Equity analysts in Sweden are expressing fears that recent days’ closures of open ended property funds in the UK could spill over into a direct impact on the value of Swedish property assets.
The link is based on the fact that several of the UK property funds affected are owners of equity in locally listed property companies.
Lars Söderfjell, head of equity strategy at Swedbank, is quoted by Swedish newspaper Svenska Dagbladet saying that liquidity demands hitting the UK funds mean that they may need to sell parts of their Swedish holdings. That means there is a significant risk for selling pressure hitting the local property sector. Companies that could be hit include Castellum, Hemfosa, Wihlborgs and Hufvudstaden, according to the comments carried by SVD.
However, Söderfjell also notes that the fundamentals of local property companies remain unchanged. The challenge is that in the short term although profitability from these assets is not impacted, it could take time to find new owners of the shares. During that period, the share prices could be negatively affected. Investors need to pay heed to the situation, the analyst added.
Meanwhile, in the UK further developments in the closure of property funds means that some €17bn worth of funds have been frozen – the biggest such seizure in the market since the financial crisis in 2008.
Some seven asset management groups have announced limits on redemptions from their funds since Monday, while others have made significant changes to the valuations of their property portfolios.