SEB report: Speeding up the tempo

8/8/2019 SEB report: Speeding up the tempo

1/41

Investment

Outlook December 2010p iv b ki g - i v m gy d u h


2/41


3/41

3Investment OutlOOk - december

Contents

S a gy

o io .........................................................................................................................5

S a y ...............................................................................................................................Po o io a gy .................................................................................................................Th : Sp i g p h po ..................................................................................... 11Th : E gi g a a h pa ...................................................................... 15Th : Low go o yi - w po o io hi i g ................................. 1Th : Wha wi happ o h o a i a a a ia i a ? .......... 20Ma o a y ................................................................................................................ 23

CLEq i i ............................................................................................................................... 25Fix i o ..................................................................................................................... 2H g ...................................................................................................................... 30R a a ......................................................................................................................... 32P i a q i y .................................................................................................................... 3Co o i i ..................................................................................................................... 3C i .......................................................................................................................... 3


4/41

4 Investment OutlOOk - december

Thi o p o y SEB o ai g a a i g i o a io a o i i p o . A ho gh h o i a o o j g oia , SEB wi o ia o a y o i io o i a a i , o o a y o wha o whi h a i o ia o i . i a h i

yo ho i po i a h po a h i o o ai wi hi i , o a h i o a i g o p i o pa i o o www.ai . o a io a i g o ax ay o o a a ay o yo i i i a i a . p o p o a i

Th i a ay a a w a i , a hi o i a o g a a o ; i o a , o a x h i i ia a o ii h o yo i i i i o i a i a o ig y, ha g i x ha g a a i pa h . Yo a o a po i o

i i io a yo ho a way o ai ai i o a io o a i g h . Fo o i o a io p a i a ia h i p i p o po a i o a io o h o a o p o , a ai a a www. . . a y yo ho a i ai o o yoi a o yo SEB a i o .

i u x :A a o o o a io a P i a Ba i g of i L x o g, Si gapo a Swi z a yo a o ig o pi o o h ax app i a i h o i o yo i iz hip, i o o i i wi h p o a a o a a ia a a io . S

o p o i a y ax po i g o o ig o i a i g ha yo yo p o i o a ho i i wi h i o a io a a wh q i .

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S a gy


5/41


Signs o accelerating growth are discerniblein many parts o the global economy, despitemixed messages rom macroeconomic data.It is time or the economic cycle to shi t intothird gear, speeding up the tempo. Demand isbeing driven mainly by portions o the emerg-ing markets, whose new role on the world eco-nomic stage already seems sel -evident.

Ri a a way a o h i i a , a ah o o o h a g a i g w pap h a i

i h a ia a o h wo . ia i o -i ha iz a o apa i y a ow p oy , whi h

og h a i i i g h i xpa io . Th a o ig p o , p ia y i o h E op , a p op a

i i g a y wa . M a whi i a , y q i-i , a o i i g o i g a a y i a , a xp ai

p i a i y y a i y o g g o a o o i g ow h.

Fo a o g o a GDP a o h o g- i gh x w y a gi a o o po wha a i

w ho ha a i o owa i a i y a . ay y w ha h o o i ow a a i g o o

a io wi o h i i po a o h a wh ao o i p o a i o goo .

d h u uThi i oInvestment Outlook i io o wha

o ay wi a o h . q io w haa o i : Wha wi happ i o a i h

o o y o i o p o w , a i p o g ow h aw a a a io ai a o a ?

A o h q io i wha wi happ wi h go o h a a i i a y po o io a gi i h

o g- owa a i g yi o h o a o a h y gi o i , a wha i pa hi wi hao po o io a ag .

B a o o o i o i io , w a g a a y a o a i go a o api a o q i i a o h i i .

M a whi w a i i g o ai ai a p i i i o po o io . Thi a a q a io o o .

Th o o go o a i -o ay pa ,a i h i yi a i g pwa , h o wi op o i h ha po o io a ag ha oa o o i g h pa y a o o. Thi a

ha h o i i a i g y hi i g owa a a ii a a i a gi o a io i . Thi i op o i i , i p a w a o ip o , a h a h o apa a ag wi o

o i po a . F u l clFi a ia a o i io a g a a y i p o i g, a h

i o a o ip io whi h poi h oo oa y i o a i h a ia y w i

o . Va a io o o a a a a o a . a ,hi a a i a ha i a i y a o a o o i

i .

Co i ow i a a o i o aa o p op p w a g ow h i h i ia i o i

wi a goo a o i io , p ia y o i a .

po a y, o i w o gi g a a h i o ih wo o o y i ha gi g. h a , h owa api o o i g ow h a g a a ia o wi

i i y a o i . Th a i o h owahigh a o gi g a , whi h Sw i h o pa-

i ha o i , a ha o h . Th i o a oa y o pa i a a y a a i a i h p opo -io o h i xpo goi g o h a .

Fo a y Sw i h i ia o pa i , a o h U iS a owa ay a o o - p o h i .Sa o gi g a a g owi g a g , a w

xp hi hi o o i . E gi g a a o o ga i i ; h y a a ia o o g ow h.

Hans PetersonCIO Private Banking and Global Head o Investment Strategy

i duc

Following the upward trends


6/41


S a y

ex ct d 1-2 y a s(annual av ag s)

r asoningtu n isk

equiti s 10% 17%

PositivE. The sideways trend will soon have a chance to be replaced by a better trend. Most marketsseem to be gaining frmer ground to stand on, thanks to continued economic recovery, urther monetarystimulus measures in the OECD countries, low equity valuations and good corporate proft fgures.

Fix d incom 5%* 6%

nEgativE towards government securities, PositivE towards High Yield. The macro map still indicates continuedlow key interest rates in Western countries, making government securities unattractive. From a risk/returnstandpoint High Yield (HY) is now the most attractive, with a continued decline in bankruptcies among HYcompanies. Emerging market (EM) debt and EM corporate debt also remain appealing due to high yields andpossible exchange rate appreciation.

H dg funds 7.5% 6%

PositivE. Large global imbalances and tensions between asset classes are continued arguments or GlobalMarket and CTA strategies, while Event Driven is likely to beneft rom increased merger and acquisition(M&A) activity. There are also good yield and price arbitrage opportunities or Fixed Income R/V and CreditL/S strategies.

r al stat 4.5% 3%

nEutral/PositivE. Early signs that the driving orces o the recovery will soon shi t rom speculation tothe real economy, together with a stabilising banking sector, still avour this asset class, but the real estatemarket will recover slowly.

p ivatquity 15% 22%

PositivE. This asset class took a beating when the market was choppy, but it still o ers a - per centdiscount on already conservative net asset values. Secondaries remain attractive.

Commoditi s 8% 18%

nEutral/PositivE. Global recovery is a general argument or commodities, since strong economic growthin the EM sphere will be especially avourable or industrial metals. Looking ahead, growing risk appetitemay push down gold prices.

Cu nci s 3% 3%

nEutral/nEgativE**. Currency issues are increasingly important, and countries are thinking in terms odepreciation contests to strengthen their export opportunities. We expect high interest rate (EM) currenciesto strengthen against low interest rate currencies in developed markets (DM) as risk appetite returns.

* Expected risk and return on corporate bonds that are weighted about /3 Investment Grade and /3 High Yield.** This opinion re ers to the alpha-generating capacity o a oreign exchange trading manager.

Xp C D i k D U ( - y O iZO ,U L v g )

i O iC L i k D U( Ov mb , O OC Ob , )

C g i OU Xp C D U

Equities

Fixed income *

Hedge funds

Real estate

Private equity

Currencies

Commodities

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0% 5% 10% 15% 20% 25% 30%Expected volatility

E x

p e c t e d r e t u r n

Hi o i a a a a o h o owi g i i : Eq i i = MSC AC Wo . Fixi o = JP Mo ga G o a GB H g . H g = HFRX G o a H g F . R a

a = SEB PB R a E a . P i a Eq i y = LPX . Co o i i = DJ UBS Co -o i i TR. C i = Ba ayH g C y T a .

-4%

-2%

0%

2%

4%

6%8%

10%

12%

14%

16%

2 0 0 8

- 1 1

2 0 0 9

- 0 2

2 0 0 9

- 0 5

2 0 0 9

- 0 8

2 0 0 9

- 1 2

2 0 1 0

- 0 2

2 0 1 0

- 0 5

2 0 1 0

- 0 9

2 0 1 0

- 1 2

Equities Fixed income* Hedge funds Real estate

Private equity Currencies Commodities

Fixed Income

Equities

Private equity

Commodities

Real estate

Hedge funds

Currencies

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

0% 5% 10% 15% 20% 25% 30%Historical volatility

H i s t o r

i c a

l r e

t u r n

i O iC L CO L iO( Ov mb , O OC Ob , )

E q u

i t i e s

F i x e

d i n c o m e

H e

d g e

f u n d s

R e a

l e s t a

t e

P r i v a

t e

e q u

i t y

C o m m o

d i t i e s

C u r r e n c i e s

Equities 1.00

Fixed income -0. 1.00

Hedge unds 0. -0.20 1 .00

Real estate -0.1 0.11 -0.0 1.00

Private equity 0. -0.3 0.53 -0.1 1.00

Commodities 0.20 -0.1 0. 2 -0.0 0.33 1 .00

Currencies -0.1 0.1 0.1 -0.0 -0.0 0.02 1.00


7/41


S a y

W ig i mOD p O C iO

W ig i mOD g OW

2%

5%

0%

0%

2%

9.5%

81.5%

0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

3%

4%

5%

3%

2.5%

28.5%

25%

29%

0% 10% 20% 30% 40%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

W ig i mOD gg iv

OLLi g -mO CO L iO v . m Ci WO LD( U )

1.0%

0%

5%

10.5%

0%

23.5%

20%

40%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

2002 2003 2004 2005 2006 2007 2008 2009 2010

Fixed income Hedge Real estatePriva te equi ty Commodi ties Currencies

m : i DiC iO OF F gLOb L g OW

Index service sector Index manufacturing sector Source: Reuters EcoWin

2004 2005 2006 2007 2008 2009 201030

35

40

45

50

55

60

65

30

35

40

45

50

55

60

65

m : m gi g m k CCOU FO piDLyg OWi g p C g OF gLOb L OCk m k C p

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2 0 0 1

2 0 0 3

2 0 0 5

2 0 0 7

2 0 0 9

2 0 1 1

2 0 1 3

2 0 1 5

2 0 1 7

2 0 1 9

2 0 2 1

2 0 2 3

2 0 2 5

2 0 2 7

2 0 2 9

ActualExpected

A ter large gains, the J.P. Morgan global purchasing managers in-dex or both the manu acturing and service sectors peaked in April

2010, ollowed by a downturn during the summer and early autumn.In October, both indices rose again, which promises better global economic per ormance.

