EQUITIES 4 minutes to read

What's going on with Danish stocks?

Peter Garnry

Head of Equity Strategy

Summary:  A localized earthquake of negative headlines has shaken the share prices of some of Denmark's largest companies today. The timing is coincidental but the impact, with Copenhagen down 3.6% as of this writing, is very real.


On this slight down day in global equities (-0.4%)  a financial earthquake is taken place in a small corner of the equity market. The leading Danish benchmark index on equities, the OMXC25, is down 3.6% driven by a bunch of company-specific headlines hitting several companies on the same day.

It is ultimately a coincidence, but nevertheless represents obvious pain for investors in this market. It is particularly painful as the OMXC25 has been one of the best markets for years, awakening foreign interest in this tiny little equity market.

Let’s look at some of today’s events:

• Novo Nordisk shares are down 9% (biggest index weight at 15.4%) as Eli Lilly has announced test results for an experimental diabetes drug to cut patients’ weight and reduce blood-sugar levels. If Eli Lilly pushes new drugs forward with these benefits it would threaten Novo Nordisk’s current position in this market.

• Danske Bank shares are down 4% as the US Department of Justice is now investigating the money laundering case. This follows similar moves in Denmark and Estonia, adding to the negative sentiment on Denmark’s largest bank.

• Ambu shares are down 15% as the new financial targets for FY'20 are disappointing the market. The shares are now down 50% from the peak in August as the previous investor darling has seen its price target being cut by several sell-side analysts with investor concerns over management only bolstering the sell-off. Ambu was not long ago priced at the same valuation (on free cash flow yield) as Amazon, indicating strong investor confidence, but now it seems investors are having second thoughts.


The fact that these things are all happening on the same day is, of course, random. Danish equities are still of high quality relative to global equities overall, but sentiment is definitely negative with key technical levels being broken today.

Outside of Denmark, our view continues to be defensive on equities. US stocks are becoming outright unattractive as US credit offers a better risk-reward deal for investors. It is absolutely confusing to us to see new highs in US equities while the house of cards in emerging markets is collapsing. The escalating trade war resembles a new cold war between the US and China, and is worrying to say the least.

European banks are weak and Italy looks like a time bomb ready to go off. Meanwhile, the complacency is staggering with volatility still low given the risks on the horizon. We cannot state it enough how important it is for investors to set up their portfolios for more turbulence as 2019 approaches.

You can access both of our platforms from a single Saxo account.

Disclaimer

Saxo Capital Markets (Australia) Pty Ltd prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Combined Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)