The Mundus Brief: November

The Mundus Brief: November

Photo: Stig-Göran Nilsson

The Mundus Brief is our our summary of the important stories in Sweden over the past month

Not all changes in society are obvious or expected. November’s news flow was disrupted by two issues that did not seem likely just a month ago: the housing market in a rapid correction and #metoo. Although these issues rose to prominence suddenly, we suspect that they will not fall so quickly, and Swedish events will be influenced by both in the months ahead.

Housing a risk, but don’t forget the economy – its doing great!

Sweden is enjoying fantastic economic conditions, and normally this would be a time of positive sentiment and high living, not negative stories and fear of financial risks. November saw a continuation of strong economic data, as reported in Mundus Weekly. The government’s surplus is higher than expected due to strong tax receipts. Inflation is under control, exports are up, and forecast to climb further. In response, industry is showing plenty of willingness, with investments up 2% over last year. A regular survey of CFOs, a group whose biggest worry is currently that they will run out of talent, shows that they are more positive now than at any time since 2011. The OECD has just published its review of Sweden’s economy, forecasting 3% growth this year, and near that in 2018, and the IMF has also just completed a similarly positive report.

But financial markets seem to be ignoring the good news in the real economy, focusing instead on the concerns of the housing market. The Krona, which has been undervalued for years has fallen further, and newspapers are running headlines such as Homeowners are sitting on a ticking bomb – that could blow up the economy. The Financial Times is running stories highlighting where speculators with a bearish view of Sweden can focus their shorting activities. Why? The Swedish housing market has had a head of steam for several years, and Swedish property prices have risen strongly, even when compared with other international ‘bubble’ markets. The months prior to the Swedish summer hiatus were strong for house sales, and on the face of it, not much has changed since then. But, what started out as anecdotal evidence from real estate agents in the Fall that the market had slowed is now showing up in the official statistics. Stockholm prices fell 5% over the quarter. One real estate agent said that he expected that his own home was worth SEK 2 million less than if he would have sold it in May. So, is the market in for a rout? That still seems unlikely at this stage. As Mundus reported in the November edition of the Monthly Policy Review, the expert’s view is that this is a correction in prices, which had gotten ahead of themselves, rather than a collapse in demand. In fact, the government deliberately engineered the correction through the introduction of an amortisation requirement in 2016, which it is now considering tightening further. Hence, the future of the housing market ought to be within the government’s control. Of course, that is not guaranteed …

#metoo

This story started in America, but acquired a Swedish twist after an American actress encouraged other victims of sexual harassment to come forward. This happened on October 15, and since then events in Sweden have moved incredibly quickly. Just 6 weeks later 70,000 Swedish women have used the hashtag and other industry-specific derivatives of it to register their concerns, and a number of extremely high profile media personalities have had their careers shredded. Swedes are in shock for a variety of reasons; both because of the individuals whose names have come into ill-repute and surprise at the number of stories emerging from the woodwork. Why here? Dagens Nyheter writes that the high proportion of women in careers, tradition of social movements and high union membership are the reasons for the strong impact of the #metoo campaign in Sweden. In addition, Swedes are online and social media savvy. Well worth a read.

The combined intensity of #metoo and the housing market instability has tended to push political stories from the front page. The EU summit in Gothenburg came and went without much fuss. PM Löfven used the event to meet EU leaders such a Theresa May, Emmanuel Macron and Jean-Claude Juncker, and to profile political themes such as a ‘social Europe’ and ‘green innovation’. COP23 was held in Bonn and, once again, Sweden made important contributions to global efforts.

Security and defence on the agenda

Russian-Swedish relations became even frostier with the expulsion of diplomats in November. Despite Moscow’s protests, its machinations are continuing to push Sweden towards defence partnerships with partners such as NATO and the EU. In November, Sweden decided to buy the American Patriot missile system, for over SEK 10 billion. And, it is poorly understood in Sweden that the government has in fact just signed PESCO, the EU’s Permanent Structured Cooperation, allowing for EU states that wish to drive to much closer defence cooperation to do so. Federica Mogherini, the High Representative of the EU for Foreign Affairs and Security Policy, described it as a “historic moment in European defence.” In the latest edition of the Monthly Policy Review, Mundus looks at the reasons for Sweden’s involvement.

Gearing up for the 2018 elections

2018 is an election year, and Mundus is of course gearing up our coverage! Swedish politicians are also preparing. As we have analysed in previous reports, the indications of voting patterns suggest no stable political formation following the next poll, and as a consequence, political parties are desperately searching for something that can work and put them on the government benches. During November, Jimmy Åkesson was quoted as saying he’d rather Stefan Löfven than Annie Lööf  no doubt because Centre Party leader Annie Lööf has made it clear that she won’t give Åkesson’s anti-immigration party any influence. And, in a similar vein, 6 out of 10 Social Democrat politicians want Löfven to seek support with Alliance parties rather than their current Left and Green allies. This could in part be a reaction to the current internal struggles within the government – Löfven and his leadership have been at loggerheads with the Greens who want to allow Afghani youths to remain in the country. A compromise was reached …eventually.

One issue that Löfven hopes he has resolved is the IT outsourcing crisis. During the summer, the IT scandal rocked the government, but the crisis is rarely mentioned in newspapers any longer. Still, cyber security is likely to be an issue come election time. We took a deep-dive into the issue of cyber security and digitalisation in the latest edition of the Monthly Policy Review.

Crime is likely to be one of the defining issues of the election campaign. This month, Mundus News included a shooting in Helsingborg, sex crimes on the rise and Löfven’s determination to work against international gangs profiteering in Sweden. We decided to investigate further, separating fact from fiction, in the Monthly Policy Review.
Business highlights

The housing market rebalancing is having a significant effect on the share prices of companies with exposure to the market – especially property developers. But, for Sweden’s exporters these are good times, and none are happier than ‘the Volvos’. Volvo Group, the maker of Volvo Trucks, share price is up 60%, making it Sweden’s largest company by market capitalisation. Meanwhile Volvo Cars, owned by China’s Geely, reported sales up 10% in the USA and confirmed an order from Uber for tens of thousands of vehicles.

Klarna’s turnover grew 30% in a year; profits were up 75%. Spotify decided that it would make its listing on the New York Stock Exchange, not NASDAQ. Consequently it will not have a secondary listing on NASDAQs Stockholm Stock Exchange.

Last but not least

We save this month’s closing comment to commemorate the Swedish football team, which made the World Cup for the first time since 2006, knocking out Italy in the process. Zlatan is considering coming out of retirement and many are hoping that Zlatan will join the national team one last time. Could Sweden repeat the wonders of the summers of 1958 and 1994? For a look back at the glory days of Swedish football, catch Pelé on Netflix.

 

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Sean is responsible for Mundus’ strategy and commercial activities. He began his career in the oil industry Australia. After working internationally in commercial roles with BP in South Africa, the UK and Singapore he moved to Sweden with his family in 2009. He worked in business development and then as the Strategy and Growth Director for NASDAQ Commodities from 2009 to 2015. Sean holds an engineering degree from Adelaide University and an MBA from the Darden Business School at the University of Virginia.