The Swiss Market Index (SMI), Switzerland’s blue-chip stock market index has lost 14% of its value over the last two trading days. Should you rush and buy shares ofNestlé (WKN:A0Q4DC) (VTX:NESN) (ETR:NESR), Novartis (WKN:904278) (VTX:NOVN)(ETR:NOT) or The Swatch Group SA (WKN:865126) (VTX:UHR) (ETR:UHR)? The short answer is no — at least, you should not rush into such a decision. Some caution is needed, and you should understand the reasons for — and the implications of — the astonishing drop.
The catalyst for the stock market earthquake was the decision by the Swiss National Bank to eliminate its currency floor of 1.20 Swiss franc to the euro. This move caused the Swiss franc (CHF) to sharply appreciate against the euro (EUR) (and all other currencies): At some point during Thursday, it was trading 28% higher at 0.86 CHF/EUR. By the end of Friday the Swiss franc traded at around 0.99 CHF/EUR, a 17% increase in the value of the Swiss currency compared to two days before.
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