Newsletter week 44

How fast is China growing?

China reported a GDP growth rate of 6,9% in the third quarter of
2015, which was slightly better than analysts estimates of 6,8%.
However, is this official GDP number credible? Skepticism concerning Chinas official growth rate has existed ever since the US diplomatic cables were leaked via Wikileaks a few years ago. The leak
revealed conversations from private meetings between US diplomats
and foreign counterparts.
Dubbed Cablegate, One cable from 2007 contained a conversation
between a US official and Li Keqiang. Li Keqiang has since become
the premier of the State Council of China. In the conversations, Li
Keqiang described the Chinese growth numbers as man-made and
unreliable. These words and the fact that the Chinese growth numbers always seem to come in extremely close to expectations are making some investors doubtful about its significance, especially now
when much of the macro figures are telling another story.
China represents roughly 50% of global consumption of commodities like copper, coal and iron. With commodity prices crashing, it is
probable that Chinese demand is slowing down significantly. China

has also had to deal with falling housing prices (according to official
numbers) and a crashing stock market. In response to these challenges, the Chinese leadership started to devalue the Yuan and has cut
rates repeatedly in 2015. Considering the developments mentioned
above, is it credible that China grew 6,9% in the third quarter? If not,
how fast is China really growing?
Capital Economics, an economic research consultancy based in London, has developed a China Proxy Index and according to their China chief economist, Julian Evans-Pritchard, the index points towards
a Chinese growth rate of around 4,5%. However, Capital Economics
estimate should also be viewed skeptically, since they lack transparent
raw data and are therefore bound to be highly imprecise. Only the
Chinese government really knows how fast the economy is growing
and how much the official numbers deviate from the reality. China is
obviously growing slower than the 6,9% China reported in the third
quarter, but how much slower remains elusive.

LINC is kindly sponsored by

SWEDEN
HSBC: Sweden is far from risk-free
Last week, HSBC announced that
Sweden is by some measures one of the
worlds riskiest economies. HSBC based
their analysis on a combination of high
debt levels among households, rising
housing prices and the Central Banks
interest rates, which are already in negative territory. According to James
Pomeroy, the writer of the report, this
combination of factors makes Sweden
vulnerable to financial instability, which
can leave the economy exposed to a
downturn. Other countries HSBC believe are at risk are commodity dependent economies like Saudi Arabia, Brazil, Russia and Chile. This week we also
learned that the workers union LOs
collective bargaining coordination has
been broken for future negotiations,
leaving each industry-union to fight
for themselves. The announcement
might seem alarming but according to
Carola Lemne, CEO for Swedish Enterprise (Svenskt Nringsliv) this change
will not affect employers starting point
for wage negotiation. In order to protect the jobs and the competitiveness
of Swedish companies, it is crucial that
an agreement within the industry becomes the normative agreement in
wage negotiations and serve as a basis
for negotiations in other contract areas. Further Lemne notes that Sweden
for several years has been losing in the

realm of international competitiveness,

particularly because of the excessively
high labor costs. Companies engaged
internationally have a strong pressure
on prices on their goods and services,
and theres a risk Swedish companies
will find it hard to compete with these
if labor costs remains elevated.
Stocks
Good earnings combined with a hands
on Draghi makes stocks rise
U.S. stocks rallied at the end of the
week after a batch of better-than-estimated earnings from a wide array of
companies including McDonalds and
EBay Inc. Such results raise optimism
and point to a healthy American corporate environment. McDonalds saw
its sharpest jump in its stock in almost
seven years, while Ebay headed for its
biggest gain since 2012. American Express Co. lost 5.5 per cent after results
missed analysts forecasts. Valeant
Pharmaceuticals International Inc. fell
a further 14 per cent on Friday after
tumbling 19 per cent on Thursday. Equities got a further lift from prospects
that Europe will move to bolster its
economy through fresh stimulus from
the ECB. In summary, all major American indices rose at the end of the week.
A total of 44 per cent of the S&P 500
companies have topped sales estimates so far and 74 per cent have beaten
profit projections. Meanwhile, volatility
across global equity markets has been

