Newsletter week 45

To understand what is likely to happen with the price of WTI, an understanding of what caused the price decline will help. In 1986, US crude production reached a production level of 8,940 thousand bar-rels per day. US crude production then fell for 24 years from the high of 8,940 thousand barrels per day to 5,500 thousand BPD (barrels per day) in 2010. Since 2010, the US has experienced an energy produc-tion renaissance, which was primarily driven by the “shale industry”. US production increased from 5,500 thousand BPD to 9,600 thou-sand BPD in July of 2015. This sudden production increase caused the oil market to be oversupplied. This problem was exacerbated by the fact that OPEC -nations refused to give up market share and even increased production to 3 year highs in July of 2015. The oversupply caused by the US shale industry and OPEC needs to be resolved for oil prices to increase materially. Baker Hughes report the number of rigs drilling for oil every month and in its latest report, the number of rigs has fallen rapidly. In the USA there were 787 active rigs, compared to 1929 rigs a year ago. However, despite the massive decline in rigs, US oil production has

only fallen to 9,119 thousand BPD from a high of 9,600 thousand BPD in July. With OPEC continuing to uphold its market share and with no ma-terial decline in US crude production yet, the market remains overs-upplied. IEA expect oil demand to increase in the coming years, and this demand increase can potentially offset the supply glut. However, all forecasts are unreliable and with a slowing global economy, de-mand might as well remain stable. Unless demand increases rapidly in the coming months or supply decreases materially in the US, oil prices are not likely to reach the highs established earlier in the cycle. In the long run, it is likely that the supply imbalance will correct and oil prices will increase materially - but that will take time.

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What needs to happen for WTI to reach 90 dollars/barrel?

SWEDENSwedish households are becoming less negative in their economic outlook.The Migration Board’s new forecast for the number of asylum seekers and the accompanying rising costs has sent ripples through the Swedish bond mar-ket, according to economists at Swed-bank. The new forecast from The Mig-ration Board and The Swedish National Debt Office’s deferred government borrowing report, that were published last week, have had an impact on the interest rate market. ”Interest rates have risen, particularly in the longer maturities in anticipation of increased bond supply. It is a well-justified increa-se.” wrote Swedbank in their macroe-conomic analysis. Furthermore, there are assumptions that issuance volu-mes will increase to 4.5-5 billion per auction, compared with the current 4 billion. Consequently, it would increa-se the emission volume by more than 10-20 billion annually. Last week, it was also announced that Swedish house-holds are less optimistic than expected. The Swedish consumer confidence in-dicator CCI came in at 98.8 in October, compared with unaudited 98.7 months before the NIER survey. The positive view over the private economy is un-changed, as well as the setting for ca-pital goods purchases. Household ex-pectations of their own economy one year ahead remains slightly below the

historical average. Expectations of the Swedish economy has however increa-sed slightly from last month, making a positive contribution to the change in the indicator. In a historical perspecti-ve however, households are conside-rably more pessimistic than normal about the future developments in the Swedish economy. Additional news was that the bearings manufacturer SKF fo-rewarned of redundancy of 160 factory employees in Gothenburg, due to decli-ning production volumes.StocksWall Street’s looking back at best month in four years.U.S. stock finished the week poorly as most sectors fell on Friday but neverth-eless, October has been the strongest month since October 2011. The S&P500 has risen 8.3 per cent, mostly led by en-ergy and materials. Nasdaq rose 9.4 and Dow gained 8.5 per cent. Looking at the weeks reports, CVS Health fell 4.8 per cent after a disappointing profit fore-cast for 2016. Hewlett-Packard Co. did not match analyst’s expectations as the stock lost 6.2 per cent during the week. European shares held steady on Friday but were set for their highest monthly gain since mid-2009. Renault and Air-bus both performed better-than-ex-pected and rose 5.5 and 5.2 per cent respectively. Renault’s third-quarter revenue increased 9.4 per cent, lifted by growing business with partners Nis-

san and Daimler. Spanish bank BBVA fell 4.3 per cent after it reported a loss that was worse than feared. Despite the Spanish giant’s bad numbers, the quar-ter has been satisfying with 52 per cent of companies in the European STOXX 600 index beating or meeting analyst’s expectations. Summing up October, the pan-European FTSEurofirst300 index is up around 8 per cent. This week’s top event will be the U.S. jobs data for October, which might hold the key to whether the FED will raise interest ra-tes for the first time since 2006 in De-cember. CommoditiesGood short term news for Oil but Base metals suffer as the dollar grows strong.The oil price had both ups and downs this past week as new macro-data was released. Both WTI- and Brent oil had a strong Wednesday, with statistics showing that there was an increase in the capacity utilization and that de-mand for oil had risen. This combined with the news that the American cru-de-oil stock had risen to 3,38 millions barrels, which was 0,37 million less than the Bloomberg analytic forecast, resulted in a 6% surge in the WTI- oil price during trading on Wednesday. On news that Marketwatch had foreca-sted the price of oil to be low for most of 2016, The WTI-oil price slipped on Thursday. This week´s Federal Reser-ve´s statement of a possible December

