SMI plummets to new lows

Switzerland's blue chip share index closed down more than five per cent on Monday, dragged down to levels not seen since April 1997.

Traders watching stocks tumble described the rout as “irrational trade”, as shares gave up the gains of the past five years.

The Swiss index of leading blue chips was one of the biggest losers among European bourses, falling 5.6 per cent to close at 4,699.

The move downwards followed heavy selling on Friday, which pushed the SMI below the 5,000 mark.

Better-than-expected half-year results by Switzerland’s biggest pharmaceutical firm, Novartis, failed to halt the slide.

Financial stocks hit

Financial stocks such as Zurich Financial Services and Swiss Life fell heavily, after being hammered on Friday amid concerns about the level of their reserves and their over exposure to the stock market.

Zurich lost 16 per cent, while Swiss Life was dragged down by 12 per cent. Even “safe” stocks such as Nestlé (-7.6 per cent) and Roche (-6.5 per cent) dropped sharply, pushed lower by the strong Swiss franc.

Analysts say they expect the market to recover slightly on Tuesday, but that it will probably remain weak ahead of half-year company results due out later this week.

“You have accounting scandals still putting pressure on the market and companies need to come clean to restore confidence,” said Philippe Revillet, client adviser with Credit Lyonnais. “You need to see a recovery in corporate profits and the economy.”

The Swiss franc continued to remain strong against the dollar, trading at SFr1.44. However, some Swiss traders said they were disappointed the dollar had not surrendered more ground.

“Based on what the share market is looking like, the dollar looks like it is holding up pretty well. Some people are somewhat disappointed it didn’t sell off more,” said one trader.

swissinfo with agencies