December 22, 2017 / 9:27 AM / 6 months ago

UPDATE 1-Swiss sell foreign investments, hinder efforts to weaken franc

ZURICH, Dec 22 (Reuters) - Swiss companies and investors continued to sell their foreign investments during the third quarter, data showed on Friday, highlighting one of the problems still facing the Swiss National Bank in its campaign to weaken the Swiss franc.

Swiss investors sold foreign financial assets worth 2.74 billion Swiss francs ($2.77 billion) during the quarter while companies exited overseas investments valued at 23.60 billion francs.

The desire of Swiss investors to bring money home and limit their foreign spending has been cited by the SNB as one of the factors behind the strength of the franc, by increasing demand for the currency.

Although the franc has weakened roughly 8 percent versus the euro this year, the SNB has vowed to keep its expansive policy in place to check the currency, which it describes as “highly valued”.

SNB Chairman Thomas Jordan said despite increased stability and improving economic outlook in Europe, Swiss investors were still reluctant to go abroad.

“We don’t see at this moment really an increase in the willingness of Swiss investors to invest abroad, to buy dollars or euros at the moment,” Jordan said last week.

“We have had this depreciation in the Swiss franc, but that was mainly because of diminishing risk outside of Switzerland.”

Jordan said he was hopeful investor behaviour would change soon.

“There is still potential for investors to go abroad and find better opportunities compared to the situation in Switzerland regarding the financial return,” Jordan said.

SNB data on Friday showed Switzerland’s current account surplus narrowing during the third quarter to 13 billion francs as receipts from foreign trade declined.

The outlook for Switzerland’s export-reliant economy remains bright, however, with the forward-looking KOF economic barometer hitting its highest level since June 2010.

Pension funds are only very cautiously reducing their holdings in Swiss francs in their quest for yield, according to the Credit Suisse Pension Fund Index.

Although by law the funds must hold 70 percent of their assets in francs, the proportion has dropped from 80 percent in 2010 to 77 percent at the end of September.

“The trend may continue in this direction, and although it would not make a massive impact in the weakening of the franc, it is a push in the right direction,” said Christian Wicki, Head of Strategy Consulting, Institutional Clients at Credit Suisse.

“The pension funds are trying to get a better return for their members, but it is not their job to take pressure off the franc.”

Domestic companies and investors changing their behaviour could eventually be a contributor to weakening the currency, said Andrea Lassmann, an economist at Wellershoff & Partners, a consultancy.

“I don’t think we will be seeing any big changes yet — only gradual changes, which will have a cumulative effect,” Lassmann said.

$1 = 0.9889 Swiss francs Reporting by John Revill; Editing by Catherine Evans

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