Progress in the emerging market (EM) sphere is noticeable on many ronts. The political in uence o these countries is increasing as

their economies grow. EM stock exchanges have also accounted or a ast-rising percentage o global stock market capitalisation in thepast decade. I the same pace continues, EM exchanges will account

or per cent o a world index as early as .

d u h :La g g o a i a a , o p wi h i a , a a i g g a po i i i i a o io

l d h c : Co i a g api a i ow o h EM ph , wi h i i g a p i a a o q

L w d ld w l h : a i a o i i g yi , h o o o i a po o io o - xa i

Wh w ll h w h h c l f c l cl ?Two o o h a a io pa a ig a a o ao g- o i io

Source:Fa S , MSC a a, SEB


8/41


p l

mOD p O C iOTh hi q a wa o i a y i io a o hp o a i i y o a o ip io a a o a a p

a io i h wo o o y. S q o h haha a o po i i o , i o a p ay ha

o o a a o ho gh o a o ip.

h o po a o o , High Yi o ha h p o y a i h po o io. SEB Mo

P o io p i a y a i api a p a io , a o a-o o i o High Yi a o a io i ai y i i . o -

i io o po o io ha h a . Wa pi g o xpo i a , a ho gh w ha a gi a y

ow o xp o h g .

Th ho - a i a ha how a ai i g i o h . Si J , h h - o h

E i o ha i o . o . p , whi h oa i y i . Yi o o g - go

i i ha p y i A g a h ga a i i g

i S p . Th a o o h A i a o a yi pa ag a a a yi i igh y i -

ag . A , o g- yi w p h ow o hi h US a E op , h y ga a pwa pa h i o - j io wi h Chi o o i po i y igh i g aai a i g i a io a a w wa o o ig wo i i h EU ( a : Po ga a a ). Th o -

ha o ha a y ajo i pa o o po o io, how-, i w ha o o g- a io a gi xpo . B

o To a R a Ca h P ho i g o ho . Th a ha w i a h p ag oh F ha wa i i h ho i g , a h xp

o ho - x i o ho i g , h o i oa a y o g po i i g ow h.

w , h o ig x ha g a ha oo . Th a g o ha ai y i oh EUR-USD x ha g a , h SEK ha a o o ai . Th ha g i a ag w a wo a i y

w , a o y xpo i ow ig i a y o -i . o , ow i a o i p i oppo i

i o high , i w a a i ha h o a io i h po o io, w a a i wi h

h p o w ha igh ow.

W ha a a y a po i i o o o h ha gw a i h h g po o io. Th ha a o h

ow o ha i p o . Ri ha i a o wha , o a io ha i i i h . a i o w igh i g

o Ma N a ho i g i o p o f i y gooa i g . W ow ha o ho i g a h o i w

a o whi h h g ha h po ia o g a -i g i g h x y i a pha .

Th a a a ha o i o a po i i

o h po o io. W ha o ha g o xp a io , ao ho i g ai a o p o o x i o i -

.

Port olios or better times

Lower and lower yields this autumn have persuaded investors to seek out risk, causing both equitiesand High Yield bonds to rise. In our port olios, we are now positioning ourselves or a long, slow eco-nomic recovery, with a ocus on sound growth conditions.

2%

81.5%

2% 5%

9.5%

CashCurrenciesReal estateHedge fundsFixed income


9/41


mOD g OWTh i a gi g a i Mo G ow h

o i o h po i i i h po o io i g h

a , o h i a o a a i . ia a a o p o ha o pa a i i-

. i y a i yi g wh o h h hoi o a ag ah a o a io w a a a po i i o i io .

W ha oo h p ag o q i i i h o a po -o io, i g o a gi i w ha h q i i a a

ha o i high po ia i h x - y a . Thho i g a ai y y a o a a o g o h a a -

a gi g a , a i g o a i i o a o . A h i o g p o a i g h a , p i a

q i y a o o i i ha o o o h ow -

h y xp i i g h p i g. Co o i i ha h p o i g a a i SEB Mo G ow hi J , o y o ow y p i a q i y. a iowa o o i i ha o a h o po i i . W

i ha ai a a ha h a g po ia , w ga p io a a y o wha o aa p . A o oi p i , o i w i ha h o i g y awi w i o PEC goa : a i y a p i i h USD

- / a a g . A hi w i i g, p i w a o USD 8 /a .

Th x i o po io o SEB Mo G ow h a ha g o i io o h po o io po i i hi

a . Th iz o h -po o io a o p o Mo G ow h o i wi h h ha p p i o

o i a ho i g i h High Yi g g a ha o a a y a i io xp a io . A o g h

ho i g ha oo o wa E gi g Ma D , whi h hai y o ha p i J .

A h p a w High Yi o a i - yia ow , xp wi o o wha ow . W

ha h a gi a y a j o o a ow wa ,

w i ha h i yi i f i y a a i op i p ag o h po o io ha g . How , w

ha ho o o ho i g i h G ag a i a h p ag o h po o io o i -

i g o q i i ( a o ). W i ha h po ia ox i G a i i a y o - xi .

w , h o ig x ha g a ha oo . Th a g o ha ai y i oh EUR-USD x ha g a , h SEK ha a o o ai . Th ha g i a ag w a wo a i y

w , a o y xpo i ow ig i a y o -

i . o ow i a o i p i oppo i-i o high , i w a a i ha h h o a io i h po o io, w a a i wi h

h p o w ha igh ow.

Th a o ha gi g o h g -po o io ha o -i h o gho h pa q a a ha o y o p . W ha i i h w wa a ha

p o a po o io a a y i . p a io ha g ai i y h iq i i y y o a h p i .Th pha i wi o CTA (Sy a i Di i wh

h a ag ig o p o ha i g aa a io ), G o a Ma o a Fix o . W a a o

a i g wo w wi h a E D i a gy, a io h M i a gy ho i g w a a y ha . Th a gy

o h h g -po o io i i i a io o pao h q i i -po o io, a hi i i po a i o oai ai h o a i w wa .

Po o io a gy

2.5%

3%

3%

25%

29%

4%5%

28.5%

CashCurrenciesCommoditiesPrivate equityReal estateHedge fundsFixed incomeEquities


10/41


Po o io a gy

mOD gg ivTh ai o Mo Agg i i o ap h po ia i

h ai h w o i h api a a ah a . Thi

i p i ha h po o io ha a g xpo owa oa p io a o h o o i p wi g ha h o h wopo o io .

Si o a i io i o a i o a i g i SEB MoAgg i , w ha a iz a ha o h po o io ii gi g a (EM) a . E gi g a o p i

a y 4 p o h po o io q i y ho i g . h wiw wo wi h op a a y a i g a

hoi , whi h w ha y o i a a i a o y way.Bo h o EM a op a ho i g ha pa

h i h a i i .

i wi h o high xp o h q i i aa i g h o i g o o wo y a , w a ow i a -

i g h p ag o h SEB Mo Agg i po o io i - i q i i o o 4 . How , w a pi g h

a a o a io wi hi h a a a p io y. Eq i ia h a a ha w igh h a i i SEB MoAgg i a h a o o h a g o i io o

h po o io po i i i g h p io .

A h i o g p o a i g h a , p i a q-i y a o o i i ha o o o h owh y xp i i g h p i g. Co o i i ha h p o i g a a i SEB Mo Agg ii J , o y o ow y p i a q i y.

h x i o -po o io, w a hoo i g o o -i o i o o i a h p ag o q i i

i h po o io. Co i o ha p o i a a o

i io o h po o io, w i w h q i i o poa o a a i o SEB Mo Agg i . Nowa ay h

x i o -po o io o i o y o h o po a HighYi a E gi g Ma D g . W i o a

a o a i -a j po ia o h ho i g , whi hwi a whi p o i high i yi ha h p o

oo h h o a i i y i h o a . Loo i g ah a , wa o o i i i y ha hi g wi p o i a ig i

a o i io o h p o a o h po o io.

Th a o ha gi g o h g -po o io i way. Th pha i wi o CTA, G o a Ma o, Fix o

a owa ay a o E D i a gi wh w a aw o h po o io. W a a o i i g i a C iLo g/Sho wi h a o wha o iq i a a i g-o i a gy. W xp hi ho i g o h po -

o io o a io wi h o a . Th Mo Agg ih g -po o io o o h ai h g

a ag ha w o a ha i g po ia . Hw a a o i i yi g owa y i a y i a ,

yo ha w a pha i i g a ag who a p a highi i h i . Si o h g -po o ioo ai i yp o a gi , w i ha a goo i-

i a io a high xp .

23.5%

10.5%

20%

40%

1.0% 5%

CashCommoditiesPrivate equityHedge fundsFixed income

Equities


11/41


h :d u

h

Faster growth rates and the Feds QE will

bene it risk assets... ...and capital is lowing into the emerging

market sphere... ...generating major opportunities but also

global tensions

A h wo o o i a a ia i i i i i g o y,Ma h aw a hi i o g a i h o y p o

o q i i a o h i a a w a . Li oa y i o , h i i ia a y pha wa ha a i y

a oa - a i a i a a : a a a .

pi g wi h hi o y, h o o y a i i a h ooa h o a o . Th U i S a a

a y o h o i ga h i o y a o h io . Th g o a y i a p wi g wa h o y

a o o o i a i i a i . Tog h wi h ig i -a o a i g , hi a o po a p o o i , whi

i a i o i ia i o i ai yow. A o i a io o api o o i xpa io , pwa i-io i g ow h o a , high p o a ow i ah p o i a y a o a i o o i a .

c d La i , h o y y hi o o g a , a

a ia a ga o o a o a y o hpo i i a ga i o . S o a h how oo a i way p i a g a i g a h wa ag a o o h q a i y o i : a a pha a .

