Switzerland, unlike many other European economies, has
maintained a budget surplus and a credit rating of 'AAA'. The
unemployment rate of the nation is also much lower than the
neighboring economies, suggesting that Switzerland has been able
to do better than most (
5 ETFs for Countries with Highest Employment
Yet, that doesn't mean that Switzerland is resting on its
laurels, as the nation is looking to improve its export level and
market diversification, with negotiations with China for a free
trade agreement. The deal which is still subject to approval of
the parliament, but it is expected to benefit various companies
of the country.
The removal of Chinese duties will especially benefit the
chemical industry, the engineering sector, food producers and
The deal under negotiation for three years now is finally set
to reach fruition. China is already the sixth largest export
market for Switzerland and the deal will benefit the European
Swiss companies like Swatch, Richemont and Shindler will stand
to gain from the deal as Chinese tariffs would be lowered. China
is the third biggest export market for Swiss watches and the deal
will fortify the position of Swiss watch companies in China.
Currently, imported goods from Switzerland are charged an 11%
import duty and luxury watches, worth more than 10,000 yuan
(1,500 Swiss francs), are subject to a 20% levy (
Switzerland ETF Investing 101
Luxury watchmaker Swatch has 20% exposure to China while
Richemont is 10% exposed to the country. Although the exact
reduction in duty is still left to be disclosed, this will surely
benefit these companies with heavy exposure in China.
This will also help to offset the impact of reduction in Swiss
watch sales in Asia in the first three months of 2013. The
country witnessed a reduction in sales as a crackdown on
According to the Swiss Watch Industry Federation, overall
Swiss watch exports will likely increase between 4% and 6% in
2013, down from 11% in 2012 and near 20% gains in 2010 and
With only a few weeks left for the deal to finally reach
fruition, investors may opt to invest in Swiss stocks. Instead of
investing in single companies, going via a basket approach may
prove to be beneficial for an investor.
Investors who look to capitalize on the benefits that Swiss
companies will reap from the deal can look to invest in the
ETFs for the Most Competitive Countries on
iShares MSCI Switzerland Index Fund (
Launched in March 1996, EWL is linked to the MSCI Switzerland
Index. The Index has been designed to measure the performance of
the Swiss equity markets. The index is a float adjusted, market
capitalization weighted index which mostly consists of publicly
traded large cap stocks.
The fund manages an asset base of $650 million and trades with
volume levels of more than 400,000 shares a day. The average bid
ask ratio stands at 0.06% so total trading costs will be quite
EWL provides exposure to 40 Swiss securities which mostly
cover the large cap section of the market spectrum. The fund
appears to be highly concentrated in its top 10 holdings as
nearly 73% of the asset base goes towards those stocks.
Drilling down further into the top ten, the top three holdings
in the fund play a dominant role in its performance, as more than
45% of the asset base is invested in these firms. The first three
holdings are occupied by Nestle, Roche Holdings and Novartis.
Among others, the fund does not invest more than 5%.
For sectors, the fund appears to be heavily invested in health
Biotechnology ETF Investing 101
). EWL allocates 29.2% of the asset base to the sector.
Other than this, the fund assigns double-digit allocation to
consumer staples, financials and industrials. Among others, the
fund does not invest more than 8.25%.
In the last one year, the fund has done a good job delivering
a return of 20.7% while year-to-date gains stand at 15.04%. The
fund charges a fee of 52 basis points annually from investors and
has generated a yield of 2.58% in the process.
First Trust Switzerland AlphaDEX Fund (
Launched in February 2012, First Trust Switzerland AlphaDEX
Fund (FSZ) is the latest addition to the Swiss ETF line-up.
FSZ is a passively managed ETF designed to track the
performance of the Defined Switzerland Index, an
index consisting of the stocks selected on the basis of
the AlphaDEX screening methodology.
The AlphaDEX methodology for selecting stocks uses both growth
and value factors for determining the stocks to be included in
the fund. In this way, investors get a blend of both growth and
value stocks in one fund.
The methodology may sound interesting and could lead to
outperformance, but this comes with a high cost of 80 basis
Unlike its iShares counterpart, the fund has not been that
popular among investors as indicated by the trading volume of
just 6,000 shares a day on average. Since its inception, the fund
has been able to amass an asset base of $16.1 million.
The ETF seeks to invest its asset base across the market
spectrum with a slight tilt towards smaller securities. Among mid
caps and large caps, the fund appears to be equally spread
The fund appears to be moderately concentrated in the top 10
holdings in which it allocates 40% of the asset base.
In terms of sector allocation, financials dominates the
holding pattern with double-digit allocation of 33.32%.
Industrials, materials and consumer discretionary also get
double-digit allocation in the fund. (
Two Sector ETFs to Buy in 2013
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ISHARS-SWITZERL (EWL): ETF Research Reports
FT-SWITZERLAND (FSZ): ETF Research Reports
CRYSHS-SWISS FR (FXF): ETF Research Reports
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