Wallenberg Family Fortune Feels the Sting of Brexit, Trump

(Bloomberg) -- The holding company that manages about $37 billion in assets for Sweden’s Wallenberg family says political risk stemming from trade wars and Brexit could have serious repercussions for a number of its investments.

Johan Forssell, the chief executive officer of Investor AB, says some of the companies it owns are building up inventory in an effort to prepare for the worst outcome of Brexit negotiations. Meanwhile the trade dispute between China and the U.S. has put businesses in a state of limbo as they try to figure out what kind of an agreement will be struck.

“The longer this uncertainty remains, the worse,” Forssell said in an interview in Stockholm. “The companies can only adjust, there’s nothing else to do.”

Investor AB holds sizable stakes in some of the world’s biggest and best-known companies, including Ericsson, AstraZeneca, Saab and Electrolux. All of them rely on well-functioning export markets to plan their operations across the globe.

Sweden’s Wallenberg Backs Trump’s Push on China Trade Relations

“Political risk such as a potentially hard Brexit or trade tensions do affect many of our companies, which have to adjust,” Forssell said. In the fourth quarter, Investor lost 15 percent on its main publicly traded companies, though it paid a higher dividend for 2018 than analysts had expected.

The Trade War

The world is awaiting the outcome of talks between China and the U.S., with nothing less than the future of global trade at stake. President Donald Trump has threatened to escalate a tariff war on about $200 billion of Chinese goods if the two sides can’t reach an agreement over the coming month. Commerce Secretary Wilbur Ross said on Jan. 24 that China and the U.S. were “miles and miles” from a deal.

As companies face the threat of more tariffs, they will probably need to adjust their supply chains, Forssell said. Managing supply will also be an issue if Britain fails to strike a deal with the EU before it’s due to leave on March 29, he said.

“A hard Brexit would definitely affect the flow,” he said. “Some of our companies have already started to build additional inventory as a preparation for a potential hard Brexit.” Though he declined to specify which companies he was referring to, Forssell gave the example of how such barriers threaten to hamper industries that provide vital services in areas such as health.

“We’re a big owner in AstraZeneca, and they have patients dependent on medicine,” he said. “For them it’s especially important to be able to deliver.”

At Nordea, the biggest Nordic bank, the assessment is that “the trade war, political uncertainty in Europe and tighter financial conditions are hurting economic development.”

Against that global backdrop, the focus in the Nordics is on “higher policy rates and their likely impact on each country,” according to Helge Pedersen, chief economist at Nordea, who made the comments in connection with the bank’s revised economic forecasts published on Monday.

“It’d be very positive for the world economy if China and the U.S. could find a solution to the trade issue, if there could be a solution to Brexit,” Forssell said. “It would lead to significantly less uncertainty. Less uncertainty would lead to more boards, more managements daring to invest again, and the wheels would start spinning.”

--With assistance from Jonas Bergman.

To contact the reporter on this story: Hanna Hoikkala in Stockholm at hhoikkala@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net;Niklas Magnusson at nmagnusson1@bloomberg.net

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