DKK: Unchanged appetite for Danish bonds among foreign investors in September Jens Nærvig Pedersen Analyst Danske Bank Markets jenpe@danskebank.dk +45 45 12 8 61 28 October 213 Important disclosures and certifications are contained from page 12 of this report. Investment Research
Overview of foreign portfolio investments and securities statistics in September In September, Danish investors net purchased foreign shares for the third consecutive month. Foreign investors net purchased Danish shares and government bonds and net sold Danish treasury bills and mortgage bonds the net selling of mortgage bonds can, however, mainly be attributed technicalities regarding the maturity of short-term mortgage bonds. In nominal terms, foreign investors now hold DKK26bn in treasury bills, which amounts to 81.2% of the total stock down from 85.9% in August, but up from 65.6% in June. Foreign investors hold DKK231bn in government bonds which is 34.1% of the total stock the highest share since October last year. With regard to mortgage bonds, foreign investors currently hold DKK313bn, which is 11.9% of the total stock of mortgage bonds. Bonds with a remaining maturity below one year make up the largest share of the bonds held by foreign investors. In September, it amounted to 39.8% of the total stock of bonds held by foreign investors. Overall, foreign investors appetite for Danish bonds does not look to have changed significantly in September. See details on the following slides. 2
Foreign investors net purchased shares and net sold bonds Danish investors net purchase of foreign shares 2 15 1 5-5 -1-15 -2 Danish investors net purchase of foreign shares Source: Nationalbanken Foreign investors net purchase of Danish share 1 8 6 4 2-2 -4-6 -8 Foreign investors net purchase of Danish shares Source: Nationalbanken Danish investors net purchase of foreign bonds 4 3 2 1-1 -2-3 Danish investors net purchase of foreign bonds Source: Nationalbanken Foreign investors net purchases of bonds 6 4 2-2 -4-6 Foreign investors net purchase of DKK denom. Danish bonds Foreign investors net purchase of Danish bonds denom. in other curr. Source: Nationalbanken 3
Euro and US net sold bonds and Swiss investors net purchased bonds Euro investors net purchase of DKK bonds 14 12 1 8 6 4 2-2 -4 Euro investors net purchase of DKK denom. bonds flow acc. US investors net purchase of DKK bonds 4 3 2 1-1 US investors net purchase of DKK denom. bonds -2 flow acc. Swedish investors net purchase of DKK bonds 3 2 1-1 -2 Swedish investors net purchase of DKK denom. bonds -3 flow acc. Other investors net purchase of DKK bonds 6 5 4 3 2 1-1 -2-3 -4 Other investors net purchase of DKK denom. bonds flow acc. Note: In September, it was mainly Swiss investors that bought Danish bonds 4
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Foreign investors net sold Danish bonds in September 5 4 3 2 1-1 -2 % of total stock 19 18 17 16 15 14 13-3 12 Netpurchase by foreign investors of DKK denom. bonds (l.a.) Stock of DKK denom. bonds held by foreigners (r.a.) Foreign investors net sold Danish DKK denominated bonds in September and the ownership share dropped to 16.6%. However, the change can primarily be attributed technicalities regarding the maturity of short-term mortgage bonds. 5
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Slight drop in the foreign ownership share of treasury bills 15 1 % of total stock 12 11 5 1 9-5 8-1 7-15 6-2 5-25 4 Netpurchase by foreign investors of treasury bills (l.a.) Stock of treasury bills held by foreign investors (r.a.) In September, foreign investors net sold treasury bills and now own 81.2% of the total stock down from 85.9% in August and up from 65.6% in June. 6
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Thousands Foreign investors net purchased government bonds 3 2 1 % of total stock 38 36 34 32 3-1 -2-3 28 26 24 22-4 2 Netpurchase by foreign investors of government bonds (l.a.) Stock of government bonds held by foreign investors (r.a.) Foreign investors bought government bonds for the fourth consecutive month in September and now hold 34.1% of the total stock of government bonds the highest share since October last year. 7
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Large technical drop in ownership share of mortgage bonds 25 2 15 1 5-5 -1-15 -2-25 % of total stock 15 14 13 12 11 1 9 8 Netpurchase by foreign investors of DKK denom. mortgage bonds (l.a.) Stock of DKK denom. mortgage bonds held by foreign investors (r.a.) In September, foreign investors sold off mortgage bonds and the ownership share dropped to 11.9%. This move is mainly due to technicalities regarding the maturity of short-term mortgage bonds. 8
Mortgage bonds popular among foreign investors 7 6 5 Stock of DKK denom. bonds held by foreign investors on bond type In nominal terms, foreign investors now hold DKK313bn in mortgage bonds, DKK231bn in government bonds and DKK26bn in treasury bills. 4 3 2 1 28 29 21 211 212 213 Government bonds Treasury bills DKK denom. mortgage bonds 9
Mainly bonds with short remaining maturity held abroad 8 7 6 5 Stock Danish bonds held by foreign investors on remaining maturity Foreigners mainly hold bonds with a remaining maturity of less than one year. It accounts for 39.8% of the total stock. 4 3 2 1 28 29 21 211 212 213 Remaining maturity < = 1 year 1 year < remaining maturity < = 5 years 5 years < remaining maturity Note the chart includes bonds in all currencies 1
Foreign ownership share not high in historical perspective 22 2 18 16 14 12 1 % of total stock The foreign ownership share is currently only slightly higher compared with pre-crisis and lower compared with early 2s. 8 2 22 24 26 28 21 212 Stock of DKK denom. bonds held by foreign investors 3M m.a. 11
Disclosure This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ( Danske Bank ). Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts rules of ethics and the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality research based on research objectivity and independence. These procedures are documented in Danske Bank s research policies. Employees within Danske Bank s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Danske Bank is a market maker and may hold positions in the financial instruments mentioned in this research report. Danske Bank, its affiliates and subsidiaries are engaged in commercial banking, securities underwriting, dealing, trading, brokerage, investment management, investment banking, custody and other financial services activities, may be a lender to the companies mentioned in this publication and have whatever rights are available to a creditor under applicable law and the applicable loan and credit agreements. At any time, Danske Bank, its affiliates and subsidiaries may have credit or other information regarding the companies mentioned in this publication that is not available to or may not be used by the personnel responsible for the preparation of this report, which might affect the analysis and opinions expressed in this research report. See http://www-2.danskebank.com/link/researchdisclaimer for further disclosures and information. 12
General disclaimer This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) ( Relevant Financial Instruments ). The research report has been prepared independently and solely on the basis of publicly available information that Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report. The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These opinions are subject to change, and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in this research report. This research report is not intended for retail customers in the United Kingdom or the United States. This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank s prior written consent. Disclaimer related to distribution in the United States This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely to U.S. institutional investors as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the United States solely to U.S. institutional investors. Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA but satisfy the applicable requirements of a non-u.s. jurisdiction. Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in non-u.s. financial instruments may entail certain risks. Financial instruments of non-u.s. issuers may not be registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission. 13