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Swedish markets drop as crisis fears mount

The Stockholm stock exchange suffered a sharp slide on Monday, dragged down by steep share price drops for Swedbank and the Carnegie investment bank, while the Riskbank took further measures to shore up liquidity, adding to fears that the effects of the global financial crisis may be hitting Sweden.

Published: 29 September 2008 16:47 CEST
Swedish markets drop as crisis fears mount

By 4pm, Stockholm’s OMXS-index was down 5 percent on the day, with Swedbank shares down more than 15 percent to 85.25 kronor ($12.56).

The bank’s stock, which was Sweden’s third most-widely held as of July with 316,000 shareholders, has shed more than half its market value since the start of the year.

Carnegie’s stock price had also plummeted, down around 18 percent. Shares in SEB were down 11 percent, while the stock price for Nordea and Handelsbanken were down 4 percent and 6 percent, respectively.

Meanwhile, the Riksbank announced it was tripling the size of its previous reciprocal currency arrangement with the Federal Reserve Bank in the United States from $10 billion to $30 billion kronor.

“It is the responsibility of the central banks to cooperate and together safeguard financial stability,” the Riksbank said in a statement announcing the expanded swap facility.

The move will allow the Riksbank to lend more dollars to struggling Swedish banks in the hopes of avoiding further stress on already tight credit markets.

Despite the move, the Riksbank stressed that there was no need for panic.

“The Riksbank’s assessment is still that financial stability in Sweden is satisfactory. The Swedish banks are well-equipped to withstand the increased unease that is now also apparent here. We are carefully following developments and have a close cooperation with the Swedish banks and government agencies as well as with other central banks,” said the Riksbank.

“The market is very quick to shift its focus and today the focus has shifted from the American market over to Europe,” said Swedbank’s Ronny Jacobsson to the TT news agency.

“The latest development in European trading raises questions about the preparations for dealing with the financial crisis over here.”

Jacobsson added that the US bailout package, currently in the final stages of approval, is an important piece of the puzzle, but that a US solution doesn’t mean the crisis is over.

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MONEY

How to protect your Swedish savings when the stock market tumbles

Recent stock market developments have made consumers in Sweden worried about the savings they have invested in the market.

Published: 5 August 2024 14:44 CEST
How to protect your Swedish savings when the stock market tumbles

Stock market volatility can be unsettling, especially when it hits close to home.

On Monday, the Stockholm stock exchange mirrored global market turmoil, with the OMXS index dropping 4.8 percent in morning trading. By 11 am, there was a slight recovery, but the index remained 2.6 percent down.

READ MORE: Stockholm stock exchange opens in the red amid global market jitters

Big names in Swedish industry weren’t spared: Boliden, a major mining company, dropped 3 percent, defence giant Saab fell 1.5 percent, and engineering firm Sandvik declined by 2.6 percent. In the banking sector, SEB took a 2.4 percent hit, while Swedbank dropped 3.6 percent.

This turbulence in the Swedish market came after significant drops in Japan’s Nikkei 225 index, which experienced its most significant one-day fall since the 1987 Black Monday Crash, and similar declines in markets across South Korea, Frankfurt, London, and anticipated losses on Wall Street.

In these uncertain times, many Swedish consumers with money invested in the market wonder whether they should do something to safeguard their savings.

Avoid impulsive decisions, expert warns

Stock market volatility can raise concerns about the safety of your savings, but according to SEB household economist Américo Fernández, there’s no need to panic.

“Should they be worried? I mean, no. I would say that this is how the stock market works: there’s a lot of uncertainty and risk connected,” he told The Local. 

“When you have savings on the global stock exchanges, this will happen, especially when we’ve had at least six months of really, really good returns – maybe even too good. Then, this is a little bit expected.

“But of course, it’s always dramatic when we have such developments in the stock market in just one or two days.”

Slow and steady wins the (investment) race

For those wondering how to protect themselves against such crashes, Fernández emphasised a consistent and steady approach to investing.

“The most common thing, the best strategy for the broad masses, is to save on a monthly basis. And this is what many Swedes do; our surveys show that 9 out of 10 Swedes save on the stock market every month. This is precisely what you should do: invest in a mutual fund, which is quite common in Sweden,” he said.

“In circumstances such as these, you buy more at a lower price, instead of timing the stock market, which is almost impossible, continue your monthly investments through mutual funds. That’s a good way of diversifying your portfolio.”

READ ALSO: Will the krona’s decline stop Riksbank from cutting rates?

Ignore the alarmist headlines

The SEB household economist also advised against reacting hastily to alarming headlines.

“Another thing that households should be aware of is that when you see alarming headlines, you should sit and calmly ride the wave out.

“It’s understandable that a lot of people are affected by herd mentality when we have these negative headlines. Everyone, but especially households with tiny savings, acts and sells, and then they buy again when the headlines are positive, when the stock exchange is at high levels…

“That is the opposite of what you should do. Try to neglect these things and be cool in these circumstances, even though it seems bad and hurts your wallet. However, if it hurts your wallet too much, that might be a signal that you have too much money in the stock market (laughs), which can be common for younger investors. Although they have had it pretty good recently,” he noted.

This advice is not only applicable to Sweden but also relevant across Scandinavia, according to Fernández.

“I think it’s applicable. Across Scandinavia, all Nordic countries save a lot of money on the stock exchange, partially because the pension system isn’t fully funded by the government,” he said.

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