For a long time international investors regarded the Swiss equity market rather like the poor relation, with domestic blue chips lagging the EURO STOXX 50 by around 25 percentage points on a five-year view. The large conglomerates have picked up the pace over the last few weeks, however. Measured by the BX Swiss Top 30 Index, which has a rather broader basis than the classic SMI, Swiss stocks outperformed the EURO STOXX 50 by a respectable 5% over a period of three months. The race to catch up goes hand in hand with a head start in the heralded cycle of interest rate cuts: while the SNB has already lowered base rates twice in the first half of the year, so far the ECB has only acted once.
Widespread political uncertainty may have recently also caused investors to step up transfers of capital to the Swiss equity market, which after all is known for its defensive qualities. The dominant food and pharmaceuticals sectors can provide stability in the event of exogenous shocks. These include the war in Ukraine, the conflict in the Middle East and the trade war between the USA/Europe and China, as well as the change of government in France. In addition, the duel between Joe Biden and Donald Trump for the White House at the end of the year is another important election that can affect stock markets across the world. Following the first TV debate, the likelihood grew that the challenger Trump would win, which in turn led to a rise in bond yields. It is a similar picture in France, where market observers also expect to see a rise in national debt on the back of the change in government.
Back to the Swiss equity market: the three heavyweights – the world-leading food manufacturer Nestlé and the two pharmaceuticals giants Novartis and Roche – account for a good 44% of the BX Swiss Top 30 Index. The barometer, which contains the 30 largest shares of the Alpine republic, is not just defensively oriented. On the contrary, the index is enriched by many technology specialists covering a wide range of fields. Alongside SMI member Logitech, these also include VAT from the second tier. The manufacturer of vacuum valves, which are used primarily in semiconductor production, expects market conditions to improve again in the current year and anticipates growth in both sales and net earnings. Encouragement comes from the order book, which reached CHFmn 235.8 in the opening quarter, up about CHFmn 100 on the same quarter the previous year. China in particular contributed to this rise. The news was well received on the stock market, with VAT’s share up a little more than a fifth since the turn of the year.
A large number of recent managerial changes have also brought fresh wind to the Swiss equity market. Hanneke Faber, for example, has been holding the reins at Logitech since December 2023. According to outgoing chairperson Wendy Becker, whose successor has still not been appointed, Faber has enjoyed a very successful start as CEO in the last seven months. The new woman at the top, she said, was strengthening the leading position of the company and laying out Logitech’s future strategic orientation for growth and innovation. Medical technology company Straumann similarly welcomed two new members to its board in April, while in May this year Swiss Life appointed a new CEO for its German arm. There were also changes at Richemont and Swiss Re. On 1 June Nicolas Bos, the CEO of jewellery brand Van Cleef & Arpels, took over at the helm of the luxury goods group from Jérôme Lambert, who had held the post since 2018, and on 1 July ex-Allianz boss Andreas Berger replaced the long-standing CEO, Christian Mumenthaler, at the world’s second largest reinsurer. New chief executives usually bring a different angle and can help to stimulate growth.
Source: Leonteq, as at: 08.07.2024