Switzerland is one of the most prosperous country in the world, home to world-leading companies and a regular outperformer. We analyze the 4 most important Swiss stock market indices.
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Introduction
Despite being a small country, with just over 8 million people, Switzerland plays an important role in the global economy. It is one of the richest places on the planet and a very important financial center.
At the same time, the Swiss Franc is probably the strongest currency in the world. And it is often used as a haven, together with the US Dollar and gold.
Switzerland is also home to 3 of the 10 largest corporations in Europe. Plenty of Swiss companies are world leaders in their sectors. This is the result of the Swiss economy being one of the most dynamic of the continent.
For those who want to invest directly in Switzerland, we analyze its most important stock market indices. This will allow you to choose an appropriate ETF:
SMI (Swiss Market Index)
The Swiss Market Index, commonly referred to by its acronym SMI, is the main stock market index in Switzerland. It is the one we will often see quoted in the financial press.
The SMI is an index owned by SIX, the company that operates Switzerland’s stock exchanges, including the Zurich stock exchange. The SMI was introduced in 1988 and is composed of the 20 largest companies in the country.
Companies are weighted according to their market capitalization adjusted for free float. However, the index also has a rule that says that no one company can represent more than 20% of the index’s total capitalization. If this were to happen, their weight would be capped at 20%.
This has happened in the past, since Switzerland has three gigantic corporations: Nestlé, Novartis and Roche. In fact, approximately 50% of the index’s market capitalization is concentrated in these three companies. This means the other 17 companies share the other 50%.
When looking at a historical chart, we need to bear in mind that the value of the SMI index is quoted in Swiss Francs. And because the Swiss Franc has been such a strong currency for decades, we would need to convert the SMI into either US Dollars or Euros before we compare it with stock indies from other countries.
It will not be difficult for you to find an ETF tracking the SMI. You will find additional information by accessing the official website of SIX.
SPI (Swiss Performance Index)
The SPI (Swiss Performance Index) is also calculated and published by SIX, as is the SMI. In fact, it was introduced a year earlier, in 1987.
The SPI is composed of all companies listed in Switzerland as long as they meet two criteria. The first one is that Switzerland must be the company’s primary exchange. The second criterion is that at least 20% of the company’s shares must be listed on the exchange.
Most companies included in the SPI are of Swiss origin, but we can also find some from either Liechtenstein or other foreign countries.
Because stocks are weighted based on their free float-adjusted market capitalization, without any caps, the larger ones tend to dominate the index. In fact, the 20 companies included in the SMI account for more than 80% of the SPI’s market capitalization of the SPI. Consequently, the correlation between the SMI and the SPI is very high
You will find more information about the SPI index in this link.
MSCI Switzerland
The MSCI Switzerland is another very important index for those who wish to invest in Switzerland through an ETF. Calculated and published by the US company MSCI, this index includes all Swiss stocks that can be found in the MSCI World Index.
Switzerland is the second European country with the largest weight in the MSCI World Index. Only the United Kingdom has a larger weight.
While the number of companies in the MSCI Switzerland index fluctuates over time, depending on how many meet the eligibility criteria, it tends to be around 40.
Because of the larger number of companies included in the MSCI Switzerland, this index offers us a little more diversification than the SMI. However, Nestlé, Novartis and Roche still account for a combined 50% of the total capitalization of the index.
This is the official website of MSCI when you will find more information about the index.
FTSE Switzerland
Finally, the FTSE Switzerland is another alternative for those interested in investing in Switzerland. The FTSE Switzerland is calculated and published by the company FTSE Russell, a subsidiary of the London Stock Exchange.
The FTSE Switzerland shares many similarities with the MSCI Switzerland. It is made up of all Swiss companies that are included in the FTSE All World Index. Consequently, the exact number of stocks fluctuates over time.
Because companies are weighted according to their market capitalization adjusted for free float, the correlation between the FTSE Switzerland and the other three indices is very high.
If you are interested in additional information, you can go to the FTSE Russell website.
I hope you found this analysis about the most important stock market indices in Switzerland useful. I also encourage you to subscribe to my newsletter:
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And if you ever wondered what makes Switzerland such a rich country, I recommend the following analysis:
Top 10 Reasons why Switzerland is so Rich
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