Credit Suisse looks secure, Sonova could bump SGS in Swiss SMI

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FILE PHOTO: Logo of Swiss bank Credit Suisse is seen Zurich

By Paul Arnold

ZURICH – Credit Suisse is likely to remain in the blue-chip Swiss Market Index (SMI) when it is up for a review in early July, even after the crisis-ridden bank has lost about a third of its value since the last index revision a year ago.

Its market value is now below that of the SGS testing group, seen as a potential candidate to drop out of the list of Switzerland’s 20 largest and most liquid listed companies after more than 17 years in the index.

However, Swiss stock exchange SIX selects SMI stocks based equally on market capitalisation and trading volume and Credit Suisse is at number 10 on its selection list.

“For CS to be in danger of being removed from the SMI, trading volume would have to roughly half and free float market capitalisation would have to plummet by almost 30%,” said Christian Kronseder, head of index technology provider Allindex.

Constituents of the SMI – dominated by heavyweights Nestle, Novartis and Roche – are worth 1.1 trillion Swiss francs ($1.15 trillion), according to Refinitiv data, making it almost as big as Frankfurt’s benchmark DAX, albeit with 40 stocks.

The first 18 companies from SIX’s list are directly included in the SMI. In order to reduce fluctuations, incumbent candidates ranked 19 to 22 have priority.

Right now, SIX ranks SGS 23rd, outside of the so-called buffer and it could be replaced by hearing aid manufacturer Sonova, which has a similar market capitalization above 17 billion francs and is ranked 19th.

It is not certain yet though that SGS will have to vacate its SMI slot.

“Based on the latest selection list, it also looks to us like SGS will leave the SMI,” said Omar Brem, head of investment research at Zuercher Kantonalbank. “However, SGS has outperformed Sonova since the end of March, which is why the second quarter, which is still to come, will be decisive.”

(Writing by Michael Shields; Editing by Tomasz Janowski)