Swedish investors lose US$22bil as benchmark stocks flounder

STOCKHOLM: Investors holding shares in some of Sweden’s biggest listed companies were left considerably poorer last week.

Disappointing second-quarter earnings from Ericsson AB, Nordea Bank AB and Atlas Copco AB led to the Stockholm benchmark OMXS30 index’s steepest weekly decline in 1½ years, shaving 180 billion kronor (US$22bil) off its total market value.

The index, which comprises the 30 most-traded stocks in Sweden, fell 4% in the busiest week of the summer earnings season. The selloff wiped away all gains since mid-April. Ericsson led the losses, sinking 16% after its results on July 18. Atlas Copco, a Swedish industrial giant, fell 6.9% on July 17. Nordea dropped 5.2% on July 20. Of the 27 companies on the OMXS30 index that have reported earnings so far, 63% fell after their reports, with 11 of those slumping more than 3%.

Analysts said the sharp stock declines were caused by earnings estimates that had simply been set too high. Morgan Stanley’s Ben Uglow said Atlas Copco’s drop didn’t illustrate any fundamental problems in the business, but rather exaggerated expectations.

According to Christopher Lyrhem, an equity strategist at SEB AB, there have been “somewhat high short-term earnings expectations implicated in the valuations, especially in the industrial sector.”

“We’ve seen some sharp reactions from an objective perspective and based on a historical price pattern,” Lyrhem said by phone. “Investors have been quick to price in new scenarios in many stocks, and it’s tough to say whether that’s correct or not, but one should always keep one’s head cold and look at what fundamentally happens in the companies.”

A few OMX30 companies have still to report second-quarter earnings, including Securitas AB on July 28 and Lundin Petroleum AB on Aug 2.