Investing in Swiss shares in case of a euro collapse?

Brendan Burgess

Brendan Burgess

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I have suggested that those worried about a euro collapse should invest part of their portfolio in shares denominated in other currencies.

But is this correct? The Swiss stockmarket seems to be suffering because of the rise in the Swiss Franc against the euro and other currencies. Their exporters are really suffering.

Is a devaluation good for stockmarkets?
 
I think it is more complicated than just saying "shares denominated on other currencies".

You need to look at the individual companies and their accounts.

What currency do they do business in?
Have they a strong balance sheet?

If the comapnies conduct all their business in Swiss francs, then a devaluation won't make any difference.
 
The Swiss are actually talking about pegging the Franc to the Euro because of it's strength. One of the head central bankers over there came out yesterday and said that the currency was hugely overvalued against both the Euro and the USD. I can see the beginnings of a currency war to add to our problems if we are not careful!

On the subject of the Swiss market, I don't really know it but I might hazard a guess that the index is heavily exposed to financials through USB, Credit Suisse and Zurich to name but three so this might impact on the performance of the index as they are not immune to wider European concerns. And of course the strong CHF doesn't help the huge exporters either.
 
Sunny said:
The Swiss are actually talking about pegging the Franc to the Euro because of it's strength. ....
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When a currency is pegged, how is this done? Is it thro Central Bank intervention? And, wouldn't this be open to attack by speculation?

On the substantive issue of investing, I take the company rather than the currency into account. I agree the CHF is probably overvalued and will drop as markets eventually settle. Investments made in the CHF could be a risky speculation on the currency. THat's assuming fo course, that Euroland get's its house in order, which I think it must. A collapse of the Euro, whilst not impossible, seems very, very unlikely.
 
Brendan Burgess said:
I have suggested that those worried about a euro collapse should invest part of their portfolio in shares denominated in other currencies.

But is this correct? The Swiss stockmarket seems to be suffering because of the rise in the Swiss Franc against the euro and other currencies. Their exporters are really suffering.

Is a devaluation good for stockmarkets?
Click to expand...

Hi Brendan,

You have to be very careful went talking about investing in Switzerland, because we have so many well known multinationals in the line up! If you look at the Swiss Market Index (SMI) (Page 3, left hand side), you'll see many household names such as Nestle, Roche, Novartis, ABB, and Adecco, in fact the only true Swiss is SwissCom. These companies have operations all over the world, so except for reporting purposes they are really not that impacted. If however you take a broader index such as the Swiss Performance Index (SPI), then you are right, so be careful what kind of ETFs you buy.

Right now the strength of the Franc is a big problem no doubt, but there is two sides to every story, the Franc is so high because everyone wants to deposit money with the Swiss banks and as a result interest rates are very low, so Swiss companies enjoy access to very cheap capital. If often heard it said that one of the main reason there are so many Swiss multi nationals is because they were able to bet their hands on such cheap capital in the past. So I guess we'll have to wait and see what happens.

Jim (Switzerland)
 
Sunny said:
On the subject of the Swiss market, I don't really know it but I might hazard a guess that the index is heavily exposed to financials through USB, Credit Suisse and Zurich to name but three so this might impact on the performance of the index as they are not immune to wider European concerns. And of course the strong CHF doesn't help the huge exporters either.
Click to expand...

The SMI is actually: Health Care - 33, Consumer Goods - 30, Financials - 19, Industrials - 11, Basic Materials 4, Oil & Gas - 2, Telecom - 1.

You have to remember that in addition to the well known financials we also have companies like Nestle, Novartis, Roche, ABB and Holcim just to mention a few.

Jim.
 
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