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Switzerland Hikes Rate First Time Since 2007: ETF in Focus
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The Swiss National Bank (SNB) raised its policy rate by 50 bps to -0.25% in its June 2022 meeting, giving a surprise to markets that expected the interest rate to be held constant. Switzerland joined the bandwagon of various other central banks those have been raising rates lately as the Swiss central bank did not rule out further rate increases in coming meetings.
The move marked the first-rate hike since 2007 after the central bank kept its policy rate at record lows of -0.75% since 2015. The move was to counter increased inflationary pressure as surging prices for energy and food boosted headline inflation to a 14-year high of 2.9%.
The SNB also indicated it may intervene on the foreign exchange market should the need be. The SNB held growth forecasts to 2.5% this year, expects GDP to remain favorable and unemployment to remain low, if energy supplies in Europe remains stable (given the Russia-Ukraine war). The Gross Domestic Product (GDP) in Switzerland grew 0.50% in the first quarter of 2022 sequentially.
Inflation hit 2.9% in Switzerland in May. The safe-haven franc’s strength has reduced the impact of inflation in Switzerland. Still, the SNB hiked its inflation forecasts for 2022 to 2.8% from the 2.1% it offered in March. It also expects inflation of 1.9% and 1.6% in 2023 and 2024, up from its previous guidance for prices increasing by 0.9% in both years.
We believe that SNB wants to keep its rates in tandem with other central banks. SNB's move followed a 0.75% rate hike by the U.S. Federal Reserve in June while the European Central Bank also hinted that it would raise its rates in July to rein in soaring inflation in the Eurozone which hit 8.1% last month.
Against this backdrop, below we highlight the pure-play Switzerland ETF in detail.
iShares MSCI Switzerland ETF (EWL - Free Report) in Focus
The underlying MSCI Switzerland 25/50 Index consists of stocks traded primarily on the Zurich Stock Exchange. The underlying Index is a free float-adjusted market capitalization-weighted index. The fund has major exposure to Health Care (34.52%), Consumer Staples (23.47%) and Financials (15.93%).
The fund has company-specific concentration risks. Nestle Sa (20.80%), Roche Holding (13.93%) and Novartis AG (10.86%) are the top three holdings of the fund. The 41-stock fund charges 50 bps in fees. EWL is down 21.5% year to date while the fund has gained about 0.7% past month, beating flat return of the S&P 500 (as of Jul 8, 2022). The fund yields 2.07% annually.
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Switzerland Hikes Rate First Time Since 2007: ETF in Focus
The Swiss National Bank (SNB) raised its policy rate by 50 bps to -0.25% in its June 2022 meeting, giving a surprise to markets that expected the interest rate to be held constant. Switzerland joined the bandwagon of various other central banks those have been raising rates lately as the Swiss central bank did not rule out further rate increases in coming meetings.
The move marked the first-rate hike since 2007 after the central bank kept its policy rate at record lows of -0.75% since 2015. The move was to counter increased inflationary pressure as surging prices for energy and food boosted headline inflation to a 14-year high of 2.9%.
The SNB also indicated it may intervene on the foreign exchange market should the need be. The SNB held growth forecasts to 2.5% this year, expects GDP to remain favorable and unemployment to remain low, if energy supplies in Europe remains stable (given the Russia-Ukraine war). The Gross Domestic Product (GDP) in Switzerland grew 0.50% in the first quarter of 2022 sequentially.
Inflation hit 2.9% in Switzerland in May. The safe-haven franc’s strength has reduced the impact of inflation in Switzerland. Still, the SNB hiked its inflation forecasts for 2022 to 2.8% from the 2.1% it offered in March. It also expects inflation of 1.9% and 1.6% in 2023 and 2024, up from its previous guidance for prices increasing by 0.9% in both years.
We believe that SNB wants to keep its rates in tandem with other central banks. SNB's move followed a 0.75% rate hike by the U.S. Federal Reserve in June while the European Central Bank also hinted that it would raise its rates in July to rein in soaring inflation in the Eurozone which hit 8.1% last month.
Against this backdrop, below we highlight the pure-play Switzerland ETF in detail.
iShares MSCI Switzerland ETF (EWL - Free Report) in Focus
The underlying MSCI Switzerland 25/50 Index consists of stocks traded primarily on the Zurich Stock Exchange. The underlying Index is a free float-adjusted market capitalization-weighted index. The fund has major exposure to Health Care (34.52%), Consumer Staples (23.47%) and Financials (15.93%).
The fund has company-specific concentration risks. Nestle Sa (20.80%), Roche Holding (13.93%) and Novartis AG (10.86%) are the top three holdings of the fund. The 41-stock fund charges 50 bps in fees. EWL is down 21.5% year to date while the fund has gained about 0.7% past month, beating flat return of the S&P 500 (as of Jul 8, 2022). The fund yields 2.07% annually.