Once regarded as a safe-haven currency, the Swiss Franc has weakened to multi-year lows against the USD in 2022.
Now, after announcing its first rate hike since 2007 this week, Swiss National Bank Chairman, Thomas Jordan warned the central bank is “prepared to take the necessary measures in every situation” to ensure price stability of the Franc.
There are many observers who believe the language used by Jordan leaves the door open to Switzerland liquidating some, or all, of its massive positions in U.S. tech stocks.
“The thinking is that they may dump U.S tech stocks, to raise USD, to buy Swiss Francs to keep CHF stronger. Around 25% of their FX reserves currently sit in equities,” said Amplify Director, Eddie Domnez.
“This is a significant, hawkish, change of stance by the Swiss National Bank.”
The tech stocks that could be liquidated
According to Bloomberg data, the Swiss National Bank’s top stock positions are dominated by U.S. tech stocks.
Here are the banks top 10 holdings, as at the end of Q1 2022.
| Company | Number of shares owned by Switzerland |
| Apple Inc | 71m |
| Microsoft Corp | 30.8m |
| Amazon.com Inc | 39m |
| Alphabet Inc (Class A) | 1.3m |
| Alphabet Inc (Class C) | 1.2m |
| Telsa Inc | 3.7m |
| Johnson & Johnson | 11m |
| UnitedHealth Group Inc | 4m |
| NVIDIA Corp | 11m |
| Exxon Mobil Corp | 18m |
The big Swiss gains
The Swiss National Bank’s foreign reserves currently stand at around US$1 trillion. Switzerland’s purchasing of foreign (mainly U.S.) stocks dates back to the post-GFC period when the country was facing extreme appreciation of the Franc.
Hedge Analytics Principal, Meyrick Chapman, summed out the situation in a recent FT contribution.
“Swiss investors returning home and foreigners seeking a sanctuary from the eurozone mess (GFC) pushed up the currency that many saw as the ultimate ‘safe haven’. A distinctly Swiss version of quantitative easing was born; newly created Swiss francs were sold to those clamouring for them and the proceeds used to buy foreign assets.”
“The Swiss National Bank’s first choice was to buy European bonds. But as demand for Swiss francs went nuts, the Swiss National Bank had to look further afield, buying bonds and equities in the US and elsewhere. Foreign demand for Swiss currency was thus converted into Swiss National Bank assets.”
So, given Switzerland’s stock purchases date back to the post GFC crash period, rest assured the central bank’s foreign stock portfolio is still sitting on big profits. Chapman estimates that profit currently stands at around US$65 billion.
Time will tell if those gains will be motivation to sell or hold as the bank turns hawkish.