Swiss Bank Says Swiss Bonds a ‘Nightmare’ as Yields Go Negative
(Bloomberg) — J. Safra Sarasin Holding AG, the private bank controlled by Joseph Safra and family, is advising clients to buy European stocks as investors face losses holding Swiss government bonds and deposits in the country’s currency.
“People want to avoid losses,” Karsten Junius, Safra Sarasin’s chief economist, said in an interview on Tuesday in Geneva. “A sure loss from investing in Swiss bonds is a nightmare for a lot of them. They worked so hard for their money and they would lose it to banks or the Swiss state.”
Investors seeking a safe haven have driven yields on Swiss government bonds with a maturity of as long as 10 years to below zero and some of the country’s banks introduced charges on cash accounts. The Swiss National Bank increased the cost of holding francs to 0.75 percent of sight deposits after its January decision to remove its currency cap against the euro sent the franc soaring.
Junius said the bank has seen “a lot” of money flowing into European stock markets, and expects equities will extend this year’s gains once the European Central Bank starts buying assets in March through its quantitative easing program.
Safra Sarasin is touting German companies Henkel AG & Co. KGaA and Allianz SE as well as Spain’s Repsol SA among its favorite stocks for 2015. Germany’s benchmark DAX Index may reach 11,300 by the end of the year, according to an investor presentation document. It closed at 10,905.41 on Thursday.
The surging franc is increasing the cost of business for Swiss exporters and depressing private consumption, meaning the country will experience a recession this year, Junius said.
Safra Sarasin no longer advises clients buy certain Swiss companies such as Swatch Group AG and Clariant AG, where earnings may decrease because of the stronger currency, according to the presentation. The firm still expects shares in Switzerland’s UBS Group AG and SGS SA to advance this year.
Sharon Valdettaro, a spokeswoman for Safra Sarasin, declined to comment on whether the firm is following Switzerland’s largest banks UBS and Credit Suisse Group AG in introducing additional fees on deposits.
To contact the reporter on this story: Giles Broom in Geneva at gbroom@bloomberg.net To contact the editors responsible for this story: Mark Bentley at mbentley3@bloomberg.net Cindy Roberts, Edward Evans
