Profit from Swiss Government's Likely Abandonment of Franc/Euro Peg – Here's How

The Swiss franc is pegged to the euro at 1.2 EUR/CHF (Chart 1) so if the euro keeps going lower and lower against other currencies, the Swiss franc will do the exact same thing. However, if Switzerland were to de-peg the Swiss franc from the euro, there would be a tremendous upside in the Swiss franc. [That being the case, how can one best profit from such an eventuality?] Words: 265

So says Katchum (http://katchum.blogspot.ca) in edited excerpts from his article* as posted on Seeking Alpha.

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Katchum goes on to say, in part:

Switzerland’s real GDP [is strong having risen] 0.7 % from the previous quarter…compared to declining GDP in the periphery of the eurozone. [As such,] Swiss francs would be a safe haven in Europe during a coming recession [were the currency to be depegged from the Euro].

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According to Societe Generale, it is predicted that after June 2012, the peg between the Swiss franc and the euro…could be abandoned. Were the de-pegging to happen, Swiss denominated assets and equities would start to rise due to a rising Swiss franc – and considerably so because Swiss 2-year bond yields have dropped to a record -0.23% on 31 May 2012 given the prevailing fear that the euro will break up (chart 2) , while the average dividend yield of the Swiss equity index is much higher at 2.5%.

 

 

How to Profit

A good way to benefit from this is to buy the iShares MSCI Switzerland Index ETF (EWL).

 

 

*http://seekingalpha.com/article/630331-swiss-government-bond-yields-signaling-de-pegging-of-swiss-franc-against-euro (To access the above article please copy the URL and paste it into your browser.)

Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.