The Battered Krona’s Woes Are Far From Over, Says Swedish Fund

(Bloomberg) -- There’s little cheer in store in the new year for the worst-performing major currency of 2019, according to Swedish money manager Erik Penser Bank AB.

Sweden’s krona may slip further in 2020 as the economy grapples with weak consumption and investment growth and a lack of political will to tackle these problems, said Jonas Thulin, head of asset management at Stockholm-based Erik Penser, which oversees 38 billion kronor ($4.1 billion) of assets. It has fallen over 5% this year to about 9.40 per dollar.

Still, the asset manager expects further losses to be smaller than in 2019 with the Riksbank seen raising its policy rate back to zero this week, exiting almost half a decade of negative interest rates that have weighed on the krona. Also, signs of a recovery among the main trading partners of the export-oriented Nordic economy should work in the currency’s favor, according to Thulin.

“We’ll hopefully see quite a boring year in 2020 for the krona,” he said. “We think the big krona slide is behind us as the move lower in euro-dollar, which took the krona with it, has passed.”

The krona slumped this year as Sweden’s economy, seen as a barometer for global trade, was battered by recession fears and tariff wars, while the central bank maintained an expansionary monetary policy. The currency is on track for its fifth annual decline in six years.

“We have the currency we deserve in Sweden,” said Thulin, referring to what he sees as politicians’ failure to address the economy’s problems. “You can’t only blame the Riksbank for it.”

Short Position

Penser has broadened its short-krona position on the view that the currency will see smaller but more broad-based losses in the coming year -- adding long positions in emerging-market peers and the Australian dollar, in addition to the earlier long dollar and euro positions.

The firm is overweight equities, betting the asset class will benefit from continued accommodative monetary policy and a recovering global economy. Penser sees about a 15% rally next year in both U.S. and Swedish stocks.

The money manager has started to build exposure to Europe again through exchange-traded funds that carry similar risk as issuing credit-default swaps, according to Thulin.

Penser recently changed its approach to the U.S. stock market by selling S&P 500 futures in favor of exchange-traded funds with exposure to fin-tech and bio-technology companies. It has increased holdings in Swedish small-cap firms, with a focus on real estate. Penser also likes autonomous-vehicle technology company Veoneer Inc, as well as Iconovo AB and Smart Eye AB.

“We do less and less broad indexes and more targeted strategies,” said Thulin. “We think that we’ll beat the competition by doing this.”

To contact the reporters on this story: Love Liman in Stockholm at jliman1@bloomberg.net;Hanna Hoikkala in Stockholm at hhoikkala@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Anil Varma, William Shaw

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