Soo a N w Y a h po igh o h a iap o o h G go , a Chi a oo i

p owa igh i g i o o i po i i . h o hha , i g h p i g o pa i p p i i g ygoo a i g po , a a h a i GDP o aw ai h . B i g h o q a , hE op a o ig i i xp o , i g i iz ap i i o i a . Th a a y a

w ha a i y a a io . Th w i -

y ow GDP o a i h wa o ow g ow ha i h ECD o i , g igh i g i o hE op , a i g o E op a a , a o a

o ip io i h US a i g xp a io hah F a R (F ) wo a g - a o p -ha q a i a i a i g o i a h o o y.

h d

A a o a y a o a g a i g, i ow o io h y o hi i o hi g a . Thi i o ig o -

w a a io i g ow h a i a y pa o h g o ao o y, h q a i a i a i g y o a y po i y a -

i y ECD i ia i o i ( op a ,DM) a ai o g o o i g ow h i h gi g

a (EM) ph o p wi h ow o i a io , a wa p o p o o i p o i p o a o g

a a h i o pa i wo wi .

The cycle shi ts into third gear

Index service sector Index manufacturing sector Source: Reuters EcoWin

2004 2005 2006 2007 2008 2009 201030

35

40

45

50

55

60

65

30

35

40

45

50

55

60

65

i DiC iO OF F gLOb L g OW

A ter large gains, the J.P. Morgan global purchasing manag-ers index or both the manu acturing and service sectorspeaked in April 2010, ollowed by a downturn during thesummer and early autumn. In October, both indices roseagain, which promises better global economic per ormance.


12/41


Th : Sp i g p h po

Th ow i g ow h a ( ai y i h DM o i )whi h ga a y i h o q a o hia , j gi g o a io a i g o o i i i a o .

o , o h a a i g a i a i i y a ao h i i ix o h , a o i g o h JP Mo ga

g o a p ha i g a ag i x. B hi hi w highp o io , o oo i g a p oy . Th o ia gio ha po h a g o a i p o i

h a a i g a i o i h US, hU i Ki g o , Chi a, Ho g Ko g, ia a R ia.

h a a i g o o a y o i , h o /i -o y a io a a i g- a i g i i a o o i o .

, o xa p , o oo i g i q i y a h a i ao pa i a i g i o i whi h i ow h a i

a g wa h o A i a i hi p o i g owi g a -i i y ah a o o pa i oo p o io , o h o g a a a o i h i i o i .

h U c lA o g o h a o o o i a ha o y

h a po i i o o i ag i g o waA i a Na io a F a io o p B i (NF B)i x h a i q i a o h SM p ha i g

a ag i x whi h po i a g p i ixo h . M a whi US a a g .

Th wo o o i a a io ig a y a i g i i a-o o happ i g a i a i ha o ia y o a ( h o q a o ). h a o

o ha GDP o a wi i pwa i h wi -. hi o y p a i , hi wo o i o i i g o

a . D i g h pa a , a i a o app oxi a yo p i h o o a o o -y a g o aGDP g ow h ha i a g o a o a p oa o p , a i g q a . A h o i i i -

a o i , h o a io w i o a ao a a io ha p ia y a g i h US.

B i o o i o xp y ho oa ia y o p a , xp a io o i g o a y

po i y i i ia DM o i wo p o a y oo hi

i a igh i g i io , whi h i i wo ha a ga ii pa o o a . Thi happ , o xa p , i hUS i g o .

g w l c dTh y i a i p o ha i ow o i a i a ,a o g o h hi g , o i g , wh o pa i p ia y i h DM o i ha p y a h i

x i a a y ho ho a ai o y-i g api a goo . Thi ha ow i a g owi g o

p a wo -o a hi oo , a , ig a o , wa hi ga hi . U a y ow i a i h wa o

oo o a y po i i i ajo DM o i a a o ha o ha h o o i y . A hi i h wq a i a i i a y a a .

a y o , h Ba o Japa a o a p og aq i a o USD 6 i io o p ha a io a : go -

o , o ia pap , x ha g - a (ETF ) a a a i (RE T ). B h F

w o o US q a i a i a i g (QE ) yi g USD 6i io wo h o go o y i - wi o

i po a . Thi wi w h F a a h o a yUSD . i io , o pa o a o USD 8 i io i h

o , o h a ia i i .

i wo h a i g ha h F wi a o o i i i gi p o a p i ipa o a i g goa o gag o i w go o . A a ,i o a p ha o h o y J , wi o aa o USD 8 i io (a o 6 p o GDP). A o i g oF a a io , USD i io i w o p ha a

o gh y q i a o a . p i h a a , i y i a .

Source: Reuters EcoWin

2002 2004 2005 2006 2007 2008 2009 2010

U S D

t r i

l l i o n

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

U S D

t r i

l l i o n

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

F D b L C WiLL W LL g i

Immediately a ter Lehman Brothers went bankrupt in mid-September , the Federal Reserve launched a massive quantitativeeasing programme, which was re ected in thegrowth o its balance sheet rom roughly USD

billion to about USD . trillion. It hasremained at approximately this level so ar during , but new Treasury bond purchaseswill swell the balance sheet by USD 6 billion

rom this autumn until mid- .


13/41


Th : Sp i g p h po

A o i g o h a i io ha i , QE wi a o -a y a h US o o y, i h o y ia h ha . Th

i ia ow a o yi a i a io xp a io

i , i g i a - i i a o ho i g,o api a goo , o io a o po a api ap i g. Th o i ia i i g i a p i , whi h

g h ho ho a a h a h wi i go o whi oo i g o po a i oow i api a o . Thi y, a ow o a x ha g a

i a US o pa i ha xpo o o p wi h i po ,whi h wi o o xp i . Th o a ia

h ha ay oo GDP g ow h i y a y .p ag poi , a y a i o i .

How , i i i y ha QE wi ha a y ajo po i i

i pa o h o o y ia h a i g y a h iip i . o o hi o happ , a a yo a a g - a xpa io o h i a a h h o gh

i a i g, whi h i p o a y o i h a wha a i o a o h q i p i yh w Ba api a a q a y .

O h c u l c d QSo o h a ia a i a o QE ha a a y

o i a , o h i h US a i a io a y, axp a io o w o p ha y h F haxi i h a i h . Thi i , oxa p , i h i o h o a a a o pa yi g ap-

p ia io o a y i i h EM ph . E p ia y iah o ig x ha g a a i a g api a ow , o ho i a h a o ig i a y i pa y QE .

Th i i US T a y yi a hi w i i g (No) h wo-y a yi i j ow . p i po

o QE ha a a y i o o high ih o po a o a High Yi g a i o ho i , p i a i y h EM ph , whi h o a ia y

yi o o h go a o po a o . Thi a h o ha g a y o i o h api app -

ia io o a y EM i , whi h i ha o gh h

o p o y wa a h i o a a i i oh a ia w h a i .

F xch Th i a io a o p i i o EM o i wi h

oa i g x ha g a ha w a . A o ho i ha a y i i g i h o ig x ha ga o i i y a i a , i o i g ax a

i io o o ig po o io i i o a q-i i , a w owi g h pa o o a y igh i g ( i

o g i o o a o ha a igh i g ).

B EM o o i ha ha p gg h i i o hUS o a , o xa p Ho g Ko g, a o o a j h i

o a y po i i o ho o h F i o o p -

a a io p o h i i . Th i a powo a y i whi h i h o high p i a o

p o o y a a i y a .

Th a o i h wa o QE a h ha oa y o pa i i h EM o i ha o p i a-io a y. Chi a i a o g h x p io , a h y a

ha o y i a gi a y agai h o a i h .M a whi o i o o i a i i i , h a p i a o -

p io a o io , a i g o h ap i -po a o - ow a i a . Co p wi h high

o o i g ow h, hi a a goo o a i o - i a y EM o i .

h l h

Th g o a a o a a pi ha ha g o ai p a i a y p . B h a a o h a , a o gh a ia i a a i h p i o a a

a o a a o o o i . Thi g a yq i a if a a i g a wh o i a y o h i

o a y a a po i i , a i i i y o igg ajoy- a io .

o p a , h ha i i a o gigh i g, p ia y y h P GS o i (Po ga , a ,

G a Spai ). Po ga , G a Spai ha po - y i i g o gh a a i y p og a , a a

wi o o i a y D o o h q i o ia ia ai pa ag o h E op a U io (EU) a h

a io a Mo a y F ( MF). Th i h go a -g i o i g i o p o GDP y 4.A h pa ag o a , a y o

xp ha Po ga i x i i o i i h E op aFi a ia S a i i y Fa i i y (EFSF), whi h wa a h y hEU a h MF i g h .

India, Government Benchmarks, Bid, 2 Year, Close, INR United States, Government Benchmarks, Bid, 2 Year, Close, USD United States, Corporate Benchmarks, BBB Rated, 2 Years, USD Source: Reuters EcoWin

2004 2005 2006 2007 2008 2009 20100

1

2

3

4

5

6

7

8

9

10

P e r c e n

t

0

1

2

3

4

5

6

7

8

9

10

C FO U i b Fi i gCO pO D m bO D

The Federal Reserves zero interest rate policy and quantita-tive easing have led to record-low US Treasury bond yields.

Investors seeking higher returns are nding them in the cor-porate bond market and emerging market debt (EMD).


14/41


Th : Sp i g p h po

Li g i g wo i a o p i a i h P GS o i ,a o g wi h G a y a ha p i a ho

a y a o ha h o i a o zo o y a opay h i a p i ipa o i oa , ha a i

a wap (CDS) p i a go o yi ih P GS o i o oa i No .

Th a i i i o h E op a a i h ia y i h a . B wh EU a i i -

a o ha h i p a o a w g y ,i i g g a ia i i y o p i a , wo o ia a y o a i g go o i h io a ha

h w wo o a i a i - , hia h a po a i y.

A o g ajo DM o i , h i a io a a i gp i a a y. G a y app a o i g i g

i ow h p o GDP i io a a y a xy a . h UK, Cha o o h Ex h q G o g oha p a o gh GBP 8 i io a g o o a g

igh i g y . h US, h w R p i a ajo i y ih Ho o R p a i a h No io

wi a o po i i a g i o a h i o pa i i y i po i y. Th ax ha w a y P i G o gW. B h ay po i y x . B o i g hi i ha

a y o P i a a i a a owxpi i g, a US a po i y wi h igh a o a i a y.

Japa whi h i a y a o o i p i oi w a i a o a i g h q i a

o USD i io a xp oo , ai a p oppi g pgio a o o i a a i .

F cu l c d G o a i a a p ia y h US a o ia Chi a p a h y io g a y

h i a a a w a A i a QE p og a w aajo o o h G i i S o o No - .

