Switzerland is starting the second half of the sporting year with the high-carat Gstaad Swiss Tennis Open. Seven of the top 20 players will be appearing at the tournament in the Bernese Oberland. Even before the first ball is knocked over the net, though, the economy has already delivered a successful serve, with inflation having surprisingly fallen in June. While economists had expected the figure to remain unchanged, the annual rate of price rises actually fell to 1.3% from 1.4% the previous month. This certainly vindicated the two rate cuts, then, and there could even be a third downward move by the SNB during the year, in either September or December. The KOF economic barometer, a provisional indicator for the domestic economy, is likewise proving to be in good shape, remaining slightly above average in June. “There is a good chance that the Swiss economy will gradually recover over the months ahead,” the economic research institution concluded.
In view of the brightening economic picture and the possibility of a further cut in interest rates, Swiss shares also could continue on their road to recovery in the second stock market semester. Since the darlings of the market can grow quickly, a diversification of investment is thoroughly advisable. The BX Swiss Top 30 Index offers a much broader range than the classic SMI. Brought into being in 2018, the barometer has since appreciated by a quarter. The 20 SMI members are joined in the index by another ten stocks. And these are certainly pack a punch: the 10 selected have delivered an average rise of 6.1% in the year to date. Swatch and Straumann are the only two components to have lost value so far. Sandoz, VAT, SGS and Julius Bär have even recorded double-digit percentage growth. The first of these, a manufacturer of generic drugs that was carved out of Novartis last year, leads the way with an increase of 23.6%, followed by VAT, the vacuum valve specialist, at 22.1%.
The composition of the BX Swiss Top 30 Index is not set in stone, however, but is instead reviewed quarterly and adjusted where necessary. This ensures that the barometer always takes account of recent trends on the market, enabling it to reflect the current mood of the Swiss equity market. To be included in the index selection, companies must meet certain criteria, including a listing in Switzerland and an average daily trading volume of at least CHF 7,500. A free float of at least 20% is also required. The individual components are then weighted according to their free-float market capitalisation.
An exchange-traded product (ETP+) on the BX Swiss Top 30 Index enables investors to take a diversified position in the Swiss equity market. The corresponding open-end instrument is even linked to the net total return (NTR) variant of the index, which means that the dividends paid by the companies are included when the price is calculated. This is a not inconsiderable factor: while the price variant has achieved a return of 3.5% p.a. since the index was launched, with the NTR version the average annual return has been as much as 4.8%. Given the active index process, holders of the certificate have to pay an annual fee of 0.5% p.a. However, the ETP+ is not only an effective and low-cost investment product, but also offers an additional protective function thanks to specific collateralisation: a pledge for each ETP is deposited with SIX SIS AG, which will sell the pledge in the worst-case scenario, i.e. if the issuer were to enter into payment difficulties, and distribute the proceeds to the holders of the ETP.
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