The most important Swiss share indices at a glance - the guide for beginners

In the highly complex world of financial markets, investors are looking for clear and reliable information for initial and independent orientation. The Swiss equity indices are of central importance for investors who wish to place their capital on Swiss equity markets. This applies both to long-term investment strategies and to investors who want to take advantage of short-term opportunities with equity securities on the stock exchange.

The Swiss stock exchange has several share indices, which in their entirety serve as a barometer for the country’s overall economic performance. If you understand the structure, composition and functioning of a stock index, you will already have a sound understanding of the markets. Furthermore, a Swiss equity index will give you valuable insights into the opportunities and risks associated with trading Swiss equities.

This beginner’s guide will give you a detailed overview of the most important Swiss equity ind ices. Each of these indices offers insights into different aspects of the Swiss economy.

The most important facts in brief

• A stock index shows the development of a defined part of the stock market.
• The selection of shares in an index serves to reflect the stock market of a country, a region, a sector or other sub-sectors.
• The stocks included in the index are weighted according to market capitalisation or another defined method.
• An equity index enables investors to compare the performance of their portfolio with the comparable overall market.
• Equity indices are not tradable securities, but statistical tools.
• With ETFs, which track indices, investors invest indirectly in indices.

Share index: definition, explanation and examples

A stock index, also known as a stock market index, is a statistical measure developed to represent the performance of a specific part of the stock market or the entire stock market of a country or region. It serves as a benchmark for measuring general market performance and not for measuring the performance of individual companies.

A stock index usually has the following characteristics:

• Composition: A stock index consists of a fixed group of selected stocks that are typically chosen according to certain criteria. These criteria may include market capitalisation, sector, liquidity or other factors. The selection of shares is representative of the overall market or a specific market sector.
• Weighting: Each share in the index is weighted according to its market capitalisation or another defined method. This means that larger companies with higher market capitalisation have a greater influence on the index than smaller ones.
• Calculation: An equity index is usually calculated by adding up the current prices of the shares included, taking into account the weighting. Changes in share prices lead to changes in the index level.
• Benchmark: Share indices often serve as benchmarks against which the performance of investment funds, portfolios or individual shares is measured. Investors use these benchmarks to assess how well their investments are performing compared to the broader market or a specific market segment.
• Historical data: Stock indices provide historical data that allows investors to analyse the performance of the market over time and identify trends. The closing levels of stocks are usually used for this purpose.

The reference point for calculating a share index is always a fixed point in time. The subsequent changes in the share index reflect the performance of the shares contained in the index. The respective level is expressed in index points.

Well-known global examples of share indices are the S&P 500 in the USA, the DAX in Germany, the Nikkei 225 in Japan and the Swiss Market Index (SMI) in Switzerland.

Swiss Market Index (SMI)

The blue-chip SMI index, the most prominent share index in Switzerland, contains the 20 largest companies from the SPI. It represents around 75 percent of the total market capitalisation of the Swiss stock market (source: SIX). The SMI is free-float-adjusted: Only the tradable shares in the index are taken into account.

SIX caps the weight of each stock at 18 percent every quarter (source: SIX). If two stocks are each above 20 percent between the quarterly reviews, SIX applies an additional ad hoc cap. The SMI therefore complies with the ESMA UCITS guidelines and can be used within the EU as a benchmark for the Swiss equity market.

The SMI is published as a price index; its total return version has the symbol SMIC. As the SMI covers a large part of the Swiss equity market, it serves as an underlying for a wide range of financial instruments such as options, futures and ETFs.

The SMI was launched on 30 June 1988 with 1,500 points. The composition of the index is reviewed annually. The SMI is calculated in real time during trading hours.

Historical development of the SMI (performance)

The Swiss Market Index (SMI) was launched on 30 June 1988. Here is a summary of the historical performance of the SMI since its launch in 1988:

• Early years (1988-1990s): The SMI started at a base value of 1,500 points. It experienced moderate fluctuations in the early years, but showed an overall upward trend.
• Rise and dotcom bubble (late 1990s): In the late 1990s, the SMI experienced a significant rise, driven by a general enthusiasm for technology stocks. The index first exceeded 5,000 points on 5 May 1997 and 7,500 points on 27 March 1998 (source: SIX). This period was characterised by the so-called dotcom bubble, which eventually burst.
• Decline and recovery (2000s): After the dotcom bubble burst, the SMI experienced a decline and entered a consolidation phase in the following years. The index then recovered and first exceeded 9,500 points on 4 June 2007 (source: SIX).
• Financial crisis (2008-2009): The SMI, like many other equity indices worldwide, was hit hard during the global financial crisis. It recorded significant losses, but recovered in the years that followed.
• Developments since 2010: Since around 2010, the SMI has shown a general upward trend, with occasional corrections and fluctuations. Its 2007 high was not exceeded until 5 January 2018, when it closed at 9,558 points (source: SIX).

The history shows long upward phases, but also declines after the dotcom bubble burst and heavy losses in the financial crisis. The SMI only surpassed its 2007 high more than ten years later.

