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Roland Egger – "Pharmaceutical and banking stocks have catching potential" News

Thursday, August 17th, 2017 | Economy

The nuclear weapons crisis around North Korea and the USA has frightened the markets and significantly increased the volatility. The Swiss Market Index (SMI) is likely to remain volatile in the coming weeks and months as well, says Roland Egger, investment specialist of the Lombard Odier private bank in Zurich, in the cash exchange talk. The reason for this was the seasonality of the market: "September and October are the weaker and thus more endangered months on the stock market."
A good starting point for the next time, according to Egger, however, Pharmabranche and the banks: "Both industries offer attractive valuations and have upside potential." Because of the large proportion of pharmaceuticals Roche and Novartis on the SMI weighting, Egger assumes that the blue chip market can catch up overall. Added to this is a better dividend yield on the SMI securities.
However, Egger hampers hopes for too big leaps. Lombard Odier expects the SMI to grow by two to three percent by the end of the year. And: "At twelve-month point of view it is about twice as much."
At the current level of the leading index of 8980 points, this would be an increase to around 9250 points by the end of the year. Within a year, the SMI would be heading towards 9500 points, according to Egger's forecast – and the SMI record mark of 4 June 2007 would also touch or break (9548 points).
Industry under pressure
According to Egger, the industry is currently under pressure. What can make the production and technology-oriented enterprises a dash through the bill are higher raw material prices. "Therefore, there and there the margin can press something on the result."
This is also likely to be evident in the equity market. The SPI Extra, which represents the market without blue chips, has been consolidated since May. Between May 2016 and May 2017, this stock market barometer rose by 28 percent – the SMI made about half of this share price during the same period. Compared to mid-May, however, the price change of the SPI Extra de facto is flat, but with multiple rashes against the bottom and top.
According to the expert, a re-entry of the course participants in the broad market is not very likely. One disadvantage of this segment against the stock market heavyweights is still the direct comparison of higher valuation of small and medium-sized companies, Egger recalls.
Franc depreciation is possible
"In the past few weeks, the Swiss currency has also been" guilty "of the somewhat disoriented ups and downs on the Swiss stock exchange. At the end of June, the exchange rate of the euro to the franc began to loosen from the mark at 1.09 suddenly upwards, to a multi-year peak at 1.1538. This sparked optimism and drove the prices of currency-sensitive companies. The Korea crisis, however, the euphoria again somewhat braked.
Egger, however, does not want to raise high expectations of a franc slowdown. "After the significant rise over the summer, consolidation is underway." The trading margin is currently between 1.11 and 1.17. Contrary to, for example, the official attitude of the National Bank, Egger says that the Swiss franc is no longer over-rated. In his opinion, the purchasing power (the value of the basket in two currencies) is between 1.20 and 1.20, or slightly lower.
Roland Egger is also analyzing the balance sheet in the cash exchange talk, which is slowly drawing to a close. He explains why he sees a positive mood for the company and which indicators and statements in the half-year and second-quarter results of the listed companies he sees particularly positively.


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