Swiss National Bank to Sell Part of Its $100 Billion Worth US Stocks?

Swiss National Bank to Sell Part of Its $100 Billion Worth US Stocks?

23 October 2020

If public voting bans investing of public money in defense companies, the Swiss National Bank will be forced to sell some part of its $100 billion worth portfolio of US stock.

Public Voting

                On Nov. 29 Swiss will vote in a national referendum for or against a proposal to ban investment of public money in defense companies. As a recent poll, provided by public broadcaster SRG on Friday, showed majority will vote for this ban – 54% are in favor. If such is the result of voting, there will be introduced new law forbidding pensions funds and the central bank from investing in companies that gains more than 5% of revenues from arms sales. This would force the SNB to sell some of its stakes held in US companies. According to the SNB’s estimates, it would have to sell stocks of 300 companies, altogether worth 11% of value of its huge global stock portfolio. There are not much details on individual holdings in companies, but it its known that the SNB hold, among others, shares worth $369 million in Raytheon Co, Tomahawk cruise missile-producer, as well as stock worth round $388 million in Boeing Co, a producer of B-52 bomber.

For and Against

                The proposal to ban investments in arms making-companies was made by anti-war activists that want to ensure public money are used in harmful way. The initiative though is opposed by the Swiss federal government that claims it won’t stop whatsoever arms producers and sellers, and only will make it more difficult for pension funds to get returns on investments, which already are quite low.

More Trouble for the SNB

                The campaign behind this proposal is also seen as another jab at the independence of the Swiss central banks. Over the years it has been forced to pay more money to government, change the way of providing stimulus to the economy aimed at weakening CHF exchange rate or sell investments in fossil-fuel producers. The SNB already is excluding not only that kind of enterprises from its investment list, but also producers of internationally condemned weapons like anti-personnel mines. Adding another companies engaged in arms sales could make its investment policy more complicated.

Why the SNB Invest in Assets?

                The Swiss National Bank makes investments in stocks and interventions on foreign exchange rate market, like it can buy euros or other currencies, to weaken the Swiss franc. The overvalued Swiss franc is hurting the country’s economy relying much on export and inflation goal. The investment in stocks are made to support broaden SNB policy objectives and thus the bank doesn’t engage in active stock picking but seeks to minor indexes with its choice of stocks.