declining. The Chicago Board Options

Exchange Volatility Index of U.S. posted
the longest streak of daily declines since 2009. The VIX fell 13 per cent Thursday to 14.45, its lowest since Aug.18.
European shares followed those in
the U.S. and hit a two-month high on
Friday. Export-driven stocks like autos
lead the way even as China announced
a surprise rate cut. The pan-European
FTSEurofirst 300 index was up 2.1 per
cent at end of business Friday.
Commodities
Commodities slightly lower on Dollar
strength
Thursdays ECB event seemed to be
the biggest price mover for commodity markets this week. European Central
Bank President Mario Draghi, announced further stimulus packages for the
European economy. The announcement put strong pressure on the Euro
and the Dollar index rose sharply, which
prevented a price surge in some commodities. As a result of the strong Dollar index, gold fell 0.2% to 1.165 dollars
per ounce, its lowest mark this week.
Copper managed to do quite well on
Thursday despite Draghis announcement and rose 1,1%, which was its first
green day in a week. On Friday afternoon, China caused some ripples as
well, by announcing a surprise interest
rate cut. This is sixth time in a year that
the worlds largest consumer of commodities has cut its interest rates. Oil

and metals were immediately affected

by the news and both markets rallied.
Amid varied opinions on what this rate
cut meant for the health of Chinas
economy, both oil and metals seeded
ground by the end of trading despite
their initial climb.
Bonds and Forex
ECB signals further easing might be necessary
Mario Draghis announcement after
the ECB meeting last week may have
been brighter than expected. In his statement he reiterated that the downside
risk remains high as inflation continues
to be low. His words hinted for those
reading between the lines - that the ECB
is ready to boost the drooping economy
with further rate cuts and a stepping-up
of QE if necessary. In turn, the euro
tumbled, dropping around 2% against
the dollar, breaking a two week bullish
streak. During the last two weeks the
dollar has seen weakness in conjunction with expectations of a lowered US
10-years treasury yield, which seemed
to reflect a belief that the Fed arent
going to raise interest rate this year.
Have Thursdays event changed this
belief? If it did, it would align with the
view held by most leading economists
around the world, who have consistently forecasted a rate raise. But one could
also argue that the ECB, with their continuing of easing, actually decreased the
chances of a FED hike this year. How the

Swedish Central Bank will react to Mr

Draghis announcement may also be of
interest. On Wednesday a meeting will
be held to discuss a way forward for the
Swedish stimulus plan. To keep up with
the ECB, the central bank may have to
extend its bond buying programme that
is scheduled to end in December. The
Swedish National Institute of Economic
Research expects the rate to decrease
by 10 basis points this year. Some economists forecasting a cut is coming as
early as this Wednesday.
MACRO EVENTS WEEK 44
Monday: Israel: Interest Rate Decision
Sweden: Weekly unemployment figures. U.S: New Home Sales SEP
Tuesday: Sweden: Business Confidence OCT, Consumer Confidence OCT
and Balance of Trade SEP. U.S: Durable Goods Orders MoM SEP, Consumer
Confidence OCT.
Wednesday: Sweden: Interest Rate Decision. Japan: Retail Sales YoY SEP.
France: Consumer Confidence OCT.
U.S: Fed Interest Rate Decision
Thursday:Germany:Unemployment
Rate OCT. Europe: Business Confidence
OCT, Consumer Confidence Final OCT,
Economic Sentiment OCT.
U.S: GDP Growth Rate QoQ Adv Q3, Fed
Lockhart Speech