Th o iq o owi g h i g o ai a -a a io wi h a a i g o o o i a a ia

i a a i h wo , wi ho i i g o a io .

pi o hi , i p a o o ha h i w a o a h ag o h a o .

B h o o i i ha h i o a o o xp a y oh o i o ha g i o o i po i i a a oh i g.

Spain Portugal Greece Ireland Source: Reuters EcoWin

Aug2008

Nov2009

Feb May Aug Nov2010

Feb May Aug Nov0

100200300400500600700800900

1000

1100

B a s

i s p o

i n t s

0100200300400500600700800900

1000

1100

Xp iv O i U pig Ov ig bO D

China USSource: Reuters EcoWin

1985 1990 1995 2000 2005 2010

U S D

b i l l i o n

-250

-200

-150

-100

-50

0

50

100

150

U S D

b i l l i o n

-250

-200

-150

-100

-50

0

50

100

150

WO i Om imb L C b W UD C i

The US current account de cit totals nearly USD billion per quarter, while Chinasquarterly surplus is about USD billion. Many observers maintain that a major decline inthe US dollar (USD) exchange rate against theChinese yuan (CNY) is essential in reducingthis nancial imbalance. In the summer, Chinaresumed CNY appreciation against the USD,but so ar the pace has been very modest.

A ter minor sovereign debt worries about the PIGS countries(Portugal, Ireland, Greece and Spain) late in the summer,more recent concerns about Ireland in particular have spread to the others. This has led to skyrocketing costs or insuringtheir -year government bonds using Credit De ault Swaps(CDSs).


15/41


h :

l d h c

EM now a natural part o a port olio

Large capital ows to the EM sphere will continue

We oresee good potential or EM assets

Si ha p i o o o i a y Ma h , g-i g a (EM) ha a ig a o i a o g o h a a-

y a i o . Thi i i a a i api a i owo h o i , i g i ha p y i i g ha p i , -

y a a o p i .

Th high g a y i i gi g

a o pa o op a (DM) ha w -j i , i h pi o a wo- p wo i a i g y a . A ho gh h g o a o o y

h o gh i wo y i a p i h G a D p io oh , h EM ph ha a a o g wi h a y -

i p g h. o a , ECD o i a ajoha g i h o o giga i a ia i , high -

p oy a ow g ow h. Thi a i i h a o whyw a a y o h ha a h EM ph o a

hoi po i io i o g o a q i y a o a io .

i o h wo - p ha h EM ph ha

w a h h ha g o h a ia i i wi h yi go o . Th a g o h o g- po ia o EMo i a a o wi y ow , a h a w a a y

who ai o i g h p ai o h EM ph . B wh ha h i o h ip o y a a wo a , h wa -

i g gi o i g. Who o wha wi i a p i ow h igh , wh h i o o i y ha a a y o -

w igh h EM ph i i po o io ?

Y pi h a y a h i - i oi w, o a i ha EM a ha o o gi . Soa hi y a , g o a i o ha o gh o q a i y i -

. A wo o o i o y gai a io , h i owi o owa a ha g a g ow h. Thi i whyi o a i y o o i a i g EM a .

h i a w o , i o wi a o p pa og a a y a o i . F a o a o ip io ha

a , o pa i a i i g i i g p o , i awi ai ow o a x p io a o a a -a io a a a i i a hi o i a p p i . G a iapp i a i io a y a o a o o gi g

a .

x A a o h p a ia a o o i i i , hwo o i ia a a ow h i y i -

a o o - ow . D o o ay api a ow ,ow y a i W o i ha a o p h ow

g o a i a . A a- oo o a y po i y i h

G o i i oo xpa io a y o h EM ph . Foxa p , ho - o i a i a i gi g a - a ag a o p , whi GDP g ow h i o i a

ha pa p i g h pa o h .A a , a a g gap w o owi g o a g ow h

a o i a o o i a i i y, i i g a p i a ,a y, i a io . B a o g i i a io i p a o a, h a goo p o p o o i p i i a .

Continued growth trend in emerging markets

-60

-40

-20

0

20

40

60

80

100

2007 2008 2009 2010 YTD

EM bondsEM equities

Source: EPF

i FLOW i U D biLLiO

The in ow into EM unds has been massive, increasing therisk o large out ows i risk appetite alls, but we believe risk appetite will remain high and that EM assets have more togive.


16/41

16

y a , o a i ha xpo o gi ga o h ECD o i ha i . a , a

i a i g p ag o a o wi hi h EM ph .

Thi hi i a ow i i y o EM o i . Th ip o W a i a i g, a i i h

i po a i hi a a . a a a aia o i o , who a i a po i io o i a h ip ha . U p oy i h EM ph i o pa a i y

ow, whi i a o ow a h a i g a io i high.

o a y o xp a io w o o oo ah a ,h EM o i ha h o o i po i y oo o a wi hhi . Th i y i a a a i y high, a i a ya h i go a i a o i g. Th EMo i a h i a po i io o p xpa io a y a

a o a y po i i a . o W o i ,how , go a o o a h a h y i

a ha a a y a h o a o z o.

d h a o g - p p i , gi g a o -

i i a i g y oo i h i o h .D op o h pa a i i a ha a pa a ig

hi i way. D i g hi p io , g ow h ha 4p ag poi high i h EM ph ha i h ECD

o i . A a who , i EM o a ha p high ha h wo i x, a h i i ( a -

a o a i i y) ha g a a y a o h a a iECD o a .

Th xpa io i gi g a ha p i a i y o a - h o h i i . B o ha , opi g o -

i i o i p o h i a . Fo h a ia a , ip a i i i ajo i x pp i (MSC , FTSE a S&P) ha

wha i a opi g o a op o y, p -i y. D i g h pa y a i h gi g a

o p wa a h h ha o y a w pg ao opi g o op o y. A i o a a

So h Ko a, whi h w y a i a op

o i , o y Po ga a G ha a a o hop a go y, a o i g o h i i . B o ay h

wo o zo o i a o o a ia p oa h i pa h o o y wi o g, o o a if .A a , a i a i g ag i ha p G aPo ga o h i wa h i o h ow g a i g.

How , a o o i ha ow g a oopi g o i o o i a ( a y o i

wi h a ha a o if o a i a io a i -o o gai a o). Fo xa p , S a a & Poo haow g a A g i a, Jo a , Nig ia, Pa i a , S i La a,

V z a a Co o ia. Co q y o h o o iha ai o op a h pa o hop o . Th aa a hi o i a xp a a io o h ho o i g .A o g h o o o a i a o hip , wa a i iwa , o p io , hyp -i a io a o i .

B h pa a ha wi ajo ph a a , o hpo i i a a o o i . Mo opi g o i ha i p -

a - a hi g a o , a o g o h hi gai a i p o i g h f i y o h i o o i , gi i g

a a o i p , g a i g a ia a -, a i g po i g po i i a o o i g

o p io . A a , h EM ph ow a o o ia y o a g o ha p io y.

Hi o i a y, a ga i p o wi i h g o a o o y haa y op i o a - a o i h EM ph .

o a io wh a opi g o y o o y ha i a ag , i ha a i io a y p i g i o .

B hi i a o , h o a . Th a i ho o i pow o h w a i i h hai .

How , h a i a o EM o i ha aha a i y wi p a o p io , a i po i i a a

a o o i o h i o i . B h o ia o i g w .

h w h w chTh EM ph a o o a o 4 p o wo GDP(a j o p ha i g pow ), a i ha i g owi g ap-i y. Chi a i xp o pa h US a h wo a g

o o y y , a ia i xp o pa h US y. Thi xpa io i a io a o o i i a o i

h o pa i ha a a i h EM ph . h Fo4 i o h wo a g o pa i , h o h a

a i h EM ph . h a g o pa i , ai Chi a, a ha o y h US a . i a ha a wwo o i a ia i i g a ha hi i o i g a a appa .

Investment OutlOOk - december

Th : E gi g a a h pa

30

40

50

60

1998 2000 2002 2004 2006 2008

E M t o D M I ntr a E M

%

W m D FLOW

Trade within the EM sphere is accelerating and the percen-tage o EM exports going to developed countries is alling.This trend is bene cial to EM countries, since they are lessdependent on debt-burdened Western consumers.

Source:SEB


17/41

17

A a ago, gi g a a o o o y 4 p o g o a o a api a i a io . Si h , h gha a i y g ow a ow a a a o 4 p ,

hi i i y ow o i i g h o o i iz o h EMph . xp a a io i ha o EM o i i ha

i io o wha q i i o ig i o ay ow . a -i io , a y a g EM o pa i a o y a a p -

ag o h i ha a ai a o p i a i o .

A o o i a a ia a i h o i oa h i op o h g o a o o y i a , EM q i-

i a i y o oo h i ha o h g o a q i i i x. hi o a h a pa a i g h pa a ,

gi g a wi a o o p o h g o a i -x i a 4 p i . A o w igh i g i EM

q i i o ay i h i y o ga a a w igh -i g wi hi h a i y a .

x u h m hW goo p o p o EM- a a , ga owh h h y a q i i , i , x i o i io o o i i .

Fo q i i , w a o i i g o gg o w igh i g EMha i g o a q i y po o io . Th o i ha w -i ha h g a po ia i h EM ph a R ia,

Po a a T y. D pi ha p y i i g ha p i , a -a io o o app a xagg a o EM o x ha g .Th P/E a io i ow , o a a o h a a i g

h . D i g h , h a ag P/E a io i h EMph wa . EM ha a a i io a y a a a i oo pa o h wo i x, a o h o aa y i o h hi i o ha a ow o o p , whi h i i i a a i g. B gi h wo- p

o o i i a io ow p ai i g i h wo wh h

EM ph i h o g a i h a i o i oq a y j i .

A a , h o ig x ha g a i o o y iapp i , h a a yi g a i o ia i a i a o yi p a (wi h i -

o o owi g wh i a a ow a p i g h io y i o p a wh i a o yi a high). Ah a o poi owa o g EM i o pao h ECD ( a o h C i io o hi po ).

a a i way o gai i g y xpo i o yo i y EM o i . A i o h xp po i-i o y o , i o a a o a

a a ag o h high yi p ai i g i h EM ph . a i io , o a i a poi i i ia o i i y

a x i o po o io i o a a g o a haa g a . o i a oppo i i , a

i i EM o ai y p o i y xpo .Ba o hi o i p i a io ( o a i i y), y o -

a o o a o wo hi a yi oa o o hi o p i a io .

ia a a o y o o EM xpa io . a i ha p i o i ia a wi o i o

i a h a a a wo o o i o y, whi h ii g i y h EM ph . i po a pi o h

p zz i p i o a io i h i a io i h o o i i -h g y Chi o o y. A a ow i a a i ga i i y i g h , i ia a a a ow poi i g

owa a a io . a i io , h i o y aw- owha oo p a i Chi a i g h ha o o o , a a i po a i i g o agai . o a -

, opp a a i i ha h g a po iaa o g i ia a ( h Co o i i io o

hi po ).


