Political Risk Pressures Sweden ETFs | ETF Trends

Sweden stock- and currency-related exchange traded funds are suffering from risk-off trades ahead of elections less than two weeks away.

The iShares MSCI Sweden ETF (NYSEArca: EWD) was down 0.6% Tuesday while the CurrencyShares Swedish Krona ETF (NYSEArca: FXS) was 0.4% lower. Over the past week EWD dipped 0.6% and FXS declined 1.1%.

Stirring greater uncertainty going into the elections, Sweden Democrats, a party that wants to restrict immigration, is gaining popularity and could prevent the Social Democrat-led bloc from establishing a majority, Bloomberg reports.

Early polling show that the Social Democrats will unlikely reach 50% of the vote, with the Sweden Democrats taking in 10% voters.

The far-right Sweden Democrats have been vocal against granting refuge for those fleeing oppression and war due to the strain the influx of immigrants has placed on the country’s welfare system, Reuters reports.

“The immediate election outcome and the period after could evolve into a political thriller that would justify a political risk premium being factored into the krona,” Henrik Unell, a Stockholm-based senior analyst at Nordea Bank AB, said in the article.

Prime MinisterFredrik Reinfeldt believes that the minority bloc undermined the public’s opinion of stability in regards to the government’s ability to handle budgets and public finances. Economists and investors argue that a political stalemate would delay budget talks and pressure the central bank.