Switzerland: As good as gold or not?

Bloomberg TV has a “debt deadline” countdown, accurate to the second, ticking away for the U.S. But, with no agreement to raise the deficit overdraft and with the PIGS economies foundering, investors have been turning to the Swiss franc and gold as safe havens to hold their money with the confidence that they will, at least, get it back. Accordingly, the Swiss franc has risen 30% over the past year against the U.S. dollar and reached new record highs on Monday. As can be expected, Swiss business leaders have warned of the consequences of the strengthening currency with businesses taking a hit on earnings as they deal with rising costs and exports deemed less attractive. The Swiss market Index is down 6.5% this year in comparison to the S&P 500’s 6.3% gain. We will look at those firms in the cross hairs of negative investor sentiment: Temenos Group AG (SWF:TEMN), Logitech International SA (SWF:LOGN), Meyer Burger Technology (SWF:MBTN), Nobel Biocare Holding Ag (VTX:NOBN), Galenica Ag (SWF:GALN), Straumann Holding Ag (SWF:STMN).

Average short interest across Swiss equities is at a low of 1.6% of total shares outstanding. That said, there is some evidence of growing short interest across Industrial, Materials, Healthcare and Information Technology stocks.

Shorted Techs

Temenos Group AG (SWF:TEMN) released a profits warning earlier this month, blaming uncertainty in the banking sector to which it provides its software. The USD 1.7 billion market cap’ software & services company has suffered an abysmal share price performance this year, which was further amplified by the recent 20% fall. Short selling picked up in May from an already high positing and has since doubled to 16% of total shares outstanding; it’s highest level this year. Temenos has seen the largest increase in short interest over the past month across all Swiss equities. This bearish sentiment is also reflected on the long side of the market as institutional investors have also halved total holdings to 400 million shares over this year.

Logitech International SA (SWF:LOGN) remains the most shorted Information Technology stock with 19.5% of total shares outstanding on loan. Short sellers rushed to cover their positions over the month of May as short interest peaked at 30% of total shares outstanding and the share price continues to fall. Both short interest and share price are now at annual lows. Almost all of the lendable supply is currently out on loan as institutional investors have sold off almost half of total holdings.

Industrials and Materials exposed to shorting

Meyer Burger Technology (SWF:MBTN) is a long standing name the Data Explorers listed of most crowed shorts. As the most shorted stock in the region with 31% of total shares outstanding on loan, it has also reached a new annual short interest high of its own. However, institutional investors are bullish towards this stock, having doubled holdings over the past year. As a manufacturer of photovoltaics for the solar industry this contrasting sentiment is not unusual for the stock. In addition, as an exporter, this stock is highly exposed to the highly volatility EUR/CHF volatility levels as illustrated by the FT (http://ftalphaville.ft.com/blog/2011/07/25/633321/whats-as-good-as-gold-but-potentially-much-more-volatile/).

Other industrial stocks which are also heavily shorted include OC Oerlikon Corp AG and Clariant AG which see short interest currently standing at 20.4% and 9.1% of total shares outstanding.

General check-up of Healthcare stocks

Nobel Biocare Holding Ag (VTX:NOBN) – Short interest currently stands at 9.7% of total shares outstanding on loan, having increased from 8% since June.

Galenica Ag (SWF:GALN) – The most shorted Healthcare stock in the region with 16.4% of total shares outstanding on loan after short interest has doubled over the 2011.

Straumann Holding Ag (SWF:STMN) – Short interest reached an annual high in May at 10% of total shares outstanding on loan, as did the share price. The share price decline to new annual lows has prompted some short covering to 8% of total shares.