Coutts: Spotlight Switzerland

Coutts: Spotlight Switzerland

(Bild: © Schlierner –

London – The strong Swiss franc makes it increasingly difficult for companies to compete with foreign competitors. Data from Swissmen, industry association of the machinery, electronics and metals sectors, shows that new orders fell by around 11% in H1 2012 compared to the same period a year ago.

It is clear that previous strong quarters of economic growth were based on building of backlogs – yet this source of growth is fading. Analysis of Swiss export data since 1984 shows it typically takes two years for exports to feel the impact from changes in the trade-weighted Swiss franc. If this pattern continues, then the longer the floor in the euro-Swiss franc exchange rate is in place, the less pressure we will see on exports.

  • Foreign Exchange Outlook: Since the day the SNB announced the minimum conversion rate of 1.2 Swiss Francs per euro, we have held the view that we don’t expect the franc to appreciate beyond this level, nor do we forecast any further weakness.
  • Fixed Income Outlook: The SNB’s forecasts highlight what we already expressed in our last update on Switzerland in March 2012 – we do not anticipate a rapid acceleration in inflationary pressure.
  • Equity Market Outlook: Given the rally in risk assets since June, we think that the total return potential for equity markets is limited in the months ahead. We believe that GDP growth is a key factor for the longer-term performance of equities and, as we said previously, we are negative on the prospects for growth.

Detailed report…

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