Will UK investors profit from the falling Swiss market?

15th January 2015

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The Swiss stock market collapsed on Thursday morning as the country’s central bank dropped its peg against the Euro.

As a result the Swiss market fell by around 10% as the franc soared against the pound, euro and US dollar.

According to estimates from Hargreaves Lansdown, UK fund investors have in excess of £4bn invested in Swiss stocks, primarily via European funds but also more surprisingly, through UK Equity Income funds.

Roche and Novartis, both Swiss stocks, are popular fund holdings with managers in the UK Equity Income sector, who can invest up to 20% of their portfolio overseas. For instance, Woodford Equity income has 3% invested in Swiss Pharmaceutical giant, Roche.

Hargreaves Lansdown analysis shows the average European fund has 9% invested in Swiss stocks, the typical European (ex-UK) tracker fund has around 20%, and  the average UK Equity Income fund has just under 1%, though some UK Equity Income funds have closer to 5% invested.

So far, even though the Swiss stockmarket has tanked, the effect of a rising currency has more than offset that fall.

After factoring in the currency rise against Sterling, UK investors would on average have made around 2% on their Swiss stock market holdings this morning.

UK Equity Income funds invested in Roche and Novartis would have made more, both these stocks rose about 5% in sterling terms.

“Not bad for a morning’s work,” said Laith Khalaf, senior analyst, Hargreaves Lansdown.

He added: “The Swiss stock market has been decimated this morning by the central bank’s decision to remove their currency peg to the Euro. However UK investors can afford a wry smile because the appreciation of the franc has made their Swiss holdings more valuable, despite the stock market plunge.

“European investors will now be keenly watching whether the ECB turn the money printing taps on next week, and considering what effect this will have on the single currency, and on stock markets across Europe.”

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