The Swiss National Bank's recent decision to abandon its policy of pegging the Swiss franc to the euro caused the country's SMI index of leading shares to nosedive by more than 14%. The unexpected move caused mayhem on the money markets and spooked equity investors, with stocks marked down across the board. The full impact of all this may well take some time to play out. But at Stockopedia we couldn't help wondering whether it might be an opportunity to pick up some good quality Swiss shares at knock-down prices.
Over the past 12 months the SMI - which is made up of Switzerland's 20 largest and most liquid stocks - rose by a steady 10.4%. In fact it was trading at a near 7-year high just before the Swiss central bank caught everyone off guard.
What happened when the Swiss peg was ditched?
Regulators introduced a ceiling of 1.20Fr / 1 euro back in 2011 at the height of the eurozone debt crisis. It was meant to limit the potential damage caused by investors piling into the country's 'safe haven' currency. At the time, there were big concerns that the Swiss franc was strengthening too far, which was making the country's exporters uncompetitive.
To keep the wheels on that policy, the SMB had to swell its balance sheet by buying up foreign currency. Even before it ditched the peg, questions were being asked about how sustainable that policy was. And with EU regulators soon expected to kick off a round of quantitative easing, the Swiss peg would likely have become even more expensive to maintain.
Switzerland's biggest share fallers over the past week have included some of its best known names:
- Swatch, the £14.7bn watch maker, saw its shares slide by 20%
- ABB, the electrical engineering company, and UBS, the banking giant, both fell 15%
- Other major corporations like Nestle, Novartis and Roche were all down between 10% and 11%
That said, the SMI has already drifted back by more than 4% since the close last Friday. So has the Swiss Performance Index, which tracks most of the country's traded shares. We took a closer look at the market to see…
