Swinging Stock

Shares in Swiss central bank ‘as volatile as Bitcoin’

SCHWEIZ NATIONALBANK
Beware the shares. Source: Picture Alliance

The Swiss National Bank, the central bank of Switzerland, is as rock solid as Swiss granite but not its wildly fluctuating shares, which analysts say are an investment every bit as risky as Bitcoin. The shares have enjoyed a crazy rally of over 600 percent in the last two years and were changing hands at 9,000 Swiss francs ($9,400) last Friday before tumbling to 7,000 francs by Wednesday.

Matthias Geissbühler, chief investment strategist at Swiss cooperative bank Raiffeisen, warned investors to steer clear of them. “We usually only see such extreme price swings with Bitcoin or some technology shares,” he said. The SNB declined to comment on the gyrations.

It’s unusual for a central bank to have listed shares, but there’s a simple reason why the SNB became an anomaly. Switzerland’s money used to be printed by private sector banks, and the creation of the SNB in 1906 was a typical Swiss compromise to find a middle way between a public and private sector institution.

On average only 200 shares change hands every day, hence the huge fluctuations.

At first sight, SNB’s shares are an attractive investment. After all, the bank is an important financial market player and has amassed 743 billion francs worth of foreign currency reserves. Unlike the European Central Bank, the SNB doesn’t just buy bonds but shares too, and it owns stakes in top global companies like Apple and Amazon.

The rise in financial markets helped SNB post a record profit of 54 million francs last year. But here’s the rub: The dividend payout is capped at 15 francs per share, amounting to a meager dividend yield of 0.2 percent at the current price.

In normal companies, shareholders have the right to force the management to hike the payout. But SNB isn’t a normal company. Shareholders’ voting rights are limited to 100 regardless of how many shares they own. Besides, the Swiss cantons and the government-owned cantonal banks hold a majority of around 51 percent.

Investors can only hope that the SNB will withdraw its own shares from the stock exchange one day and offer shareholders a premium in return. That’s what the Bank for International Settlements, the Switzerland-based umbrella organization for the world’s central banks, did in 2001. “But from the SNB’s point of view there’s no reason to do so,” said Mr. Geissbühler.

Many small investors don’t care. SNB shares are seen by many as an insider tip and even likened to the legendary Blue Mauritius, one of the world’s rarest postage stamps.

The shares are so volatile because they’re so illiquid. Of the 100,000 registered shares issued only a few thousand are traded on the stock market, Mr. Geissbühler estimates. On average only 200 change hands every day, hence the huge fluctuations. “We firmly advise against joining in the speculation,” said Mr. Geissbühler.

One shareholder at least is likely to have struck gold with SNB shares. German entrepreneur Theo Siegert was the biggest single shareholder in SNB in 2016 with a 6.7 percent stake. Late last year he only owned some 6 percent, meaning he sold around 650 shares.

Michael Brächer is a financial editor in Handelsblatt’s investment team in Frankfurt. David Crossland adapted this story into English for Handelsblatt Global. To contact the author: braecher@handelsblatt.com

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