Calm prevails on the Swiss stock market. Two months after the forced rescue of Credit Suisse by UBS with the help of the Swiss authorities, the stock market is fighting to heal the wounds caused by the financial panic that shook the foundations of the country’s financial system, the cornerstone of its economy. . The Swiss Market Index (SMI), the benchmark for this market, accumulates a revaluation of 7.8%, which leads it to aim for annual highs. The index has closed this Friday at 11,571 points after touching the barrier of 11,500 points at the end of April, which allows it to touch the level at which it was found exactly one year ago (11,579 points).
The ‘acceleration’ of more than 9.5% experienced since that ‘horribilis’ weekend in March in which an ‘in extremis’ rescue was devised that has put an end to a bank with 167 years of history has contributed to this momentum. Once the threats of a financial crisis have dissipated (for the moment), said index presumes a gradual recovery and despite what has been experienced, it rises in the annual calculation more than other references on the Old Continent such as the London FTSE 100 (+4% ), which is highly conditioned by energy values.
Credit Suisse and UBS prices in the US, in dollars
The rest, who, although they have not experienced the threat within their territory, have noticed the tremor, started with a greater advantage, so that the gains have already caressed 17% in the German Dax, 16% in the Italian FTSE MIB, the 15.7% in the French CAC 40 and 12.4% in the Ibex 35, where the weight of the bank ate part of the gains. Against this backdrop, analysts are sending mixed signals about expectations for the Swiss stock market. The ‘Bloomberg’ consensus sees potential for it to reach the level of 12,650 points, a threshold that it has not touched since April 2022, in the midst of the stock market revolution due to the Russian invasion of Ukraine which, if confirmed, would mean an advance of 9.3% .
The figure, which has been revised slightly upwards after the storm clouds, becomes relevant if the context of the coming one is taken into account. However, these rising expectations granted by investment banks are not accompanied by strong support, since the majority opt for the option to hold (80%) and the remaining 20% to buy. Something that contrasts with the fact that it is among the favorite European places for fund managers, only behind France, according to a survey carried out by Bank of America.
Green shoots in the Swiss park
Of the 20 stocks that make up the SMI, practically the majority accumulate significant gains so far this year and more than half beat the index. Among them, the pharmaceutical company Lonza Group (+27.5%), the company focused on luxury Richemont (+27.5%), the construction materials manufacturer Holcim (+23.6%), the technology company ABB and the manufacturer of audiophones Sonova. Somewhat more moderate are the advances of Novartis (+8.28%) or Nestlé (+6.2%). UBS is in the “less noble” part (+4.56%) after the collapse suffered due to the “contagion effect” found by its new acquisition, Credit Suisse, which collapses 71.3% after its stock market crash and the correction experienced after the operation valued their titles at 0.76 francs. Since then, its price has remained stable and closed this Friday at 0.79 Swiss francs, which makes it the ‘red lantern’ of the index, along with the Zurich insurance company (-3.2%) and Roche (- 0.77%).
This week it has emerged that the operation carried out ‘in extremis’ will cost UBS 17,000 million dollars, which will be divided between 4,000 million in provisions to cover possible litigation and regulatory costs derived from the exits to which are added another 13,000 million dollars derived from the adjustment between the assets and the liabilities of the new resulting group. According to the planned roadmap, the closure at the end of this month of May or the end of June, giving rise to a banking giant with a market value that will double the Swiss GDP, which is estimated at 800,000 million Swiss francs.
“The banking turmoil in mid-March was a stark reminder that rapid and synchronized monetary tightening tends to provoke,” said Thomas Hempell, head of market and macroeconomic analysis at Generali Investments. Despite this, the expert is optimistic and believes that the markets have overcome a “wall of concern” supported by “resilient” macroeconomic data and corporate earnings, as well as “more moderate” expectations from the Federal Reserve that has accompanied by a “new dose of liquidity” from central banks.
Although the bankruptcies in the United States had a “limited” contagion effect, analysts insist that mistrust is still present. One of the stumbling blocks is the AT1 debt holders, who were written off in the context of the emergency merger, causing losses of 16 billion Swiss francs. Holders of CoCos, as it is known in the jargon, are now demanding that the Swiss Financial Market Supervisory Authority (Finma) reveal the decree they used to cancel these instruments after hundreds of demands have been rejected. Recently, from Federated Hermes they see it as an essential issue to restore the commitment of investors with this class of assets, both because of the size of the CoCos market and because of the effects it can have on the granting of credit.