Th : E gi g a a h pa

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2 0 0

1

2 0 0

3

2 0 0

5

2 0 0

7

2 0 0

9

2 0 1

1

2 0 1

3

2 0 1

5

2 0 1

7

2 0 1

9

2 0 2

1

2 0 2

3

2 0 2

5

2 0 2

7

2 0 2

9

Actual

Expected m gi g m k CCOU FO piDLy g OWi g p C g OF

gLOb L OCk m kC pi Li iO

Progress in the emerging market (EM) sphereis noticeable on many ronts. The political in-

uence o these countries is increasing as their economies grow. EM stock exchanges havealso accounted or a ast-rising percentageo global stock market capitalisation in thepast decade. I the same pace continues, EMexchanges will account or per cent o aworld index as early as .

Source:Fa S , MSC a a, SEB


18/41


Government bond yields have been alling or a long time

What will be the next low-risk investment? The traditional role o bonds in a port olio

needs to be re-examined

Ma a way gi h po ia o g a , o i w ay i i o i i g ha h i po -a i i io a i g a i y i .

ag o yo g wo a i i g i o o oa o i o a i g o h i pho ha a ai o p p io o how po o io a ag wo .

a i y, o a ha g h i i io o o wi ay a ; h y i i i yi g h hi . A o h o a ,i i i po a o ha a o o g- p p i .Righ ow hi a o ha gi g i io a y a , a hi ha wi ha ajo o q o po o io

a ag i g a .

y ld d d w w dFo a y o g i ( i h a y 8 ) h wo ha wa hi g o yi ow wa . Thi ha a o -q o a a o : - ow i a io i h wa o

i a io - gh i g o a y po i y, i a g o a o p i-io , ow o o i y p i a o h pa a oo a a g q a i y o w p o io apa i y i opi go i , whi h ha a a i g p i o a y goo .

B o hi , o yi ha i i g ia y i h, a a o api o o i g ow h a a o -

pa yi g o p i io o a i g a h ai y o i i gi a io , a o g o h hi g a y wo oi p i hoa g owi g g i i y o i h a h US.

Bo yi p a i h a y 8 , p ia y a ho oi p i ho ha i p i a io o o - igi

i a y i ia i o i . Si h o yiha a ha p y, a o ay h y a hi o i a y ow.

Thi ha a ha go o ha a gooi i g h a p io . Th o a o i a

o i a io o h i a a whi h a o i i ao i o a a a io . Th a o o i a

wh i a a , i h o w i a h i a . Fo xa p , i a o i i wh a

i a i p a a i a a p , h a o h o i . A a o q , o

h pa y a o ha a y goo i ha q i i i g a y p io . o h wo , i

a i g ha o pai o .

Th ip i o h a o - io a o a i hai go o yi ow o a o i a -

a io h o wi g a y ow . Th io q o hi i ha go o a a aa wi o p o i h - i ha p op

a o o.

Po o io a ag o go o o ow hi i a po o io. Co i a io o q i i a o ha

hi o i a y , a i a y a ai , a oo o a j -i g h i o a po o io o a i o i i

.

l w, uMa y p i a i o ha a o ho a i io a ix

ha app y i i a phi o ophi . To ay h i a a gha a y h a gi wi g a y ow o gi , p i g o how h a ag hai . Th i wi o a i y, p o i ha o yii . Thi i ho o xagg a o ay, i w i

a o g p p i i xi . A o a , w ho o i wo a a - i i a a o o h .

To ay go o yi a y ow. o o ih y a o hi g . Sw h y ha

g a a y g o i , h y ai ow. Th y a y -

o -y a go o i a o . p iSw , wh i E op a h US.

Do government bonds still belong in aport olio?

h :L w

d ld w l

h


19/41

19

To ay w ha a wo o o y ha i g a a y i p o i g.M a whi api a a a i g h p y a xpaq a i a i a i g p og a i h US, ig o p h

ow o yi . G o a y, hi wi h p iq i i y i o ha ia y a p o yi ow o a p io . W

a o o h i ha a o poi , yi wi g a a yo pwa . Thi o a o o a g , i i a-io p i h W i y ow.

w l cTh a a a y wo o i a a io : go

o yi wi a i , i whi h a o ay wi o i . Th o h i ha yi wi i a a o -q o o g o o i g ow h, i whi h a w a

xp ga i .

So how wi i o ha ? h , h y wi i wao ha ip o o a i , ai a

o i g h i ha p q i y ho i g a . Thi aha a a ag a i y o a h o o h ho o

a hi hi a a . Fix i o a o i a -ag wi h a a o i o a h a ( o

xa p a go o i x) wi i a .

E o ay, w a i g a g owi g o y a -ag x i o i . Th y a a o i h g

wi h ow i a a ha o o o i ,a a go y ha wi o g owi g i po a i h .So api a wi i way i o o po a o , a

ha ha way o o i a ha wi o i .

Th p a w High Yi o a q i a go - o , o xa p , i i wi a i o ha h

hi o i a a ag . Go o a p oy a i

i po o io , a o a a oo o a i g o po i o . H h o a ay a a

a a i i wh yi ha a a h ah y ha . A ho gh q i i wi ha h a ha

i o a o o , o yi ha ha o ow ha h yi o q i i ha o a a a-i o a i o a poi .

qu ld c l c o a io w a a i ha o o h wo a -

i g o a ag , Pa i Ma ag Co.(Pi o), ha a q i y . w a ha o

a a a o a y a a h g o a o o i -o y wi o i a a a i y h a hy pa , q i i wi hyi o -4 p wi app a o a o a a i oa po o io a ag .

Po o io a ag a i o wi h o wpa h o i i a io a w o o . h

a ag y , h g a o a ay ho a o o a g owi g o i o .


Th : Low go o yi w po o io hi i g

-20%

-10%

0%

10%

20%

30%

40%

1 3 5 7 9 11 13 15 17 19 21 23

Year

Real return 1945-1969 Real return 1985-2009

U O bO D iDiFF yi LD vi O m

Swedish government bond yields bottomed out in the late s and then peaked in .During the -year period rom to 6 ,the return on the government bond market av-eraged a modest . per cent annually in real

terms, while the corresponding gure duringthe period o alling yields was .6 per cent.

Source:Di o a , E oWi , SEB


20/41

20

h :Wh w ll hw h h c

lf c l cl ?

Looking ahead two years, the consequences o stable economic growth look promising

but the question is whether there is upsidepotential le t

Considering pro it estimates, the answer isprobably yes, despite a mixed macro situation

No , 8 h i a io i h Sw i h oa , i o i p a o h wo , wa p a . Th

a ia i i , whi h ha g wi h h -p i i ia y a a a ha a i , ha a a i pha . ThSw i h o y a o , a h US a a h

F a R i a o wi h a ga i yi . B aS a ha a a y i 8, o S p

ha y a h a o a o h ajo i a ,L h a B o h . Thi a p y ha p io a o

h wo , p ia y i h x i o a . Th Sw i ho a ha a i g i h o , a

o hi ay h S X R x a h i ow poi .

w c dNow, wo y a a , h i a io ha ha g . Th a a ho h a ia i i ha q i o i a o a y p o-p i No h A i a a h o E op , wi h w x p-

io h MX No i Ex ha g S o ho a o h Sw i ho x ha g ha a i ph . Th S X R

x ha i y p , a h ig q io ow iwh h h a h p i i a o o , o wh h

h wo o a wi a a a o p hap ow wa . Co i i g a a y p o o a o h

x w y a , i ho a y o a w hi q io i haf a i , i i o a y ha i p .

h o g , a a ia a a i y xp a-io o , a i g i i o a o . Ah o No 8, xp a io o h o h a i y

a o pa i o h S o ho x ha g w o a o ap o o SEK 44 i io i g ha y a . A h gi i go 8, xp a io ha SEK 6 i io , o h y ha

y p . Exp a io wo o io a g a a y i h a o o wa i a y i

i h o o a a a ia a . Th a a wa a o SEK i io . Exp a io o h x

o p o y a , a i g a , ha a o a awo a ow h y a a y . Ea i g xp a-

io o o o a h o A g : o y SEK i io o h y a a SEK 4 i io i (i

o h wo , ow h p o po o 8). Aha , xp a io ga o o pwa .

ay pa a oxi a ha h MX No i Ex ha gS o ho ha a a y o o o y a No

8, ho gh p o i a o i o go a-

a i ow wa a j i h o owi g . Whyy q i i i h wi wo i h ? Eho gh hi i hi o y, h q io i wo h a i g i o o

a a ha i .

Th ha ow i a hi . how h p i / a -i g (P/E) a io i S o ho , wi h o i g - o h o a .A h o No 8, i hi a ow o 8. . Th h P/E

a io o o a p a o .4 a h o S p . Thi o q i y, i ha p i w i i g whi

p o i a w i g ow ; h a o o h a-io i a whi h o i a o a .

How a stable economy will a ect the stockmarket

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

P/E ratios, OMX Nordic Exchange Stockholm

C iv p/ iO

P/E ratios in Stockholm, based on expected pro ts 12months ahead, bottomed out at 8.1 in late November 2008. A ter that it has risen, but it remains relatively low. (Chart 1)


Source:SEB


21/41

21

i g h P/E a io gi a a o h xp o h o x ha g . i o o pa hi o

o yi , o xa p . h o 8, h wo o

h a ia i i o o , a a h o J ya Sw i h -y a go o wa i g q o a4. p , a o h a a a y a a i wh h

-p i i i ha xp o . Wh h i i a p agai ,hi yi api y . Th ha ow i a o a

( a o h i P/E a io) a -y a go - o yi .

Th i ia (o p a ) w o a ao yi ay ga a a i p i , h x a

ha h o a a i o o ho q i-i i a o x i o i i . Thi i i a i h

ha o h x pag . A h o J , i o h wop i y wh h -p i i i o o , hi p aa h a ow o . p ag poi . Th h i p i

i a o a x a h o No 8,o ha 8.8 p ag poi , whi h i a h i ii a io w .

