30 December 2016 – Swiss and global market roundup.
Brought to you by Investec Switzerland.
In the last week of the year, the Swiss Market Index deepened its loss for the year as banks continued lower on low trading volumes. The SMI is set to end 2016 with an annual loss of 6.8% as banking and pharmaceutical giants pulled the index down in a year of turbulent trading.
A volatile 2016 started with a brutal equity sell off as investors dumped global stocks on fears of an accelerating economic slowdown in China and the slumping price of oil. The Brexit vote in June provided another genuine shock for markets, dragging down investor sentiment even further. Equity investor fortunes however took a surprising turn in November after Donald Trump’s victor in the US presidential election inspired a year end stock market rally as investors quickly embraced the idea of Republican driven fiscal stimulus, tax cuts and the rolling back of regulations for US business.
Bond markets also experienced whiplash over the year as conflicting forces of central banks attempting to support currencies, investors rushing for safety and monetary policy divergence on the two sides of the Atlantic pushed yields to record lows by mid-year. Borrowing costs then aggressively reversed in November on anticipation of Trump’s inflationary policies and the Federal Reserve announcing an increase in its key rate for just the second time in a decade.
Meanwhile in the Eurozone, investor attention shifted to the busy political calendar. In early December, Italian voters rejected constitutional changes backed by the government, prompting Prime Minister Matteo Renzi to announce his resignation and handing populists another victory in the heartland of Europe. The changing political landscape in Europe will remain a key topic through 2017 as investor focus turns to the general elections in both France and Germany next year.
Switzerland’s equity market index disappointed in 2016 amid a lackluster performance from banks and pharmaceutical giants. Swiss Mid-Cap’s however posted a positive performance of 4.35% for the year thanks to better than expected earnings results and investor’s view of more attractive growth opportunities in the medium sized segment vs. Switzerland’s global giants.
In this week’s company news, Credit Suisse may not have heard the last time from the U.S. Securities and Exchange Commission (SEC) for the time being. According to reports released on Wednesday, the SEC sent letters to bondholders last month asking for documents provided by Credit Suisse relating to the sale of Mozambique bonds in 2013. Credit Suisse Group AG, Russian bank VTB Group and France’s BNP Paribas sold the bonds to investors for a Mozambican state-owned company that said it needed money for tuna fishing. But months later, Mozambique’s government announced that the funds had also been used to buy military equipment. This comes just a week after Credit Suisse reached a $5.28bn settlement with the commission to bring to an end to a major US investigation linked to the sale of toxic mortgage-backed securities in the run-up to the financial crisis.