As long as the SNB can bamboozle global speculators into chasing after the incredibly watered-down tiny Swiss franc, it can continue to print money to buy up global assets at essentially no cost.
By Wolf Richter for WOLF STREET.
The Swiss National Bank – now a fund that prints its own money to buy global assets denominated in foreign currency – doesn’t disclose its detailed holdings. But in the US, it has to disclose on a quarterly basis its holdings of US-traded stocks and American Depositary Receipts (ADRs) of foreign companies, which it did this morning with its Q2 SEC filing.
The SNB has piled up US stocks across the range: On June 30, it held 2,437 stocks, compared to the 3,415 stocks in the Wilshire 5000 Total Market Index. From March 31 through June 30, the total value of its US stock holdings rose by $25.6 billion, or by 25.8%, to a record $118.3 billion; $6.0 billion of those gains came from its top 5 holdings: Apple, Microsoft, Amazon, Alphabet, and Facebook.
By comparison, over the same period, the Wilshire 5000 Total Market Index rose 21.4% and the S&P 500 rose 20.0%. But in addition to the gains in market value, the SNB also bought more shares of most of its biggest holdings.
The SNB Top 40.
Of its total holdings of $118.3 billion at the end of June, $51.9 billion were concentrated on its Top 40 stocks and ADRs.
Apple moved into the top spot, pushing Microsoft down into second place. Amazon remained in third place, Alphabet (class A and C shares combined) in fourth place, and Facebook in fifth place.
These Giant 5 accounted for $22.4 billion, or 19%, of its holdings, up from $16.4 billion (17.4% of its holdings) at the end of the prior quarter.
The SNB whittled down the number of shares of two positions of its Top 40: AT&T and McDonald’s, each by -0.3%. But it added to all its remaining Top 40 positions, including huge piles in three of them (increase in the number of shares):
- AbbVie: +21.7% (now #29).
- Alibaba Group ADR: +15.4% (now #12).
- Tesla: +11.2% (now #34).
The SNB holds nearly 30 ADRs, many of them Chinese companies trading in the US. Alibaba is in the Top 40. The others are not, such as Baidu, Bilibili, Weibo, Huazhu, ZTO Express Cayman, Baozun, etc.
The table below shows the Top 40 holdings on June 30, in order of the dollar value of the positions (million $), the share count, the change in the dollar value of the position (million $), and the percentage change in the share count (if your smartphone clips the six-column table on the right, hold the device in landscape position):
|Q2||Q2||Q1 to Q2||Q1 to Q2|
|SNB Holdings, US Stocks & ADRs||Million $||Share ct.||change million $
||% change share count|
|4||ALPHABET CLASS A+C||3,397||2,399,618||651||1.6%|
|6||JOHNSON & JOHNSON||1,590||11,304,866||128||1.4%|
|8||PROCTER AND GAMBLE||1,286||10,757,748||107||0.3%|
|12||ALIBABA GROUP HLDG||1,035||4,800,094||226||15.4%|
|19||MERCK & CO. INC||833||10,769,157||13||1.0%|
|20||CISCO SYS INC||815||17,476,145||154||3.9%|
|21||COCA COLA CO||808||18,089,344||15||0.9%|
|22||DISNEY WALT CO||796||7,140,371||120||2.1%|
|24||EXXON MOBIL CORP||778||17,386,892||128||1.6%|
|25||PAYPAL HLDGS INC||768||4,406,965||353||1.8%|
|33||LILLY ELI & CO||647||3,940,898||103||0.5%|
|36||ACCENTURE PLC IRELAND||621||2,890,138||153||0.9%|
|37||THERMO FISHER SCIENTIFIC||572||1,577,260||130||1.3%|
|40||COSTCO WHSL CORP||547||1,804,518||41||1.7%|
Speculators in Swiss francs enable the SNB to run this racket.
All kinds of folks think that buying Swiss francs (CHF) is sort of an insurance policy against devaluation of their own currency. Others buy the CHF for pure speculation. The Swiss economy is tiny, and the Swiss franc is a tiny currency, but there is enormous global demand for the CHF which drives up its value against other currencies, such as the euro, dollar, or yen. Ostensibly, the SNB attempts to cap the exchange rates by creating new CHF and selling them to buy assets denominated in other currencies.
Total assets on the SNB’s balance sheet amounted to CHF 835 billion in June. Switzerland’s nominal GDP was CHF 700 billion in 2019. So the SNB’s total assets amount to 119% of 2019 GDP. How big is this?
The Fed’s gargantuan balance sheet currently measures $6.95 trillion. That’s about 31% of 2019 nominal GDP:
- The SNB’s assets are proportionately speaking nearly four times the size of the Fed’s assets.
- If the Fed’s balance sheet were 119% of 2019 nominal GDP, it would amount to $26 trillion instead of $6.95 trillion.
That’s how proportionately huge the SNB’s balance sheet is.
To keep this racket going, the SNB must make the world believe by hook or crook that the CHF can only go up, that the SNB itself is struggling valiantly but vainly to keep a lid on the rise, that it will ultimately lose the battle, and that the CHF will always rise against other currencies. That’s what the SNB must make the world believe in order for this racket to continue.
And this scheme then encourages speculators and others to pile into CHF and actually drive up its value, so that the SNB can then print an unlimited amount of CHF and hand them to those speculators in exchange for assets denominated in other currencies, such as Apple shares.
As long as global speculators believe in this racket, the SNB can keep it going. But if these global investors realize what the SNB is actually doing – namely, printing CHF, thus watering down the CHF – and if they then flee the CHF and sell it, its value would drop sharply against other currencies, and after a while the SNB would be forced to end or even reverse the program to save the currency.
But as long as the SNB can fool global speculators into chasing after that incredibly watered-down tiny currency, thus creating insatiable demand, it can continue to print the currency to buy up assets around the globe at essentially no cost.
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