increase in the interest rate helped the dollar rally, which affected commodi-ties, especially base metals. Copper and nickel for example fell by 39 dollars respectively, to trade at 130 dollars per ton. The low demand from China is said to be contributing to the drop in copper and nickel price. Bonds and Forex Yellen: Not yet, but maybe later.Both the Fed and the Swedish Central bank delivered lenient views on the current situation after their monetary policy meetings last week. The Riks-bank left rates at -0,35 % but decided to expand their bond buying scheme as was expected. The Fed came to the con-clusion to keep rates untouched as well and - perhaps surprisingly - expressed a quite positive future market belief. In their view the markets were still “ex-panding at a moderate pace” and they also stated that a rate hike was not at all unlikely in December, or at the very least that it was not off the table. That information set the markets in motion. US treasury yields as well as the US dol-lar surged, fanning the already flaming markets that the ECB announcement caused. The USD/EUR quota reached its lowest level since August and the pattern that we saw in March reared its head once again. Goldman Sachs pre-dicts that the currencies will be in pa-rity by the end of the year. The Fed and the ECB seem to have a divided opinion

in regards to their respective monetary policy. The currency markets have been interesting this week in other parts of the world as well. There is reason to believe that the Yuan will be included in the IMF´s currency reserve basket. IMF has last week - according to Reu-ters – signaled that they plan to green light it for an introduction. All else equ-al, this would probably cause the Yuan to strengthen - a great win for Beijing. The forthcoming inclusion would be a status symbol, showing that China is an even greater and more independent player in the global economy.

MACRO EVENTS WEEK 45Monday: Japan: Nikkei Manufacturing PMI OCTSweden: Manufacturing PMI OCTUnited States: Manufacturing PMI OCT

Tuesday:Hong Kong: Hong Kong Retail Sales YoYGreat Britain: Construction PMI OCTUnited Kingdom: Factory Orders MoMUnited States: Factory Orders MoMEuro Area: Draghi Speech

Wednesday: Japan: Consumer Confidence OCTUnited States:Exports SEP, Imports SEP and Balance of Trade SEP

Thursday: Japan: BoJ Monetary Policy MeetingMinutesGermany: Factory Orders MoM SEPSweden: Industrial Production YoY SEP, Industrial Production MoM SEP and New Orders YoY SEPEuro Area: Retail Sales MoMFriday: Germany: Industrial Production YoYBrazil: Inflation Rate YoY OCTUnited States: Labor force participation Rate OCT, Unemployment Rate OCT, Fed Brainard Speech.

SPOT PRICES and one week change OMXS30 1 499,23 -0,14%NASDAQ 5 053,75 +0,72%S&P – 500 2079,36 +0,54%DAX 30 10 850,14 +0,80%NIKKEI 19 083,10 +0,52%HANG SENG 22 640,04 -2,06%Gold spot 1 141,65 -1,92%Crude Oil 49,09 +2,18%USD/SEK 8,53 +0,46%EUR/USD 1,10 -0,21

WRITERSTomas NylénDavid IngmanCarl DalerstedtMark Thiong’oMatilda AnderssonEmma EgnellOlof SvanemurEmil Esbjörnsson Johan Lövstrand

Small capHifab is in stormy weather the company is currently searching for a new CEO af-ter Jeanette Saveros handed in her no-tice. Adding to that, Hifab recently got sentenced to a 68 msek fine concerning a claim on a former subsidiary, Rimp AB. There is no deposit for this risk in Hifabs financials. Hifab’s management is speculating that with the ruling a SEO in the size of 40 msek will be necessary to raise capital for the firm. The rest of the fine will likely be financed with short term loans.

Dignitana obtains important U.S patent The United States Patent and Trade-mark Office has granted a patent to Dig-nitana for their medical scalp cooling technology. This patent has previously been granted in Europe, China, Korea and Japan, and now also in the Unit-ed States. The decision by the USPTO provides Dignitana enhanced legal pro-tection in the United States until 2031. The CEO Jan Richardsson said that Dig-nitan’s system DigniCap, is the only scalp-cooling device to have complet-ed a formal trial for U.S. FDA approval and with the patent they are creating the necessary infrastructure for making DigniCap widely available and accessi-ble in the U.S. upon FDA Clearance.

Nordic Mines last report was shaky.The mining company had no revenues for the third quarter and made a loss of 15,6mSEK with an EPS (Earnings per share) of -0,29SEK. The company has the production rights to Laiva mine, but in the wait for a higher gold price, pro-duction has taken a halt. Nordic Mines recently announced that the SEO, chair-man and all members of the board have given their intention to buy additional shares.

