Swiss market plunges amid investor pessimism

Share prices from Tokyo to Europe nosedived on Monday Keystone

World stocks, including shares at the Zurich bourse (SWX), tumbled on Monday amid fears that a deteriorating United States economy would drag others down with it.

Major Swiss shares closed 5.6 per cent down compared with Friday – in the biggest one-day slide in nearly six years.

The index of Swiss blue-chips (SMI) fell by more than 400 points to 7,287 points at the close at the Zurich stock exchange. The SMI even hit the 7,263 mark during the day to recover slightly before closure.

Among the worst-hit titles were Swiss banks and the insurance sector with Swiss Re – the world’s largest reinsurance company – suffering a ten per cent drop.

None of the 20 listed Swiss companies in the SMI closed up on Monday.

Shares in the Credit Suisse Group noisedived 8.4 per cent and the country’s largest bank, UBS, lost 6.7 per cent. The three main insurers, Bâloise, Zurich Financial Services (ZFS) and Swiss Life, lost up to 7.9 per cent.

Traders said investors dumped shares because of concern over the crisis on the US housing market and further write-offs for Switzerland’s financial sector.

“It is as if investors want to hammer home the message that they do not trust in the fiscal programme by President Bush,” added Marc Schürer at Clariden Leu bank.

There is speculations that the SMI may not have hit bottom yet and much depends on how US markets open Tuesday after Monday’s holiday.

But analysts say investors are not putting much hope on Wall Street leading a rebound when it returns to business.

“It’s a snowball effect. There are very, very many pessimists in the market,” a fund manager at Nordinvest in Germany was quoted as saying.

Recession fears

Most investors were carrying through from last week’s pessimism over President Bush’s fiscal stimulus plan to prevent a recession and fears that the downturn will spill over to the rest of the world.

The losses on the blue-chip stock indexes in Germany, Britain and France alone amounted to more than $350 billion (SFr388.3 billion).

In Asia, Japan’s benchmark Nikkei average lost 3.9 per cent to close at a two-year low on Monday while China’s stock market index plunged just over five per cent.

The global equity market rout led to increased demand for safe-haven bonds and currencies.

The decline prompted currency investors to liquidate risky positions, lifting the low-yielding Japanese yen while the dollar generally gained.

The euro dropped below SFr1.59 before it recovered slightly on international currency markets on Monday.

swissinfo with agencies

In brief

Britain’s benchmark FTSE slumped 5.5%, while France’s CAC tumbled 6.8% and Germany’s blue-chip DAX plunged 7.2% on Monday.

The Swiss Market Index (SMI) is Switzerland’s blue-chip index and is currently made up of the 20 largest and most liquid stocks traded at the Swiss bourse.