Bears Circle Swiss Stocks Already Slammed By Franc, China Slump
By Roxana Zega
First it was the strengthening of its currency in January that sent Switzerland?s stocks down, only to recover two months later. Now it?s China?s economy, and this time options traders don?t see a speedy recovery.
With a 6.9 percent plunge in August, Swiss equities are heading for their biggest drop in six years, worse than the slump in January, when the nation?s central bank abandoned its franc cap. Now bears are paying the most since October to protect against further declines.
Before concerns about China triggered a $8 trillion rout in global stocks earlier this month, the Swiss Market Index was within points off a record. With exporters bleeding again, bulls are now reconsidering.
?Swiss companies have had the problem that the franc appreciated, and now you see that the situation is also deteriorating in emerging markets,? said Alessandro Bee, a strategist at Bank J Safra Sarasin in Zurich. ?You have a lot of drags at the moment.?
Watchmakers Cie. Financiere Richemont SA and Swatch Group AG, which get more than 23 percent of their revenues from China, tumbled at least 11 percent in August. Syngenta AG, which was among the biggest gainers, is leading the declines this month after Monsanto Co. abandoned its efforts to buy the company.
The SMI had staged a stellar recovery from its low in January, recuperating all its losses in about two months, even with a stronger franc. At the beginning of August, the index climbed within 0.1 percent of the all-time high it reached in 2007. It dropped 7.5 percent since then, through yesterday.