Could SNB neutralise ECBs QE programme? (at least partially)

Considering that the SNB has such vast amounts of bonds from EU members and obviously isn’t comfortable with the rumoured details of the ECB QE programme (just like the German Bundesbank coincidentaly), one could argue that they will be selling bonds, reducing risk as soon as the ECB QE programme is announced (or even before).

Now the interesting question is, considering the size of the SNB balance sheet, and their large holdings: To what extent will they neutralise the ECB QE programme. How many german bonds will they sell. How much of their substantial other EUR denominated bond portfolio. As their P&L bleeds, will they also be able to take profits on their US Equity – and equity holdings worldwide – and what impact will that have.

If the ECB is that last central bank buying, implementing QE, there must be some chance that they will be left standing when the central bank QE music ends. From a Swiss perspective, it may be a godsend that the SNB is among the first to reverse QE (indirectly).

Should HSBC strategists be correct with their target of EURCHF 0.92 in 12 months, the SMI could see another 5-10% drop, even after the 9% and 5% on January 15th and 16th respectively.

Below the most active and biggest losers in the swiss market yesterday (Jan 16th 2015, day 2 after the SNB shocker)

Table 1: Most Volume

swiss-market-equity-best-volume-january-16th-2015_day_2_SNB-cap

Table 2: Biggest losers

swiss-market-equity-losers-january-16th-2015_day_2_SNB-cap

Interesting; Nestlé is buying back shares on the so-called 2nd line for pension funds. The financial wizards in their treasury seem to believe that overshooting is occuring.

 

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