A ho gh p o xp a io o i o a i g h o -owi g ix o h o o ( ow i g o a , o a high P/E a io), h a o a y high i p i wa

y h o a p , a hi gai x apow a o a i g -y a go o yi .A h o S p , h i p i a h a

w ow o .8 p ag poi . A io a i , p oxp a io ga o a j pwa j o ha ,

h pi g i ow h P/E a io (a h y i a h ip i ). Th a o o o wa ha p o o h

o a o pa i a h SEK i io , o a o p high ha o a . A p , o a o p o a a SEK 4 i io , o p high ha jo a y a ago.

Thi a a o h q io o how h a wi p -o i h . L xa i how h i a iooo . Fo a o a p a o h p o

p oj o hi y a , a o a o a a o h p high ha o . Th o a ha

a j pwa oo, j i ho o . A ho gh h SR x ha i a y p i h oS p , h P/E a io o h o i g w o h ha

a o .4 o . , a how i Cha ; i o h wo ,h o a ha i a ha h o x ha g i x

Th o h S o ho x ha g a a .8 p a h -y a go o yi i . p , whi h

a a p a o o ha p , a how i Cha a . Cha a o i i a ha h i p i i

a y high.

F ll u h l uGi a ai a ia wo , i ho po -

i o h i p i o a o o o a ,app oxi a y -4 p . A i g o o a a a

ha g -y a go o yi , a i p io p i h i o h a g wo j i y a

o g- P/E a io o .4, i p yi g a o a p oa y p . o y a o p o X i o , a y

i o ay, h i p i wi a a h oa wi i . B wha i wo i o i ha a o p o

X o o ow y a o p o Y a o o .

Li o o h o x ha g , h Sw i h x ha g o happy a o h F a R QE o ( o

xp a a io , pag ), whi h wi o h p o oaggi g A i a o o i g ow h, a a po a i y. B

o ha , o a w wo i ha h w a a -ia po i io o h Po g a i h go woh a h o a a y h E op a U io . B oha , h wa G . Co i i g h h g a ia i a -

a ha ha i p a o h wo o a y y a , i

0%

2%

4%

6%

8%

10%

12%

14%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Return on stock exchange Swedish 10-year yield

big p D b W OCk XC gU D bO D yi LD

Inverting the P/E ratio gives us the return onthe stock exchange, which shows an unusually high risk premium in relation to the -year bond yield. The latter ell below 3 per cent during the nancial crisis and has also beenbelow 3 per cent since April . (Chart )

Th : Wha wi happ wi h h o a i a a a ia i a ?


Source:SEB


22/41

22

i y ha h i p i wi a oo , p hap i h o g . a , i ha a a y a y

a y o p ag poi i o y wo o h .

Wi h ga o p o o a , o a a highha o , whi h i a high ha o a ohi y a . Thi a ha h i a a high oi . a pa a ai ha g o o who y a ,hi a ha h o x ha g P/E a io wi a o

. o . . B o i po a a h i i ia i i a ioo o a a j ha Sw i h a a y a y

a i g a a o q o o po a i o h po ,whi h a o i y p a p a o p o hi y a p o (a i i a o a y h a o a ).U o a y, hi a o ho h a o o o i i o -

. A i a q a i a i a i g ay h y hwo o a p ay , a whi h Sw i h x-po i y i i g h a y a o g o a, p hapo i g o o h pwa a j i h o a .

Fi a y, h q io i wh h o yi a go a y o hway p i h o g . E ho gh h a ia i i

ga a y wo a a ha y a ago, Sw i h -y a go - o yi ha o a ow h h p

o h ha o a io a y, x p i Ap i . E iyi a i i g, i wi o a y ow .

Loo i g ah a , w a h ay ha a a wo o o ha a io pa a wi p o a y o i a a o a i -

io . A p io i i a o h y a i i - , wi h ao a o i g o ha p i , app a i y. D i g hi p -io , h o i g P/E a io a i o o j o ( ha

p i ha g a a o h a pa a p o i aw i g a j pwa ) a h i p i a i -

w a 4 p . S a i g i a y May 6, how ,h o a o p i a o o o h. o h

wo , i g hi i y i p io , ho - o a i i yo high. Gi h ajo i a a i h wo o -

o y, i i i y ha o h h MX No i Ex ha g S o hoa o h o x ha g wi o po a y a o

ho , a o a a io pa a , h o g-o oo po i i .

-4%

-2%

0%

2%

4%

6%

8%

10%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Risk premium

ig bU F LLi g i k p miUm

The spread between -year bond rates and stock market returns may be regarded as a risk premium, which at present is unusually high.Considering the nancial imbalances that have built up in the world or many years, it seems unlikely that the risk premium will shrink drastically. (Chart 3)


Th : Wha wi happ wi h h o a i a a a ia i a ?

Source:SEB


23/41

23

m c u

Conditions or world growth have improved abit...

...and downside economic risks havediminished somewhat

De lation remains a greater danger thanin lation in parts o the OECD

Thi pa h wa i a ai y a o hwo o o i o y, a h o oo wo . o

h ai wo i wa a ow ow i h A i a o o y,p ia y h a g o a o ip io . Y h U i

S a o GDP g ow h i g h hi q a , ay a io US i i a o ha poi pwa . Th a -

g o io ha h a , p ia y a h F aR a h i QE p og a ( pag ). hwho , ow i i i h g o a o o y app a o ha

i i i h o wha i o h , a ho gh h a iai a io o go i o h E op i a o io o o a i a io a io ha i a ih y a a po i y .

a , h g o a o o y ha h po ia o g ow a ia i - ha a a y o a a i h -

. Th a io i i pa o h i ia i o i

( ECD) ai a g ha h i o a i a io . B io gi g a (EM) o i , h a iowa i a y high i a io .

US g ow h wi p o a o h whi wi g ha ia y i h o o . Th F a R

q a i a i a i g a wi i p o h o oo ia owa i a , i i g a a a a w a o a . Thi

wi h p p p i a o p io , o po a api a p i ga a xpo o y. So wha igh p i g wi

ow h g ow h a , how . U p oy wi a igh yi , i a io wi ai ow. A w wa o hop i i i h igg o o i i . a i

ha GDP wi i a y o ha . p hi y a , a i ha . p i a o o . p i .

Cb w ll u u h uE o zo GDP oo o g ow a i a ha . p

hi y a a a o h o i w hi pa h i wi hi h zo ha wi . G a y i

i g o a o g xpo a i g , whia io o h o zo , p ia y h P GS o -

i (Po ga , a , a y, G a Spai ) a y o p i i p o a a a i y a -

. Thi wo- p o zo wi o i i - .Fi a ia ai a a h E op a , o i wi h

a io a o - i g, ha a h a i i y p oi h P GS o i , h i p o a a o o .E o zo GDP wi i a y o ha . p i a . Low i a io wi a h E op a C a Ba(ECB) o p i a ow o a o g i i o o p-po o o i o y i o h E op .

D i g h pa ix o h , h B i i h o o y ha p -o ha a y ha o a . Fo xa p , GDPo wi a a a xp i h hi q a , a h

p ha i g a ag i i i o h a a i g a h

i o a poi i g pwa . Majo a a i y GBP 8 i io y / 6 wi ha p o o i a i i y,

Global economic prospects a bit brighter


GDP

2000 2002 2004 2006 2008 2010-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

P e r c e n

t q u a r t e r o n q u a r t e r

a n n u a

l i s e

d

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

U g OW WiLL k OFF DU i g

This winter, American GDP growth will lumber along at aslower pace than usual during a recovery, but in the courseo next year the economy will accelerate, uelled by the Fedsmonetary stimulus, as the deeply depressed housing and consumer capital goods sectors recuperate rom the crisis.

Source:E oWi


24/41

24

wi ho i p i g h o y. F h o a y i

i i y i igh o o y high B i i h i a io .

h ha o , Sw i h g ow h pa a xp -a io . Th o oo o h x w y a i a o y goo .

P i a a x p io a y o g i a i a io ap p i . Th g i o i g owa a p ap i owa o - ow . GDP i a a o

q a y high i h o h No i o i , h gio g ow h a i i w a o h ECD a ag . Th No i

o i a a who a a o ha a i y a op a a i y goo p i a .

F l J cA a o g a i , Japa g ow h a

ha p y ai y o h o - o g y . R i i a-o a howi g h agi i y o h o y. Th p ha i ga ag i x i a a i g ha a o a y o a o 4 i o . D a io i ai ai i g i g ip, a

w xp i a io o o o z o. E o o i i - a a ow i g i o a oa o . Th

go i a hi g a x a g q i a o USD i io , whi h Ba o Japa ha ow i y i

a a a h a w o o q a i a i a i g. Thiy a GDP g ow h o a y p wi o ow yg ow h o a o . p i o h a .

A ia i i i g h o o i a a ia i i hah i a h i po a o ha gio i h wo :

Si , i ha o g o a GDP ha g ow o j a o p o a y p . Thi pa , h GDP

g ow h a i A ia gi g o i a oow xpa io i a a i g a xpo , g ow h

wi ai high ha h a ag o h EM ph . W p -i ha Chi a GDP wi i a y o ha p hi y a , p i a 8 p i . Th o -po i g g o ia a 8. , 8 a p .

So a h o g p o a o h A ia o o i ha o o a y oa i a io p , a ho gh i i g oo p i

a p hi g p o p i i Chi a, ia a wh . po , h a a o h o i ha aiy i a a q i o a , a

o h igh i g a a xp oo . Thai o o i i i A ia a o o a i api a

i ow , whi h a o app ia io p o i aw a i i g p i o q i i , a a a x i o

i i , wi h h a o pa yi g a g o a .

L c w h w ld A hi y a o g p wi g, GDP g ow h i La i A i a

wi ow i i p a o h wo a -ag . a io o o p a ajo p o , ho ghA g i o p i wi i o ha p

hi y a . a i a io a o pa i o , h o oo o

h gio p i a i o g wi h g iq i a o a o . p o GDP a p whi h o a a o i wi a h

ll c l d c uTh xpo - o y o h pa y a i Ea E op i

o i i g. GDP g ow h wi a a h i o o hgio i g - . Whi i i ha h xpo -

p i h a a i g o a o o ow, hi goo po ia o o i a o a a a g

o a a g ow h gi . Th gio a i p o wi ha g a o i ha a g a y, a g

i a ow g a a y h i i g. a io wi ow g a a y i . K y i a hi wi h gi i g

ha o , gi i g i Po a a h Cz h R p i .

