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Investors lose US$22 billion as Sweden's benchmark stocks founder

[STOCKHOLM] Investors holding shares in some of Sweden's biggest listed companies were left considerably poorer last week.

Disappointing second-quarter earnings from Ericsson AB, Nordea Bank AB and Atlas Copco AB led to the Stockholm benchmark OMXS30 index's steepest weekly decline in 1 1/2 years, shaving 180 billion kronor (S$29.8 billion) off its total market value.

The index, which comprises the 30 most-traded stocks in Sweden, fell 4 per cent in the busiest week of the summer earnings season. The selloff wiped away all gains since mid-April.

Ericsson led the losses, sinking 16 per cent after its results on July 18. Atlas Copco, a Swedish industrial giant, fell 6.9 per cent on July 17. Nordea dropped 5.2 per cent on July 20. Of the 27 companies on the OMXS30 index that have reported earnings so far, 63 per cent fell after their reports, with 11 of those slumping more than 3 per cent.

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Some analysts said the sharp stock declines were caused by earnings estimates that had simply been set too high. For example, Morgan Stanley's Ben Uglow said Atlas Copco's drop didn't illustrate any fundamental problems in the business, but rather exaggerated expectations.

According to Christopher Lyrhem, an equity strategist at SEB AB, there have been "somewhat high short-term earnings expectations implicated in the valuations, especially in the industrial sector."

"We've seen some sharp reactions from an objective perspective and based on a historical price pattern," Mr Lyrhem said by phone. "Investors have been quick to price in new scenarios in many stocks, and it's tough to say whether that's correct or not, but one should always keep one's head cold and look at what fundamentally happens in the companies."

A few OMX30 companies have still to report second-quarter earnings, including Securitas AB on July 28 and Lundin Petroleum AB on Aug 2.

Mr Lyrhem said he's "cautiously optimistic" about the outlook for the Nordic stock market for the rest of the year, although he doesn't think it will be able to repeat the increase year-to-date.

"The OMXS30 on the other hand has been pressured heavily by some companies, and there could be some room for redemption in a few names," he said.