Nordea says the panic that tore through markets on Monday drove some assets down too far as Scandinavia’s biggest bank takes advantage of mispricings to adjust its portfolio.
“Because it’s an indiscriminate selloff, it offers us an opportunity to improve the quality of the assets we own,” Mathias Leijon, chief investment officer for equities at Nordea Investment Management, said in an interview. The bank is now looking for assets that offer a high cash flow, regardless of the sector, he said.
Commodities, stocks and currencies were all dumped on Monday in a market rout that ripped through Asia, Europe and then the Americas. Since Aug. 11, when China devalued the yuan, more than $5 trillion was wiped off the value of global equities. Chinese stocks continued to plunge on Tuesday to mark the deepest four-day rout since 1996.
“There’s a lot of fear because of all the uncertainties and associated increase in volatility,” Leijon said.
But stocks in Europe opened higher, as did U.S. futures. According to Hans Peterson, global head of asset allocation at SEB Investment Management, the economic growth outlooks for Europe and the U.S. don’t support continued selling.
Monday’s rout was “a large reaction, but probably starting to get overdone,” he said by phone. “It doesn’t feel like a macro story, more of a risk management or dependency-on-Asia story. At some point we’ll try to take advantage of it.”
SEB said on Monday the stock-market slump was probably close to its lowest point.
“This type of correction rarely goes beyond 15 percent,” Peterson said. “So from that historical perspective it should stabilize somewhere close to here.”
Though that assessment means U.S. and European stocks are looking more attractive, emerging market equities remain risky, he said.
“If you add the valuation of the emerging markets together with the devaluation of the currencies, the metrics become quite compelling compared to the developed markets,” Peterson said. “The price tag is better than before. I won’t say it’s a buy for emerging markets, but the valuation metrics are better.”