Th Ba i o o i ha hi h i p y i a -i E o ia, La ia a Li h a ia a how po i i GDP

g ow h i h pa wo q a ai y a a o h io p i i xpo . Capi a p i g a p i a o p-io a g a a y gi i g o p a , ai y ow

i a a o i p o i ho ho p ha -i g pow . M a whi h a a g ai i g i a ai h o o a a o a p o a iz ap i g i i La ia a Li h a ia.

d l l w hTo a i : W p i ha GDP i h i EM ph whi h a o o a y p o h wo o o y(a j o p ha i g pow ) wi i a y a o p

hi y a a 6. p i o h a . A a - o hi high xpa io a a h a y oo o -

a y po i i o a y ECD o i , h wo o o ya g ow y 4-4. p a y a i - , o pa o

a a ag o ha . p i .


Ma o a y

China, RR2 reserve requirement for small Chinese banks, CNYIndia, repo rate, INRChina lending rate, CNY


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

P e r c e n

t

2.5

5.0

7.5

10.0

12.5

15.0

17.5

P e r c e n

t

2.5

5.0

7.5

10.0

12.5

15.0

17.5

C i D i Di mO y ig i g

The central banks in China and India have hiked their key

rates due to in ation. China has also raised its reserverequirements or banks. These tightening measures seemwell-justi ed.


25/41

25

cl :qu

Attractive valuations and stable pro it outlook

combined with a gradually improvingeconomic picture

are making us more positive towards thestock market

Wh w p i h h a i oInvestment Outlook iS p , g o a o a w ha a i y ow

i app i . Sha p i o a oa o i g A ga a a o p a ga i A i a a o o-

o i a i i a h i g y i i i o a oip io i h US.

Th wo i w o ow i g S p a opo i i g app a , o h i h ow o US a i ia o Chi a, i h o o p o io g ow h. Thwo o a ha g a y how po i i g ow h

i h . Thi q a o po a po a app a i gi a y o , h i g h a goo oo ai a wi i g o a i .

D i g h p io S p - o , h wo oa ( a a h MSC Wo x i o a i )o y . p . P a i a y h i p o

o a y S p o i - o . Si h , h aha o i way . Thi i a o h A i a o

a h way, wi h a gai o o ha p (io a y) a ha i g agg hi a i i h y a .

Sha p i o h h o ogy-h a y NASDAQ x ha ggai a 8 p , US a - ap o pa i a op o y w . Thi a o app i a h g o a ;

h o ogy o pa i a a o pa i p oh ha h wo i x.

h o a ha p o o g y i g hi p -

io w Ho g Ko g, Chi a a M xi o, o ow y R iaa ia. a , o a i i i h gi g aph o o wha a ha h wo i x, whi

E op a o a p o o wha wo . agai , h o o - a i g o a i h wo waJapa , who i x a gi a y i o a y.

A avourable situation or the stock market


90

95

100

105

110

115

120

125

130

2009-Oct 2010-Jan 2010-Apr 2010-Jul 2010-Oct

S&P 500 TR MSCI EM Net MSCI Europe Net OMXS TR

m gi g m k D W D Op

Stock exchanges in emerging markets and Sweden have per ormed better than those inthe US and Europe since October , mainly thanks to continued high economic growthand a good pro t outlook. This autumn, USexchanges climbed as better macro datahave been presented. Meanwhile European

exchanges have lagged behind, with concernsabout sovereign debt and banks still hangingover the markets.

Source:B oo g


26/41

26

p u u d lTh o po a p o o oo i ai y a a i o i i g

o p a a p ay . h US a E op , o pa ia p i i g p o i a o w a 4 p i , whi p o i h gi g a ph a x-p o i a o wha o . Co i i Chi a aB azi wi how ig i a y high p o g ow h, how( o ha p ). Va a io i ga aa a i , wi h E op a q i i a i g a p i - a i g(P/E) a io j a o i x y a o a p o -i . Th P/E a io o gi g a ha i o wha

i A g a ow a a , j ow Japa a hUS, wh ha a a i g a P/E a io o a o . Th

o pa a i y ow a a io , o i wi h a p oo a , a ow oo o high ha p i .

l l c a i io , h o o i pi i g a a y i p o i g, whi h

a o j i g a op i i a o h p o ao h wo o a . h who , US a o a aha o g ha xp hi a . G o a o-

o i i i a o a o o i o , wi h h ECD a A iahowi g i p o , wh a Japa i i ha p y.

W a a h gi i g o a g o a o y, a i oo ai w ha a y a o goo g ow h ah a . a o a-

i i o i o p o i p i p i , o pa y p oo a wi p o a y i , whi h ay h p oo ha p i

i o a ha ha ow a a io .

E o o i o wi h ow y i a i i i y h a o -i a io , oo a pha a i a p o w i g

h . Thi a , w ha ig ha o y i-a o ha i , o xa p i ia a h o -

ogy ha . D i g h pha , w i i i wo ho i g o i ia wi h a p o ha a a i a

i h y . W a o p o pa i wi h high xpo oa -g owi g o i i A ia a La i A i a.

D d d w ddl cl i o i o gio a o ha a how

i g h g ow h, o i wi h a a i a a io . W wha w a a hi g o i Chi a, ia, B azi a a i-

o a o i i h gi g a ph , whg ow h i i g i y a api y g owi g i a ha ii a i g y a i g a , x y i a api a goo .Do i o pa i a i g o hi , a o gwi h W o pa i ha ha a g xpo o h

o i . h o a h o ogy, o i a ioa whi goo gi g a o pa i a a o a -i g o g a a . Th y a o q i g h wo a a apipa , a i g hi h i W o p i o y o i ghigh q a i y a ow p i o h i goo a i . ag o a q i i po o io, w a h a a hi g g a i po -

a o h EM ph . W o o wa o i h gi ga ai , who jo y ha o y j g .

m x d c d c xchA o h No i o x ha g , h i p o a ha

po i i ix . Th ig wi hi a i ho S o Ex ha g , whi h gai o ha p w S p a No , o a o wi ah a h wo i x. H i i a o p o w -

i g hi p io , wi h a p o a y p , whi iCop hag h i x o y o y 8. p . Wi h a

p o j a o p , h MX No i Ex ha gS o ho wa o o h wo a ag o h p io .

Ex p o Sw , how , h No i i i a ha oa g o pa y o o a g o ha o g y i pa h

p o a o h p i o y o a yi o i w igh i h x ha g i x. Fi a , oxa p , No ia a o o a y p o h H ix ha g , whi h a o i a o o pa i ha

a o g y p o how No ia p o . D aha No o No i , whi h a o o o ha p o h w igh o h Cop hag i x. No way, oi p i

ha a pow o h o Ex ha g i x,


A a : Eq i i

9095

100105110115120125130135140

2009-Oct 2010-Jan 2010-Apr 2010-Jul 2010-Oct

S&P 500 Consumer Discr. TR S&P 500 Industrials TR

S&P 500 Mater ials TR S&P 500 Consumer Staples TRS&P 500 Health Care TR

CyCLiC L C O v DmOvi g UpW D

This autumn there has been growing interest incyclical shares, due to the gradual improve-ment in the economic picture. Global indica-tors rose in October, and we probably haveseveral years o good growth ahead o us. OnUS exchanges, the industrial and materials sec-tors have per ormed strongly in recent months,while health care and consumer staples have

lagged behind.

Source:B oo g


27/41

27

i a p o h x ha g i o o hao . S a oi a o a o o o ha p o h

o ha p i i x. Th i i o a way ai ha h

o a i i i h o i a a y i howo ha ha p o .

ha p , Sw i o i i . A ho gh w haq i a w a g o pa i ha w igh h a i y i h i x,

o i g o pa y a o o o ha igh y a o 8p (H&M) o h i x. Th a g o pa i a a o

p a a o a o o . Fo xa p , h o -pa i wi h h high a api a i a io i S o ho H&M, No a, T iaSo a, E i o a Vo o a p

i o .

i c B o ajo a i o hi a p i ha p i i

h hi q a o pa y po p io , whi h ha g a yp o i p i p i , p ia y i o a i g . So

a , o w ha wo hi o h po ha o ia o o i i wi h a a y xp a io . Co pa i haa o how ig i a y high p o ha i g h o -

po i g q a o .

B a o a y o pa i pa h i a ay a a y o h p i a io o h i po i oa y a h a - p h a ha i

i p o o a o pwa y . p a o y . p . P o g ow h o h y a i ow

xp o 48 p , h high h g i y a .

Thi y a p o g ow h ha a g y o o i p oa gi , ai y a i ia o pa i , a w a ow oao a a . Cy i a o pa i , p ia y i h gi -

i g o , ha o h o o i o y. Thiha i a ajo p o g o h o . Th o g

o a ha a i y ow a i g g ow h o xpo , o y y a h a a y o ha a .

A ha p i ha o i pwa , a a io ha a -a y a o i . A p , h o pa i i S o ho MXS i x a a i g a a P/E a io o .6 a oxp p o . Thi i ow i a hi o i a p p i .

D i g h pa y a , h P/E a io ha a ag .a o xp p o o h ah a . A i w oo ah ia a , whi h i i a o o h high a a-io o h a y a h ow a a io wh h oa p g i g h i i i , h -y a g i

i a high a . .

C u d l h c

B a ho gh h Sw i h o a ha a a y p ow hi y a , i ha o po ia . W a i i a a i ya y pha o h o o i y , a a h o o y o -i o gai g h, a wi i a . So a , a a g

p opo io o a i g i p o i h a a i go , o xa p , ha o o - a i g a f-

i y- ai i g a , a h ha i p o a . Loo i gah a , how , w a xp p o o i a i g y

a o i a a a i g high a . Ma yo h ajo gi i g o pa i ha ha a a y p -

i h h i hi q a ha po ha p y higho oo i g o pa o h hi q a o a y a ,whi h p o i goo a p o a ah a .

a i io , w ho o o o ha h i p oa gi ha i ia o pa i a hi i g h i

i i wi a away a h o o y a a g i p o .Ma y i ia o pa i i a ha o ha p

o h o a i g a hi i g h i i i ao a a a . o h wo , h y wi o wh a o . W ho h a o oo o -wa wi h o o o i p o g ow h o h x

a y a .

