Swiss Stock Market Reopens to German Investors Following Dispute Resolution

The long-standing restrictions on trading Swiss stocks in Germany have come to an end. Starting this Friday, investors will once again be able to trade Swiss shares on German exchanges, greatly simplifying the trading process and reducing costs for German investors.

For nearly six years, a dispute between the European Union and Switzerland had prevented German and other EU investors from trading their Swiss stocks as they previously could, leading to a frustrating situation where no market prices were available for these assets. This situation changed on Wednesday when the Swiss Financial Market Supervisory Authority (Finma) informed exchanges that they could resume trading of original Swiss stocks starting May 1, or May 2 due to holiday scheduling.

Previously, investors had to navigate around the trading ban by executing trades directly on Swiss exchanges or through over-the-counter transactions. These methods were often more expensive, with less transparency in exchange rate conversions, as noted by financial experts. The alternative for many investors was to use American Depositary Receipts (ADRs), which allowed for trading Swiss stocks indirectly, but often without shareholder voting rights.

In the absence of access to the Swiss market, many investors chose to simply hold their stocks, puzzled by the lack of pricing information as the Euro trading for these securities ceased. However, with the announcement from Deutsche Börse, Swiss stocks will be tradable on platforms such as Xetra once again, with trading specialists prepared to facilitate transactions.

The Swiss market is particularly appealing to stock pickers due to the unique offerings it presents, such as renowned brands like Lindt & Sprüngli and luxury goods from companies like Swatch and Richemont. The Swiss market also includes a variety of successful smaller companies, including cantonal banks that are publicly traded. Notably, the Swiss franc has appreciated significantly against the Euro since the 2008 financial crisis, contributing to the overall returns for German investors, which are typically comprised of one-third capital gains, one-third dividends, and one-third currency gains.

As the trading landscape evolves, it remains to be seen whether future disputes will arise that might impact the trading of Swiss stocks in the EU. In mid-2019, the EU ceased recognizing the equivalence of Swiss stock market regulations, which initially restricted trading options for European investors as a means of leveraging negotiations on a broader framework agreement between the EU and Switzerland. However, a recent thawing of relations has led to the removal of these trading restrictions, with both sides recognizing the need for cooperation rather than conflict.

With this resolution, Swiss stocks are expected to regain their status in the portfolios of German investors, providing access to a market rich in opportunities and diversification.