Nordic Factoring Fund månadsrapport – januari 2023

Nordic Factoring Fund monthly report – January 2023

Nordic Factoring fund AB (publ) reports a NAV rate for January of 100.39. That's an increase of 0.39 %. The fund continues to have high liquidity and continues the work of identifying and investing in new projects to convert the excess liquidity.

The market has increased since the pandemic, which is both an opportunity and a risk, the fund is currently carrying out careful analyzes of what risks the market situation entails. The fund works and has worked to ensure that companies that use factoring are financed as a liquidity planning rather than a liquidity need. The fund assesses that there are good opportunities for new business during Q1 and beyond.

The market and the economy
Stock markets have consistently increased at the beginning of 2023, which has largely been attributed to the outlook for the economy. GDP declined during the end of the fourth quarter in Sweden. Similar developments have also been seen in Germany. The PIGS countries (Portugal, Italy, Greece and Spain) may have problems with interest rate increases from the ECB due to high government debts. The ECB has flagged that it will sell government bonds and the ECB has a high concentration of PIGS countries' bonds. The effect is that these countries can be hit by higher central bank interest rates from the ECB, which pushes apart the interest rate spreads against other more creditworthy euro countries in Europe.

The Swedish krona has weakened during the month, especially towards the end. In order not to import inflation, the Riksbank therefore needs to raise the interest rate. Higher interest rates generally lead to a stronger currency, which then has a spillover effect on Sweden. Lagarde, the president of the ECB, has been clear that two interest rate increases of 50 points are expected to come. In Spain, core inflation has turned upwards, which gives the ECB further arguments to stick with interest rate increases. If the ECB raises the interest rate, the Riksbank also needs to raise to prevent the krona from weakening further.

The expectation before the monetary policy announcement in Sweden on February 9 is an increase of 50 basis points from the Riksbank. The Riksbank also indicates that it wants to strengthen the krona, which also motivates future increases.
Since October, the market has started discounting that the economy will begin to turn around, the stock markets have performed positively, interest rate spreads have narrowed and long-term interest rates are down. Traditionally, the effect of interest rate increases usually takes considerably longer. Interest rate increases will continue, the indications are that the decline in economic activity and the rise in inflation will continue for longer than the market previously expected. The assessment is that the companies will have continued challenges throughout 2023, which may increase the risks of continued liquidity problems and also defaults.

The reserves in this fund are very low. The fund's entire exposure is in category 1 and the security is over 30,000 invoices pledged in favor of the fund. The invoices are rolled over in 30 to 90 days with credit insurance both with and without recourse. Furthermore, there is property insurance for an eventuality should false invoices appear.

Against the background of the aforementioned weaker economic outlook for the market, we have tightened and continued to tighten our routines for monitoring outstanding invoices.

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