D i g a , w xp o po a p o o o i

i a i g y 8 a p , p i y. A a y a xy a , p o a xp o x ho o h p a y a

. B i pi o hi , o i wi h ow i aa ow a a io ha h hi o i a a ag , h MXSi x i i a y p ow i p a .

Th a h a y i i a io ha wi hi h a ,h o a ay a o o h a g a i g ha ha

p ai o o i . a igh y o g p p i , i aygi o i owa w o . Thi o o a

ha h p o wi pai ; w ho o o i gp o - a i g i o - p i g h a p io .Th a i o o ho i g a o h o a ,a a g a i a h wo i wi gai h pp hai a o h wi po i i q i y i i a .

A a : Eq i i

0

20

40

60

80

100

120

2000 2002 2004 2006 2008 2010 2012

EPS

p OFi O C CO D L v L

This year, total pro ts o companies on the OMX Nordic Exchange Stockholm are expected to increase by 48 per cent, and in 2011 by another 12 per cent, yet the exchangeindex is still nearly 20 per cent below its 2010 peak.


Source:B oo g


28/41

28

cl :F x d c

High yield and EM debt the winners

Record-low OECD key interest rates and theFeds QE ...

...are making assets that provide better yieldslook attractive...

...especially High Yield (HY) and emergingmarket (EM) bonds

E o o i g ow h i ajo ECD o i wi ai y owi g h x o p o y a , a a io a y o

ow wa p o p i wi p o i a . iaa a h ha o g a o o o i h i a-

oo y i a po i i o a o g i a , i oa , a o a h q a i a i a i g (QE) p og a .

Th F a R (F ) whi h o ow i io o h h A i a o o y a i a io i o y

a o USD 8 i io wo h o US T a y o whi a a x , a p og a pop a y ow

a QE ( a o pag ). A o h a a , oo a i ha i wi ai a - . p i i - .

D o ow i a io , a ai o o i o oo , ajog a g ow h p o i h P GS o i (Po ga ,

a , a y, G a Spai ) a a o g o, w iha h E op a C a Ba (ECB) wi a ow i a o

ai a p i h p i g o . Thi a haECB o a y po i y wi h ai o a g y o h o o h E op .

Th Ba o E g a (BoE) wi i i o a y po i iagai h a op o a i y ow o o i g ow h, i -

i g - igh i g, i a y high i a io a i -i g i a io xp a io a o g ho ho . A i g haB i i h GDP h how g ow h i h a

a ha h i a io a a whi ow o wha ,w p i ha h a po a hi wi o a

. Th BoE i i y o i h QE a .

m d c u l J

o , h Ba o Japa ow i a o y a o. o - . p a a o i a w QE p og aq i a o USD 6 i io . B a o h io o-o i o oo i Japa a h p ai i g a io , h y

i a i i y o ai o o z o i a F h QE p og a a o o .

C a a i h o o i y- xpo i g o i aCa a a, A a ia a N w Z a a a w a No g Bai No way a h Ri a i Sw a i a i

i a io . S o g o o i p o a , o i a ioi , a o a h o h a a a a a

i a y api i a i ho ho a gi i g h

UK, repo rateGermany, refi rateUS, federal funds rateSweden, repo rateJapan, call money rate


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-1

1

2

3

4

5

6

7

P e r c e n

t

-1

1

2

3

4

5

6

7i O iC LLy LOW k y

Slow growth, de ation risks and scal tight-ening are important reasons why major OECD central banks appear likely to let their key interest rates remain historically low or an extended period. Swedens Riksbank hasa diferent scenario or its decisions and isamong central banks that have begun toraise their key rates step by step.



29/41

29

A a : Fix i o

a a a o o g a a y a h p h i y ia h . A a i h a o Sw a No way, how-

, h a hi wi p o a y o a a o wha ow

pa ha i o a a w o h ago.

So ig o yi i h ECD o i wi i i -, ai y o a g p i o o owi g q i -

a i app i , whi h a a o a ogo i i . Th yi i a wi a i yg , how , i i a io wi ai y ow, o o ig ow h wi o pa a i y ow a ajo a awi p h i y i a a o ow o a g hyp io . B i g ow h i ajo ECD o i i g

ho o o w a o wha a ajo i y o o aa h F a xp i g o ay, h i a o io i ha

go o yi wi i o o y.

g w Ma app i o i y i o iS p . o a h ha o No wa o ha a i y goo i app i . A o g h a ow ha o a o a po i o ip io i

h US ha a a ha a o o o i a i i oa io pa o h wo w xp y o g. Th

a o o po a o , p ia y h High Yi(HY) g , a w a gi g a (EMD). HighYi , i pa i a , o p i y o g a i g

g o o pa i , whi h i a y pa o h wo a ohow i a i g y o i a a h .

A i g ha a i a i i y i i -No ai ya o a a ia p o wi a , h o oo

o h HY g o h o po a o a i igh .Thi i o a p i i g y a o o i p , h z o i -

a po i i o a a , h F Q p og a ,h a h o , a a i a a io a a h i i g

p ag o a p i a o g HY -i i g o pa-i i o h h US a E op . Th a h g owi g

a ia g h o h o pa i . h US h a, HY o pa i , whi h a a g o p oo h i p o

y a y p o h o o h hi q a hiy a . Th o HY o pa i i E op i a o .

o h p po hi h F p og a i o pah way o high p i a o p io a o i -

ia i i g a a o ho ho a i ,

whi h a o g o h hi g wi h HY a . Thi ip ia y a h i i io ha A i a go -

o o h F a xp o i iz a i x i o i i wi h high yi ha go -

i i h a h o ai y HY oa EMD ( ow).

o h i o h A a i , h ha o HY o pa i haw a p i a i g a - 4 p ( - o h g ). Si h , h a p i ha a

p y. D i g h i o h o , o xa p ,o y A i a HY o pa i w a p . o a

i ha h a p i wi i o - p y a y. Th a ag o x y a ay ow .

A i g a a p y o a o . p i g, A i a HY o a i a a i y p i . To ay

yi p a agai US T a y i i i a o 6.p ag poi w a o h hi o i a a ag o .poi whi h i o pa i wi h a a p y g o o

ha 6 p . A a a io a o a o a o a . p a p y a i a j i a yi p a o

ha 4 p ag poi . o h wo , h yi p a oHY o igh h i y o ha . poi .

c m ld o yi p a , o ig o yi i h g-

i g a (EM) ph a i w a o h i ECDq i a . E i yi i h EM ph a h ig i -a y o a a i . i ha o ig o yi

i EM o i ay i o wha wh h y igh h io a y po i i o api g ow h a ai o h a -

i g i , h i a hi a i y o a i yo a a a y EM i ha i ha p yi h . Th p i i o EM o h o

ga a ai y a , p ia y i h o aa o i g o h F Q p og a .

Th p o p o o g EM i a h EMD aa p ia y a a i o i o wi h i i h

US o a , o o Sw i h o a a h i a y.

RETURN%

RISK ( VOLATILITY) %

10 u d . 7.

i d d . .

h y ld d 9. .

&p h d x 9.7 . u ll h d x . 9.9

U i k D U i i O iC Lp p C iv

Compared to both Treasury bonds and equitiesin large (S&P ) and smaller companies(Russell ), US corporate bonds have

ofered an attractive combination o risks and returns over the past years. (Average annual returns and volatility since .)

Source: JPMo ga



30/41


cl :d u d

Tensions between emerging and developed markets

...as well as between asset classes... ...will create good potential or hedge unds

Th p o a o i h g ha a i i g. Th if y o h g ha o h igh

i a h y a h o i io o g a i g. A o i -No , h g a a who w p

a o . p o h y a , a g w ow h hi o i-a a ag , i a a p a i w a ha hi

i o o h w a y a o hi a a .

Th po ia o h g i g h o h y a oogoo . Th a ia a i o i g a i a a o a oh g , wi h a o h ha a ag o

a a a ag o i o o g a a . W ha a woha i i i w gi g o o i , o h o

ha , a o op i ia o i , o h o h .W a a o i g a o io i h o o i o h o

op o i , wi h i g opi io o wha o o o g h o o y o a o . Th U i S a ioo i g h o o y wi h q a i a i a i g, whi E op

o - igh i g. h g o a a a, h G ha

ho i g i g wh i ha if o a ha o o o i w a o o a io . Th wo io a y- a o ay, wi h o pa i ipa i g p ay .

Th US o o g h oo . Th io p o i o h g a a ha o g a a .

E gi g a o i a g app i g wi h o h wo i .Th a ha g ow h o o oo a i a a o o ai o a o . A o h i h q io o how h api a i g

a o a g xpo ho q io h awha i h p op i a , how h ow w i -

o i a a a oo , a wha i pa po i iwi ha o . A o h a a o a q io ha

gi h g goo oppo i i o po i io ha a o y, o io y o h o i io ha h a a y i

h y ha a i o .

Th a i a io i h a o a o h g haa p oy a i a a o g a a

G o a Ma o a ag o p i y hi . Th y a ao y y o y a a y i g i a a y io . Th y a a po i io i a a h ax i o i i , i , q i i a o o i i .

A p , w o ha G o a Ma o a ag a ai yi g i a x i o i i o g a a

W a o ha h y ha g o a o i ha h yi i g h ha o , wh ai y a o h

o o y wa g a . Th G o a Ma o ho i g w ha io a gi ha g a o a w p iJa a y , whi G o a Ma o o a agg ga a i i owa o o p i g h a p io .

Global imbalances will beneft hedge unds

0

100

200

300

400

500

1993 1998 2003 2008

Dow Jones Credit Suisse HedgeS&P 500 Total ReturnJPMorgan Hedged USD GBI Global

CO ibU i g biLi y

Source:B oo g

Although hedge unds as a group ell about 25 per cent romOctober 2007 to February 2009, in a port olio context they have contributed to stability over time. According to the DJCredit Suisse hedge index, hedge und managers have recov-ered their losses rom the nancial crisis, while equities havesome way to go be ore reaching their previous peaks.


31/41

31

T - o owi g y a i CTA (Co o i y T a i g A i o )h g wo i a way i i a o G o a Ma o, h y

o p a go i h o i wha a a io

ho a . Th i xp i i i a a y i g a , ha i g o p o apa o p i i g a

o , ga o a a .

A h i x , i g CTA h g ha gaia o p , whi a o h w ha a p - p g ha how ha i i i po a

o h igh h g ha a i haa h i x o i . Q a

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