Swiss stocks regain some lost ground after heavy selling

Blue chips recovered some ground after panic selling on Tuesday Keystone Archive

Swiss blue chips staged a rebound on Wednesday after suffering a loss of seven per cent on Tuesday in the wake of the attacks in the United States. The SMI closed with a gain of more than two and a half per cent at 5838.

The SMI initially opened another three per cent down but was soon heading up again. Markets in London, Frankfurt and Paris also advanced to recover some of their losses from the previous trading day.

Eleonore Charraz, a trader at Bank Leu, told swissinfo that Tuesday’s decline was driven by panic selling, which continued in the early hours of Wednesday’s trading session.

“The Swiss stock market started out moving very much lower this morning so I guess that was the last of the panic selling,” she said. “But then it started moving very quickly higher.”

She said heavy selling like that seen on Tuesday always offers good buying opportunities for bargain hunters and that with US markets closed again on Wednesday a shortage of some stocks was forcing prices higher.

“We already had a big reaction on Tuesday and now we will wait a few days to see what happens on the political side. It will be quiet. We are not too bad today but this isn’t the last word,” said Richard Jucker, part of the sales team at Zurich Cantonal Bank.

Pharma stocks find support

Pharmaceutical stocks and other defensive issues were among the main gainers on the Swiss stock market.

“There is interest in typical defensive stocks such as Roche whose valuation is good and not at all economically sensitive,” said Christophe Eggmann, fund manager with Bank Hofmann.

The main concern of the market was the impact the attacks would have on US consumer confidence. Consumer spending – the main driver of economic growth – has buoyed the global economy despite the recent downturn in other sectors.

“There is a risk of recession,” said Eggmann. Despite talk that central banks would now move to aggressively cut interest rates and provide liquidity, it remains to be seen “how fast the real economy will react”, he added.

Insurance stocks hammered

Insurance companies’ stocks have been particularly hard hit over concerns about their exposure to the US’s reconstruction costs.

“Obviously all the insurance companies suffered, such as Zurich and Swiss Re, and it was the same across Europe as they have a lot of business in the US,” said Eleonore Charraz.

“Swiss Re has since said claims could match those of the European winter storms of 1999, coming in between SFr750 million to SFr1 billion. That’s roughly one third of their annual profit.”

US markets closed

Analysts are expecting the US financial markets to remain closed for the remainder of the week as efforts are made to calm the nerves of investors and repair the damaged infrastructure of the many companies affected by the New York attack.

Switzerland’s biggest banks, UBS and Credit Suisse, had to evacuate employees from their offices in the World Trade Center complex, and two UBS employees were reported to have been killed after the Center’s twin towers collapsed.

Eleonore Charraz said the longer the US markets remained closed the more stable the New York Stock Exchange would be when it finally did re-open.

“Since it gives people and banks the time to think I don’t expect a major downward move in the US when it reopens. The Dow Jones may lose between five and eight per cent,” Charraz said.

swissinfo with agencies