Swiss National Bank posts $14.9 billion loss

ZURICH -- The Swiss National Bank on Monday posted an annual loss of 14.9 billion Swiss francs ($14.9 billion), as it continued to deploy a range of tactics to keep the franc's value under control. 

The Swiss currency has been viewed as a safe haven in turbulent economic times.

Since the 2008 financial crisis, the BNS has broadened its options to guard against the Swiss franc becoming overvalued.

Those tactics involve massive foreign currency holdings, including in equities, which can leave the SNB exposed to stock market swings like those seen at the end of 2018. 

In a statement, the SNB said its foreign currency positions lost 16.3 billion Swiss francs last year. 

But it made 2.0 billion Swiss francs in 2018 from negative interest rates, another measure it uses to dampen the franc's value. 

The SNB charges negative rates on certain accounts in order to keep investors from buying Swiss francs. 

Last year, the SNB posted a record profit of 54 billion Swiss francs thanks to gains on its foreign currency and gold holdings.

In January 2015, the central bank decided to stop trying to hold down the franc's value against the euro.

That decision sent the franc soaring in value against major currencies and contributed to turbulence on global markets.

source: news.abs-cbn.com

Asia stocks plummet, yen soars as risk aversion grips markets

HONG KONG - Asian stocks fell the most in more than four months and the Japanese yen jumped on Monday as risky assets took a hammering before key central bank meetings this week and while investors await Britain's stay-or-go referendum on European Union membership.

Further sapping confidence over recent days has been a steady drip of economic data that has highlighted an underpowered world economy despite years of heavy stimulus delivered by central banks.

European shares are set to open lower with spreadbetters expecting Britain's FTSE 100 to open down 0.4 percent, Germany's DAX to slip 0.8 percent, and France's CAC 40 to fall 0.9 percent.

The U.S. Federal Reserve, Bank of England, Swiss National Bank and the Bank of Japan will meet this week. All are expected to hold monetary policy steady against a backdrop of caution heightened by the global impact of a possible Brexit.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.7 percent, its biggest daily drop since Feb. 11. It is down almost 4 percent in the last two sessions.

Japanese stocks led regional losses with the benchmark index falling 3.2 percent in choppy trade.

"There are many long-term investors who have given up on Japanese stocks as there are no structural reforms being delivered. Meanwhile, monetary policy decisions only have short-term effects," said Michiro Naito, executive director at equity derivatives at JPMorgan who recently visited Asian investors.

Net selling by foreign investors from January through May was roughly 4.5 trillion yen ($42.07 billion) in Japanese cash equities, according to exchange data, a stark turn from net purchases of about 2.83 trillion yen in the same period last year.

Investors hunting for bright spots in Asia this year in China and India have also been disappointed by poor data.

Latest data showed China's fixed-asset investment growth cooling to 9.6 percent in January-May from the same period a year earlier, below market expectations, while the statistics bureau said downward pressures still exist in the economy.

"We have downgraded the China market because of the debt problems and we think by the third quarter, growth numbers would start reflecting a broader slowdown," said Francis Cheung, head of China and Hong Kong strategy at CLSA.

Reflecting the bearish sentiment, S&P e-mini futures were down 0.4 percent in Asia after Wall Street marked steep losses on Friday. A shooting spree in Orlando, Florida, in which 50 people were killed and similar number wounded only added to the pessimism.

In currency markets, the mood was one of risk aversion with the Japanese yen rising to a five-week high against the dollar.

The yen was trading at 105.88 per dollar, its lowest since May 3.

The British pound has whipsawed in recent weeks on news related to the June 23 referendum on its EU membership.

Early on Monday, the pound fell to as low as 150.63 yen, its lowest level since August 2013 while the euro fell to 119.16 yen, a level last seen in Feb. 2013.

Two polls on Saturday showed British voters were still divided on whether to stay or go.

"Ahead of the referendum, many look for sterling to underperform and the yen and Swiss franc to outperform," Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said in a note.

"The euro and central and eastern European currencies are vulnerable, while risk assets, in general, are expected to weaken on a Brexit victory," he said.

Crude oil futures extended losses after falling 3 percent on Friday, pressured by the stronger dollar and data showing the U.S. oil drilling rig count rose for the second week in row.

U.S. crude futures fell 1.1 percent to $48.51 a barrel, while Brent slipped 1 percent to $50.03.

