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28 Feb 2019 | 3 min read
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Nordic Industry 4.0

5G networks, recycling, autopilot, automation, semiconductor tools and mining robots- Is that something you might be interested in?

Megatrend to follow

You are well aware of the megatrend that is freely translated called Workshop 4.0? It is about machines that talk to machines and automatically adjust and synchronize their work. Ultimately, this is about creating more efficient flows with fewer errors, lower costs and less danger for both people and the environment, while at the same time the products get higher quality and recyclability.

All the way to the sheep

When the Swedish IT consultants grew up in the 1990s, Framfab talked about the vision that "it should feel right out in the sheep" when you press the buy button in the webshop. By that Birgersson meant that the keystroke triggered a code that immediately changed the order status and stock status in both the vendor's and the vendor's sub-suppliers' business systems. This, in turn, has as soon as possible consequences through the weaving machines in Bangladesh, the yarn manufacturers and ultimately the sheep farmers. The latter put the mower in the coat of the Shaun second after your mouse click.

Internet of things is no longer just a cliché

Twenty years later, the vision actually begins to take shape in the real world, although, as expected, there are few really pure investment options. There are no internet consultants anymore, and among the technology companies hardly a semiconductor manufacturer or semiconductor tool provider can be considered to specifically represent the internet of things and automation.

But, on the other hand, it can be said that it is becoming increasingly clear that many engineering companies that are considered relatively traditional actually lie far ahead technologically. It is simply the only way to maintain its competitiveness. The index Nordic Industry 4.0 has taken this into account, and, above all, sold out smaller technology-intensive engineering industry and retained the largest, best and documented most development-friendly companies in the Nordic region.

Nordic 5G has an advantage

The index includes, for example, the 5G companies Nokia and Ericsson, which will enable the massive amount of information that machine-to-machine communication will bring. Given the ongoing trade war between China and the USA, Nordic telecom equipment suppliers can get an extra advantage. Mycronic can provide tools for the manufacture of semiconductors that are part of all information hardware.

The Swedish workshop giants Sandvik and Atlas Copco are also represented, thanks to their focus on machine vision, remote control and automated goods flows. The companies that believe that manually handled drilling and excavators will have a chance in the future can ignore this chronicle, but we others can calmly take position in Nordic engineering companies such as Veoneer, ABB, Konecranes, Wärtsilä, Sandvik, Hexagon and Atlas at the same time via NI 4.0. Over the past 18 months, the workshop sector has been unusually large on the stock exchange. The more the shares have moved before a reporting period, the faster they have recoiled during the period.

Motion pattern in a mid-cycle pause

Perhaps the stock market is only in a mid-cycle break with a little extra volatility before the steady march upwards again. Perhaps it is an unusually prolonged top formation we see unfolding.

It is particularly difficult to say for sure because of the politicians' nowadays extreme reactivity, or should I say reflectivity, to the financial sector. Old rules of thumb on valuation, leading indicators, interest curves and inter-market movements have fallen time and time again over the past 4 years, due to one stimulus program greater than the other. Bad news is considered good news thanks to the expectation of increased stimulus. And good news is good news because of course growth is always good. But then sometimes a larger movement comes down when the reporting on trade war and tougher monetary policy is temporarily intensified

One thing is here to stay

Regardless of whether the next big movement is up or down, or for that matter neither, I expect the large fluctuations to persist. So, in the long run, companies in Nordic Industry 4.0 are extremely interesting as investments - they are the ones who will build our physical future. But, in the short term, it is good to be able to hedge their portfolio temporarily, when the market takes too large fluctuations in advances but something more concrete to go on than that everyone else buys or sells.

This is when Nordic Industry 4.0 products come into their own best - so before, during and after report periods to quickly change the exposure to a group of companies where you hopefully have already selected your favorites.

Legal notice

This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

The products are not capitalprotected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

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