Friday: Japan: Household Spending

MoM SEP, Core Inflation Rate YoY SEP.
BoJ Interest Rate Decision.
England :ConsumerConfidence OCT.
Europe: Inflation Rate YoY OCT,
Unemployment Rate SEP.
SPOT PRICES and one week change
OMXS30
1452.36 -2,94%
NASDAQ 100
4886,69 +1,22%
S&P 500
2033,11 +0,99%
DAX 30
10104,43 -0,50%
NIKKEI
18291,80 +0,13%
HANG SENG
23077,59 +0,91%
Gold spot
1177,15 +1,20%
Crude Oil (Brent) 49,88
-5,00%
USD/SEK
8,24
+0,55%
EUR/USD
1,13
-0,14%
WRITERS
Tomas Nyln
David Ingman
Carl Dalerstedt
Mark Thiongo
Matilda Andersson
Emma Egnell
Olof Svanemur
Technical analysts
Emil Esbjrnsson
Johan Lvstrand

Small cap
Cassandra Oil AB has signed a memorandum of understanding regarding
a new Joint Venture in Saudi Arabia
with Tomorrow Environment Company
TECO. The broader intent of the JV is
to increase production during the next
5 years as well as to investigate other
business opportunities globally. This
long-term project will be primarily financed locally in Saudi Arabia, and is a
big step towards the commercialization
of Cassandra Oil internationally.

Brighters sales of software products

within the jDome-serie has increased
by over 70 % this year compared to
2014 after an agreement with Tibro
municipality. Brighter expects the interest and market to grow significantly
over the coming years. John Nilsson,
the innovator behind jDome is confident in the future and sees Tibro as the
beginning of a national, and in time,
global expansion. Brighter recently entered a partnership with Ericsson for
online and mobile health solutions.

Internet security is increasingly in the

news, and last week IT-security company Proact IT group reported that they
have managed to increase both revenues and profits. Revenues in Q3 were
up 35 per cent, and their profits rose
from 11.3msek (2014) to 16.7msek.
Proacts stock saw a 8 per cent increase
on the reports release. Besides a favorable report, Proact also signed a deal
with Vattenfall last week, a deal which
makes Proact Vattenfalls main supplier
of data storage solutions.

OrganoClick has signed a distribution

agreement for its textile functional additives for the Chinese market. Under
the agreement, OrganoClicks durable
water repellent will be sold and marketed in China by the distributor Shanghai Amazingtex Trading Co, which has a
broad customer network, in particular
in the Shanghai-region. The Shanghai
region is one of the most important textile regions in China. According to CEO
Mrten Hellberg, this is an important
step for OrganoClick in their ambition
to get a good geographical distribution
of their textile products on the Asian
textile market. They will continue their
expansion by setting up distribution
networks in Taiwan, South Korea and
Japan.

Auriant-mining came with a report on

Friday which showed that gold production in their mine in Tardan (Russia) rising with 28%, at the same time as the
grade of gold in the mine was upgraded to 2.5g/t from 1.5g/t in 2014. We
have successfully re-commissioned the
gravitational plant, and started mining
ore at the Barsuchy deposit at Tardan.
Also, limited exploration work has been
carried out in the Greater Tardan area;
the results expected to be announced
in Q4 2015. Denis Alexandrov, CEO Auriant Mining

Dedicare, a staffing company primarily

focused on hospital labor like nurses,
reported its highest Q3 revenues in the
companys history last week, yet profits
came in lower than last year. CEO Stig
Engcrantz commentated the report,
and the low profit margins with temporarly higher costs. Engcrantz explanied
how there has been a rise in worker
wages due to a lack of nurses on the
market in general. He also noted that
some of Dedicares customers have put
a ceiling in the numbers of nurses coming from staffing companies like Dedicare. Costs have also been elevated due
to the launching of their new brands,
Resurslkarjouren and Resursskterskorjouren, both are expected to show
profits in the fourth quarter.

