(03 DECEMBER 2018)DAILY MARKET BRIEF 1:No EU solution for double-listed Swiss shares

The European Union confirmed it will not extend equivalence for the Swiss stock exchange as of 31 December. Discussions are not ended: the Swiss Federal Council is expected to provide a formal statement, while President of the Confederation and Head of the Department of the Interior Alain Berset is planning to discuss the matter with EU Commission President Jean-Claude Juncker in the coming days. A recent letter from the EU lists potential sanctions against Switzerland. For now, despite 30% of trading volumes in Swiss stocks carried out on EU platforms, we expect some volatility in Swiss stocks.

The EU estimates that dual-listed shares from Switzerland are traded significantly in the EU, requiring compliance with EU rules. Australian, Hong Kong and US shares are traded less significantly, thus not requiring further regulation. An institutional agreement that grants judiciary powers to the European Court of Justice would make disputes more cumbersome and jeopardise Swiss rules. The Swiss government has allowed a ban of Swiss shares on EU exchanges, which has been supported by the Swiss Bankers Association and the Federation of Multinational Corporations. EUR/CHF is currently trading at 1.1336, approaching the 1.1350 range.