The Ultimate Guide to
The Swiss Market Index (SMI)
What is the SMI?
The Swiss Market Index (SMI) is an index which tracks the 20 largest and most liquid equities in Switzerland. It represents around 85% of the free-float capitalisation (or tradable portion) of the equity market. The SMI is a blue-chip index as it includes the equities of the top publicly-traded Swiss companies. It is a well-established index and is one of the most important benchmarks in Switzerland.
The largest equities are taken from of the Swiss Performance Index (SPI) Index. The SPI is Switzerland’s overall stock market index. It includes all of the companies listed on the SIX Swiss Exchange. For a security to be admitted to the SMI, it is required to be ranked 18 or higher in the selection list. Acceptance into the index takes place on a quarterly basis: March, June, September and December.
As of 30.12.2016 the companies that make up the SMI index had a full market capitalisation of CHF 1,043 billion and an adjusted free-float market capitalisation of CHF 1,001 billion.
The SMI Index is part of the SMI® Family of the SIX Swiss Exchange, which includes the SMI®, SMIM® and the SMI Expanded®. The latter is made up of the top 50 stocks and covers over 90% of the Swiss equity market capitalisation.
Which companies are listed in the SMI?
In order to be added to the SMI, the annual ranking of a stock, based on capitalisation and turnover (weighted 50% each), will be taken into consideration.
The SMI includes a wide range of sectors, such as healthcare, consumer goods, financials, industrials, and telecommunication.
The table below shows sector weightings and basket composition of the SMI index as of 30.12.2016
| Short Name |
Market Value |
Health Care
|
38.16%
|
| NOVARTIS N |
19.45% |
| ROCHE GS |
16.33% |
| ACTELION N |
2.37% |
Consumer Goods
|
27.21%
|
| NESTLE N |
22.72% |
| RICHEMONT N |
3.52% |
| SWATCH GROUP I |
0.98% |
Financials
|
17.90%
|
| UBS GROUP N |
5.75% |
| ZURICH INSURANCE N |
4.22% |
| SWISS RE N |
3.11% |
| CS GROUP N |
2.89% |
| JULIUS BAER N |
1.01% |
| SWISS LIFE HOLDING AG N |
0.92% |
Industrials
|
10.36%
|
| ABB LTD N |
4.00% |
| LAFARGEHOLCIM N |
2.58% |
| GEBERIT N |
1.51% |
| ADECCO N |
1.14% |
| SGS N |
1.13% |
| Basic Materials |
5.21% |
| SYNGENTA N |
3.72% |
| GIVAUDAN N |
1.48% |
Telecommunications
|
1.16%
|
| SWISSCOM N |
1.16% |
Total
|
100.00%
|
How is the value of the SMI derived?
The SMI is calculated in real-time every time there is a new transaction, with the shortest interval being 1 second.
The index is calculated using the Laspeyres (or base weighted) method. This calculates changes in the price of the underlying stocks on a daily basis, however changes in share quantities are factored into the following day’s calculation.
SMI Calculation
The index value is derived by dividing the market capitalisation of the components by a divisor.
The divisor is an arbitrary number which is used to produce a value that can be compared from day to day. This may be changed on the basis of factors affecting the index weightings, such as corporate events. An initial base value was set at 1500 points on the 30th June 1988. Once the index is calculated, deriving the cap-weighted value of the index is a straightforward process.
As of 18th September 2017, a new rule with regards to the weighting of the index was introduced. This caps the weighting of the largest shares at 18%. The reweighting is carried out at the quarterly reviews unless more than 2 components exceed 20%, in which case they will be reweighted when the markets open the following day. The amendment has been introduced to comply with the ESMA UCITS Directive guidance on diversification limits.
A snapshot of the SMI value in September 2017 is shown in the chart below. From the chart, it is possible to see that the SMI value has grown from 1500 in 1988 to over 9000 in 2017.
Swiss Market Index Chart – Google – 29 Sept 2017
How is the SMI traded?
Trading the SMI generally involves speculating whether the index will rise or fall without a requirement to own the underlying shares. This can be done through a range of different products, including Eurex futures and options, Exchange-Traded Funds, warrants and contracts for difference (CFDs).
Just some of the regulated brokers that allow clients to take a position on the SMI include IG, who offer spread betting on the Index and a CFD; and Plus500, who offer a CFD based on the Swiss 20 Eurex future.
The value of the SMI and the direction that it moves in also provides insights into the valuation of the currency, and trading Forex pairs would therefore be another, indirect way of trading the SMI.
To keep informed of potential factors that may affect the index, traders may wish to keep up to date with company news, product releases, defects and recalls, as well as potential mergers and acquisitions. For example, the takeover of Actelion and Sygenta had a major impact on the SMI. Switzerland’s macroeconomic events can also have an impact and traders may want to keep aware of political news, monthly reports, and economic reports.
Related Indices
- Swiss Market Index Mid (SMIM) – the 30 largest mid-cap stocks not included on the blue-chip SMI Index.
- Swiss Market Index Expanded – the top 50 highest cap stocks. This is a combination of the SWIM and the SMI and forms over 90% of the Swiss equity market capitalisation.