Swiss Performance Index (SPI)

The Swiss Performance Index (SPI) includes almost all shares listed on the SIX Swiss Exchange. It is therefore also regarded as the overall market index of the Swiss equity market.

The SPI is a total return index: it assumes that dividends are reinvested, so its level reflects both price changes and dividends (source: SIX).

The SPI has been calculated since 1 June 1987 and was first published on 1 August 1987 (source: SIX). Since then it has gone through periods of strong gains as well as sharp falls in crisis years. It offers investors broad coverage of the Swiss stock market and includes a large number of companies from various sectors. The largest individual stocks include Nestlé, Roche and Novartis.

Swiss Mid Index (SMIM)

The Swiss Mid Index (SMIM) comprises the 30 largest companies on the Swiss stock market that are not yet listed in the blue-chip SMI index. The SMIM tracks the share prices of companies that are too small for the SMI but still carry weight in the Swiss equity market.

Its constituents are weighted by free-float-adjusted market capitalisation. The SMIM was set to a base of 1,000 points on 31 December 1999 (source: SIX).

Swiss Leader Index (SLI)

The SLI Swiss Leader Index consists of the shares of the SMI and the ten largest stocks of the SMIM and thus comprises the 30 most liquid and largest stocks on the Swiss equity market. The SLI has been calculated for publication in real time since 2 July 2007.

The index was calculated back to the end of 1999 and standardised as at 30.12.1999 with an initial value of 1,000 index points. This allows it to be compared with other indices.

In contrast to other indices, the SLI limits the weightings: The four largest stocks are each limited to 9 percent. In addition, the index weighting of all other stocks is limited to 4.5 percent if required.

The SLI is an alternative to the blue-chip SMI index. The difference lies in the weighting: at each quarterly capping date, the SMI only trims a stock once it exceeds 18 percent. A few large companies therefore have a strong influence on the index level, and their price swings feed through to the index in proportion to their weight. The tighter caps in the SLI give smaller constituents more weight and make the index less dependent on individual stocks.

The caps also align the SLI with regulatory requirements in Switzerland, the EU and the US (source: SIX). As the weighting is constantly changing, the limitation factor required for the index calculation is recalculated and adjusted every three months by the SIX Swiss Exchange.

MSCI Switzerland

MSCI Switzerland is an equity index published by MSCI as part of its global index family. It is used as a benchmark for the Swiss equity market.

The index covers the large- and mid-cap companies in Switzerland and represents around 85 percent of the free-float-adjusted market capitalisation of the Swiss equity market (source: MSCI). The most important stocks are Nestlé, Roche and Novartis.

Many of the companies in the index generate a large share of their business abroad, so the MSCI Switzerland is sensitive to global economic events.

Swiss All Share

The Swiss All Share Index is a comprehensive benchmark index that includes all shares in Switzerland and the Principality of Liechtenstein. Upon application, companies that are primarily listed on the SIX Swiss Exchange can also be included in the index. Furthermore, the Swiss All Share also includes stocks that cannot be included in the SPI due to the free-float limit of 20 percent.

This index thus offers investors an overall view of the Swiss equity market, irrespective of the size of the company or the sector in which it operates. The launch of the index in July 1998 was triggered by the exclusion of investment companies from the SPI. The index level of the SPI as at 30.06.1998 was adopted. The performance index was standardised at 1,000 index points.

BX Swiss TOP 30 (BX)

The BX Swiss TOP 30 (BX) was launched by the BX Swiss stock exchange. It covers the 30 largest companies on the Swiss equity market. To be eligible, companies must be listed on BX Swiss or SIX and included in the BX Swiss All Share Index. The 30 constituents are weighted by free-float-adjusted market capitalisation, and the index is reconstituted every quarter (source: Solactive).

Frequently asked questions (FAQ)

Are equity indices and ETFs the same thing?

An equity index and an ETF are two different things. An equity index is a measure that represents the performance of a group of shares, such as the Swiss All Share Index. An ETF, on the other hand, is an exchange-traded fund that tracks a specific index, such as a stock index.

How does an equity index work?

A share index measures the performance of a specific group of shares and summarises the values in a group. It provides a snapshot of general market trends and allows investors to compare the performance of their portfolio with the market as a whole.

What are the advantages of investing in an equity index?

The advantage of investing in an equity index (via an ETF) is that it provides broad diversification and reduces the risk associated with investing in individual stocks. It also requires less time compared to buying individual shares directly.

What are the disadvantages of investing in a share index?

Equity indices are limited to the stocks included in the index (for example, the SMI is dominated by Nestlé, Novartis and Roche). If you are a fan of a particular sector or company, index investing could mean you miss out on the opportunity to invest specifically in these companies. Equity indices are susceptible to the general volatility of the market. Index funds and ETFs follow passive strategies and do not offer active management or adjustment of your investments in response to changing market conditions. This may mean that you do not take advantage of market opportunities or protect your portfolio in times of high volatility.