Many of the biggest investors in Europe seem to be chasing Swiss National Bank shares at the moment. Swiss National Bank (SNB or the Schweizerische Nationalbank) is actually Switzerland’s central bank, but it is also possible to buy shares in SNB (on the Swiss stock exchange). What is even more interesting is that the SNB share price has been soaring since the beginning of the year and is now up over 90%

Part of the reason for this is that Swiss National Bank shares are in limited supply. Most of the shares are held by the Swiss cantons and by the cantonal banks. But last year Theo Siegert, a German business, decided to sell some of his shares in SNB. Siegert, a private investor, owns over 6% of the Swiss National Bank.

The actual number of shares which change hands every day is fairly limited. In addition, SNB shares grant the owner limited dividends and voting rights.

SNB shares have soared over 50% in less than 90 days

You would expect that someone selling shares in a company would reduce the price somewhat, but in this case Siegert’s decision seems to have had the opposite effect. Shares were priced at just under CHF 4000 at the beginning of the year. Since then they have soared to over CHF 7000. At the time of writing they were trading at CHF 7,520.

The shares are denominated in Swiss francs, so as a sterling investor at the moment you may benefit from some additional upside if the CHF gains against the GBP.

There is speculation among informed circles that big investors like pension funds have started buying Swiss National Bank shares because the dividend yield makes them slightly more attractive than bunds (German government bonds) and the Swiss National Bank is considered a very low risk prospect. The fact that these investors are buying an equity rather than a debt security does not seem to worry them.

Fundamentally, SNB is not out to become the next banking giant. It is a central bank that happens to have a small proportion of its shares available to trade on the Swiss stock exchange. It is quite unusual in that respect. But if you are looking for a very low risk equity, denominated in a currency that is frequently bought when geopolitical risks are on the rise, and where your fellow shareholders are Swiss municipalities, then SNB shares may fit the bill.

Expensive, but low risk

The price tag, now at CHF 7,580 as I finish this article, makes it look quite expensive for most retail investors – that’s more than £5,642 per share. But when you consider SNB shares were to be had for less than £3000 at the beginning of the year, you can see the value the bank has already created for shareholders.

Any risks? Yes, in so far as this is a government entity. The shareholder structure is not really there for the SNB to raise capital, it is to allow the governments and banks in Switzerland to have a stake in the central bank. There is always a possibility that the Swiss government will look to dilute shareholders in some way if the price becomes too spectacular. That might be a hard thing to achieve, however, as it would require the cantonal governments to take a haircut on their assets. They may not be so keen.

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Commodities and Shares Editor
29th March 2018
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