OMXS30 formed two double top formations in April and

since then OMXS30 is in a semi-long downtrend. It hit
the bottom of both the semi-long and the primary trend
channel at 1381 SEK. This primary trend channel stretches
as far back as 2009 and a dismissal of this support line
would trigger a sell-signal. OMXS30 recoiled however.
The MACD is close to the zero-line which could trigger a
buy-signal. The index is overbought which is worrisome
considering we havent yet entered a high average RSI period (November). The closest resistance is at 1507 which
is about to be tested, if broken this could trigger a buy
signal with target towards the semi-long downtrend. At
1428 SEK and 1381 SEK many buyers were present earlier which gives strong support lines. Stop losses could be
placed just beneath them if OMXS30 turns down. In the
short term we are neutral to OMXS30. In the middle-long
term we are negative. In the long-term we are positive.
Mr Green is in a primary downtrend. Currently it is trading in a short-term uptrend. The stock is testing the
ceiling of the primary trend as well as the ceiling of the
rectangle formation. If the stock would be able to break
the ceiling of both these resistances it would indicate a
short-term and a long-term trend reversal upwards. The
MACD crossed the signal line just recently which is to be
considered a strong buy signal. The stock is however somewhat overbought. Supporting points can be found at
the 200 days moving average at 37 SEK. A stop loss could
be placed below this support or below the floor of the
trend channel at 35 SEK. In the short term we are positive
to the stock. The stock is testing strong resistance lines.
If crossed, we would change our long-term view on the
stock from negative to positive.

Multi Q was a year ago in a rectangle formation and

went through the ceiling with enhanced volume which
strengthened the breakout. This led to an uptrend which
has spawned two strong formation patterns. The latest
rectangle formation had a breakout on the upside but the
volume was low which led to the stock collapsing, breaking the floor of the primary trend channel. This initiated
a very tight downtrend which the stock is currently trading
in. The MACD is although displaying a positive divergence
between the stock price and the MACD which indicates a
trend reversal upwards. The RSI also shows that the stock
is heavily oversold. Resistance is seen at 1.03 SEK where people tend to sell and strong support lines are to be
found at 0.78 where people instead tend to buy. Stop loss
is suggested to be placed jus below this support level. In
the short term we are neutral to the stock in wait for the
potential trend reversal.

Doxa has been trading in an upward trend since it reached

a low of 0.86 SEK in October 2014. The trend channel has
been tested further on 1.4 SEK and has now being tested
again on 2.3 SEK for a few weeks ago. The stock has entered into a low volatile period with decreased volume. This
is shown in terms of contracting Bollinger bands and creation of the current rectangle formation. Also the MACD
indicator has had a calm development. This indicates
that the stock is in a very interesting situation where an
outbreak of the rectangle formation can be done in both
directions and give large movements in the stock price.
Stop loss suggested to 2.05 SEK. We are in in the long run
technical positive to Doxa and in the short run we have a
neutral view before we have observed a clearer direction.

Nordic Camping is moving inside a long-term positive

trend. For the past few months the stock has been traded
in the bottom of the trend channel without being able
to break through the resistance at 22.6 SEK. If the stock
would break through 22.6 SEK with confirming increase in
volume there are a lot of upward potential with the trend
channel as target. The trend channel ceiling is currently
located at 27.5 SEK. The MACD indicator has in the opposite direction triggered a sell signal when the signal line
being crossed from above, which can lead to a test of the
support at 19.4 and also the trend channel floor. Stop loss
is suggested to 18.1 SEK then further down to 16.9 SEK.
We are technical positive to Nordic Camping in the long
run and technical neutral in the short run while waiting for
a better signal.

Unlimited Travel Group has been traded in a positive

trend since July 2014. The past few months it has gone a
bit stiffer and the stock has been moving mostly sideways
around the resistance at 22.7 SEK and the support line
at 21.1 SEK. This makes these levels very central for the
further stock price development. The stock has recently
entered a consolidation phase and formed a rectangle formation. We are waiting for an outbreak from the rectangle formation to take clearer position. MACD indicator is
slightly positive, which can indicate an outbreak on the upside. If we get the upside outbreak combined with increased volume that would give us a good buy signal with great
upside potential. If an outbreak occurs on the downside
we suggested a stop loss to 20.3 SEK and further down to
18.6 SEK. We are at the moment technical positive to Unlimited Travel Group.