SMI review 2023: Slight plus after a turbulent year
Published: Wednesday, Dec 20th 2023, 10:01
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The Swiss stock market year was characterized by the demise of Credit Suisse and strongly fluctuating interest rate expectations. The bottom line was a slight gain.
The SMI has advanced by around 4% to around 11,150 points in the turbulent stock market year to date. However, it is still a long way from its all-time high of 12,997 on January 3, 2022, following the sharp fall of around 17% in the previous year. The range between the high for the year in May at 11,616 and the low in October at 10,251 reached 1365 points.
In an international comparison, the SMI performed extremely modestly this year. The Dow Jones Industrial, the world's leading index, recorded an increase of around 12%, while the Dax even rose by around 20%. And the boom in artificial intelligence caused the Nasdaq technology index to soar by a whopping 42%, driven by the "glorious 7", Alphabet, Amazon, Apple, Microsoft, Meta, Nvidia and Tesla.
The SMI didn't stand a chance. The three most important companies, Roche, Novartis and Nestlé, account for almost two thirds of the total capitalization of all companies listed on the SMI. The fact that Roche's non-voting equity securities fell by more than 15 percent and Nestlé's by almost 9 percent was too heavy a burden for the local blue chip index. This was not offset by the Novartis share's gain of a good 7 percent.
The two halves of the year on the Swiss stock market showed a similar picture, with a slump and a rapid recovery in both spring and fall. However, the drivers were very different in the two semesters:
When the world had to be saved because of Credit Suisse
The demise of the traditional bank Credit Suisse overshadowed everything in the spring. In March, fears of a global banking crisis led to a major slump in the SMI. In the wake of the collapse of several US banks, Credit Suisse also reached new all-time lows and confidence in the bank eroded completely following the seemingly endless series of scandals.
The rescue of CS, which was accompanied by much fanfare and criticism, led to an upward trend on the stock market following the forced merger with UBS.
The interim low in the fall was linked to the general economic climate. Despite numerous interest rate hikes by central banks, inflation proved to be more persistent than investors had hoped, and in certain regions the economy fell into a recession, albeit a mild one. In addition to the situation in Germany, the development of the real estate sector and the general economy in China was a particular cause for concern.
The uncertainty was exacerbated by profit warnings from companies and increasing geopolitical tensions following the Hamas attack on Israel. "Higher for longer" seemed to be the US Federal Reserve's motto not only for interest rates but also for numerous other problems.
Hopes of interest rate cuts in the near future boost
With the accelerating decline in inflation and the stagnation of key interest rates at the most important central banks, there was a year-end rally from the end of October, fueled by fantasies of interest rate cuts. A few days ago, the US Federal Reserve also held out the prospect of interest rate cuts for the coming year.
"The stock market year 2023 can be characterized by the motto: Firstly, things turn out differently and secondly, than you think," Remo Rosenau, Head of Research at Helvetische Bank, told AWP. Most market participants started the year very negatively. "They were expecting a recession that never came." However, the interest rate cuts did not come as quickly as expected.
Looking at the other main indices in Switzerland, the picture does not change much compared to the SMI. The broad Swiss Performance Index SPI performed only marginally better than the SMI with a gain of just over 6%. The limited weighting of the heavyweights in the Swiss Leaders Index SLI of the 30 largest stocks nevertheless allowed for a gain of just under 9 percent. The SMIM, which tracks the 30 largest companies behind the 20 largest companies in the SMI, rose by around 4.5 percent.
At the level of individual stocks within the 30-strong SLI, the shares of vacuum valve manufacturer VAT ended the year as the winner by a wide margin, currently up around 64%. They also received a tailwind from the boom in tech stocks, as did Logitech in fourth place with an increase in value of a good 40 percent.
UBS among the top performers after CS takeover
Only Partners Group and UBS fared even better than Logitech, with gains of a good 50 percent each. UBS benefited on the one hand from the increase in mass resulting from the CS takeover and on the other hand from the confidence that the integration of CS will succeed.
Holcim, ABB and Kuehne+Nagel each increased in price by more than 30 percent, with the latter receiving an additional boost towards the end of the year from the armed skirmishes in the Red Sea. As important shipping companies are now bypassing the Suez Canal, new business opportunities are arising for Kuehne+Nagel.
Conservative" stocks such as Geberit, Givaudan and Swiss Life advanced by between 20 and 30 percent, as did healthcare stocks such as Straumann and Sonova.
Sandoz, the shares of the generics specialist spun off from Novartis, were up around 11 percent on their stock market debut at the beginning of October.
In addition to Roche's profit participation certificates, its bearer shares (-27%) and Lonza (-23%) were the absolute biggest losers at the bottom of the table. Both companies had to cope with the loss of sales in the current year that they had generated in previous years thanks to coronavirus.
In the broad market, the share prices of two smaller healthcare companies more than doubled, Kuros Bioscience (+147%) and DocMorris (+162%). Doc Morris recently received a boost from the imminent approval of electronic prescriptions in Germany.
Conclusion: those who backed the right horses could also earn a lot of money in 2023. Those who invested broadly at least achieved a return slightly above inflation - which made the terrible year on the stock markets in 2022 at least partially forgotten.
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