SSE (Stockholm) Market Overviews

This week OMX Stockholm 30 Index (OMXS30) decreased by 1.58%. Only 5 stock prices increased, while 25 decreased. The major winners were Swedish Match AB (SWMA), Securitas AB (SECU B), while this week’s losers were led by Electrolux AB (ELUX B), Svenska Cellulosa AB (SCA B) and SCANIA AB (SCV B).

Swedish Match AB (SWMA), a Sweden-based company with a broad assortment of market-leading brands in smokeless tobacco products, cigars, pipe tobacco and lights products, experienced a steady increase of 2.53% in its share price and ended the week at €16.31 per share. The company has 35% of the U.S. cigar market and even though dollar rate against euro is declining rapidly, company’s profits are increasing. The present trend is that tobacco stocks’ prices around the world are increasing after JPMorgan Chase & Co. analysts called tobacco the “safest haven” during recessions and bear markets because tobacco shares outperformed the stock market in every recession from 1973 to 1999 by as much as 19%. There are also many rumours that Swedish Match AB will receive a bid of around €19.30 per share from Philip Morris USA Inc. in 2008. However, Moody's Investors Service this Wednesday said it cut the long-term ratings of Swedish Match AB from “Baa1” to “Baa2”, citing the deterioration in the company's credit metrics and liquidity results from its new financial policy. Moody's notes that the Swedish snuff market segment will again be exposed to further excise tax increases in 2008 and said the stable rating outlook reflects its expectation that Swedish Match is likely to maintain the newly defined financial policy. Even though the company’s products are still vulnerable to tax hikes denting consumption, they will generate stable and strong cash flows and share price will also increase in the future.

Electrolux AB (ELUXB), a producer of home appliances and appliances for professional use, selling more than 40 million products to customers in 150 countries, is the biggest loser this week. The shares declined by 5.03% with the closing price being €11.46. In the end of October, Electrolux announced its Interim Report and the outcomes were not tremendously fine for shareholders as the expectations for future are quite unsatisfactory. It is not only that the demand for key markets in Europe is weak but also there is an enhanced pressure on European margins which leads to increasing uncertainty towards upcoming profits of Electrolux. Accordingly, these issues could be the answer to decreasing value of the stock in the present and the future.

SCANIA AB (SCV B) was also one of the biggest losers after quite a big increase which lasted for 3 weeks. The closing share price was €17.41, indicating a total fall of 4.20% per week. SCANIA, a well-known manufacturer of heavy trucks and buses, failed to keep their good performance. A reason for this could have been an earlier announcement of Hakan Samuelsson, CEO of MAN, another well-known manufacturer of commercial vehicles, industrial services, diesel engines and turbomachines, indicating that the merger of SCANIA and MAN is in no rush. It means that past expectations of an alliance of 2 major truck and bus industry companies will have to wait and share price is likely to decrease during next week too.

By Ieva Blažytė

Kęstutis Lizdenis