Intuitive Aerial is a drone companyspecialized at producing stable drones for filming, it was introduced to Firsth North at the beginning of this year and started trading at 14kr a share. Since the IPO the stock has come down sig-nificantly and is now being traded at around 10kr a share, giving it a valua-tion of 44 million SEK. It’s a very small company in an uncertain market, mak-ing it difficult for investors to find fair valuation. Its “bigger brother” CybAero recently saw its share climb by almost 40 per cent in October, without any major news being broadcasted to the market. If we are seeing a general ap-preciation of drone-companies valua-tion, Intuitive Aerial might have some catching up to do.

Expectations are high on Starbreeze,their game Fallout 4 is incredibly hyped by the internet kids and last week Star-breeze CEO Bo Andersson, announced that he has bought additional 2.5 mil-lion A-shares. Thereby Andersson has increased his skin in the game to 270mSEK before the interim report that’s going to be released on Thursday next week. The highly anticipated game is launched on Wednesday, one day be-fore the report; surely Starbreeze will be one of the most discussed and trad-ed small-cap companies the coming weeks.

Next Biometrics, the Norwegian sensor company has a stated mission to re-place passwords, PIN codes and other form of identification techniques with the ultimate key of security and conve-nience - the unique prints of the human finger. The company got the attention of Hexagon CEO and by now well-known investor, Ola Rollén, when he announced he bought a big stake in the company about a month ago, and since then it has been quite the rollercoaster. Last week Next Bio revealed their tier-1 customer, which was none other than Dell. As the announcement was made, Next CEO Tore Etholm, took the oppor-tunity to tell investors the volume from Dell will be even greater than the previ-ously reported 1.2m units.

Etrion is currently in a long-term downtrend. A double-bottom formation was formed in the beginning of the year, which triggered a short-term positive move-ment in the stock. However, it met resistance against the roof of the trend channel and has since then been in a negative downward movement. MACD is currently below the signal line, which it crossed earlier this week. It also moves towards the zero line, which indicates a negative momentum in the stock. A strong resistance has formed at the 2.5 SEK. It did not manage to break the resistance earlier this month and has since then moved downward. The closest support is found at 1.7 SEK and we suggest that a stop-loss is set just below the support level. We are technically negative to Etrion in the medium term.

OMX Stockholm 30 is continuing in its downtrend. MACD has now crossed the zero line and is still moving above the signal line, this indicates a positive momentum. The index has trouble breaking through the resistance at 1512 SEK which it tested earlier this week and the index is now moving towards the resistance again. A downward mo-vement is expected if the index can’t break through. The closest support is at 1410 SEK. A stop-loss is suggestively set just below the support. We are still technically negati-ve to OMXS30 in the medium term.

Gripen Oil & Gas has been moving downwards for over one year now and just recently broke through the floor of the falling trend channel it has been trading in for the last four months. The break through together with the incre-asing volume gives a signal of a stronger rate of decline. However, this can lead to short-term corrections on the upside which will be supported if MACD, which is current-ly below the signal line, will break upwards through the signal line. The resistance level is around 0.15 SEK and sin-ce there is no support level for the stock, which is because the stock is trading at an all-time low, it is hard to identify a possible stop loss. The technical view of the stock is ne-gative in the medium term.

CybAero just broke out of its long-term downtrend, which the stock has been in since the middle of last year. It previously had difficulties to break out of the trend and the roof of the trend channel was tested several times. However, a double-bottom formation triggered a strong upward movement which consequently led to a break out of the downtrend and through the roof of the trend channel. MACD is currently above the signal line, which it crossed in the beginning of the month. MACD has since then moved upwards and is now above the zero line. This indicates a strong momentum in the stock and a continued upward movement is expected. The closest resistance is at 22 SEK, and closest support is found at 9 SEK. A stop-loss is suggestively set just below this level. We are technically positive for CybAero in the medium term.

Railcare Group has been trading in an upward trend for over one year where the movement of the stock has been almost horizontal for the last five months within the trend channel. The volume has been increasing for the last year with some decreasing since the stock reached 146 SEK se-ven months ago. The MACD is balanced together with the signal line which indicates that it’s waiting for a movement in either direction. The stock is currently testing its resi-stance level at 130 SEK, if it breaks through then the next level to try is earlier all-time high at 146 SEK. The support is around 117 SEK, where the stop loss tentatively is set slightly below. The technical view of Railcare Group is po-sitive in the medium term.

TagMaster is currently traded in a one-year positive trend channel. The volume has been increasing since beginning of this year and the stock is showing a strong developme-nt within the trend channel. With a MACD that just broke through the signal line together with the fact that the stock is being traded above its support level at 0.85 SEK, gives the indications of that the next level to test is the resistan-ce at 0.95 SEK. If the support level at 0.85 SEK will break, the next level can be found within the trend channel and further at 0.65 SEK. Stop loss is suggested just below these levels. The technical view of TagMaster is positive in the medium term.