Government bonds benefited with the yield on the 10-year Japanese bond marking yet another record low.

Yields on JGBs with maturities out to 15-years were well into negative territory.

Gold rose, hovering close to three-week highs. Spot gold added 0.1 percent to $1,275.16 an ounce.

source: www.abs-cbnnews.com

Why Swiss central bank decided to let franc soar

GENEVA - Switzerland's central bank on Saturday defended its shock decision to let the franc soar, insisting that the subsequent turbulence rocking global markets and the Swiss economy since the move would eventually subside.

"This was not an easy decision... (but) we are convinced it is the right one," Swiss central bank chief Thomas Jordan said in an interview published in Swiss dailies Le Temps and NZZ on Saturday.

The head of the Swiss National Bank (SNB) has faced widespread criticism both at home and abroad after the bank's bombshell announcement Thursday that it was abandoning the minimum rate of 1.20 francs against the euro that it had been defending for more than three years.

The Swiss franc has since gained around 20 percent against other currencies and is now trading at near parity with the euro.

"The franc is significantly overvalued compared to the dollar and the euro," Jordan acknowledged, noting that the bank had introduced negative interest rates that, in time, would help drive the value of the overheated currency back down.

He hinted that the bank might consider future "interventions" if the situation did not stabilise.

In the meantime, the soaring franc has caused panic on global markets, bankrupted foreign exchange traders as far away as New Zealand, and was seen as a significant threat to Switzerland's export-dependant economy.

The Swiss stock exchange's main SMI index has plunged more than 14 percent since Thursday's announcement.

The decision is also expected to deliver a severe blow to the Swiss economy, with banking giant UBS slashing its growth forecast for this year to just 0.5 percent from its previous estimate of 1.8 percent.

The yield on Swiss 10-year bonds has meanwhile entered negative territory for the first time, with the result that lenders will now have to pay to lend money to the country.

Feared losing control

"The strong franc is threatening the entire Swiss system," the Tribune de Geneve daily said Saturday, adding: "The future looks dark."

Jordan said Switzerland's central bankers had unanimously agreed to scrap their long campaign to hold down the franc after determining that continuing put the bank at risk of "losing control of its monetary policy in the long term."

"We were aware that this decision could have a major impact on markets," he said, while adding that "the markets should gradually stabilise -- (although) it could take time."

The SNB had been defending the exchange rate floor since September 2011 in an effort to protect the country's vital export and tourism industries.

It has bought massive quantities of foreign currencies to do so, allowing its euro reserves to balloon tenfold in just four years.

The rate was introduced as the eurozone crisis sent investors scurrying to the safe haven currency. More recently, the Russian ruble crisis put renewed pressure on the franc.

Jordan insisted that the efforts to rein in the franc were no longer justified since the Swiss economy was far more robust than in 2011.

"We gave the Swiss economy time to adapt to the new situation," he said, stressing that "the currency cap from the beginning was supposed to be an exceptional and temporary measure."

"It was always meant to be abandoned."

 SNB not all-powerful

Now that the cap was gone, Jordan acknowledged that "the economic situation in Switzerland is more difficult."

But, he noted, "SNB cannot fulfil all wishes with its monetary policy. It is not all-powerful."

His comments were unlikely to win over Swiss businesses bracing to see exports plunge and shoppers at home flood across to neighbouring eurozone countries for cheaper goods.

"Making products in Switzerland and selling them abroad is currently the worst possible scenario," Syz analyst Jerome Schupp told TDG.

The boss of a small watchmaking company, H. Moser & Cie, underlined the impact of the SNB's move in an open letter to Jordan, warning that he may have to move his business to Germany.

"Over 95 percent of our watches are sold to people outside of Switzerland, and the first retailers called the same day to cancel orders," Edouard Meylan wrote.

Switzerland's tourism industry, already hit by a lack of snow, was also bracing for mass cancellations as already pricy ski resorts suddenly became far more expensive for foreign visitors.

Tourists arriving in Switzerland on Friday were less than thrilled.

"With an exchange rate like that, we won't be coming back to Switzerland anytime soon," a Scottish tourist in his 60s who gave his name only as Bornsadi told AFP as he arrived at the Geneva airport Friday for a week's holiday.

source: www.abs-cbnnews.com