uptrend that began in the spring of this year with an inverted head and shoulder formation. This meant a steep climb for the stock price, and the stock has since then te-sted the channel ceiling at both 3.8 SEK and 4.5 SEK. The breakout is giving signals of a stronger upward movement. However, some small reactions downwards can be expec-ted. MACD is currently above the signal line and has star-ted to rise above the zero line which indicates a positive momentum. The stock closest resistance is at 8.4 SEK and the closest support is found at 3.8 SEK. We recommend that a stop-loss is set just below the support level. We are technically positive to Interfox Resources in the medium term.

Mindmancer has moved downward over the past year and been traded in a horizontal trend since half a year back. After the stock formed a rectangle formation a buy signal were triggered and the share broke up through the horizontal trend during high volumes in order to reach the target price at 8 SEK. However, the rectangle forma-tion indicates that further progress in the same direction is feasible. MACD is above the signal line and RSI is at 67, indicating a “bullish” view from the market, but may also indicate that a short term rebound is expected. Resistance level of the share can be found around 9.6 SEK and sup-port lies at 7 SEK., with a stop loss tentatively set slightly below that level. The technical view of Mindmancer is po-sitive in the medium term.

G5 Entertainment has for most of the last year been tra-ded in a slightly positive trend. During the previous week the stock broke through the ceiling of the trend channel during high volume as it the same time broke through the previous resistance level at which gives a signal to buy the share. MACD is moving above the signal line while the RSI is overbought which may lead to a short term downward recoil. The support level of the stock can be found at 36.7 SEK where a stop loss tentatively set slightly below this le-vel. Resistance is found at 41.6 SEK, and if the stock would break through this level the next resistance level is at 47.5 SEK. The technical view of G5 Entertainment is positive in the medium term.