Swiss Balance of Payments and International Investment Position: Q2 2017

Current Account

The current account was bellow 3.6% against the same quarter in 2016.

Key figures:

Current Account: -3.6% against Q2/2016 to 18,748 bn. CHF

• of which Trade Balance: +6.5%  to 15,550 bn.
• of which Services Balance: -12.8% to 4,087 bn.
• of which Investment Income: -22.9% to 7,369 bn.

Swiss Balance of Payments Q2 2017

Source: snb.ch - Click to enlarge

Financial Аccount

Net Аcquisition of Financial Assets

The net acquisition of financial assets totalled CHF 52 billion (Q2 2016: net acquisition of CHF 40 billion). Other investment saw a net acquisition of CHF 49 billion (Q2 2016: net acquisition of CHF 21 billion), with commercial banks in Switzerland increasing their claims against both non-resident banks and customers. As a result of the SNB’s foreign currency purchases, reserve assets recorded a net acquisition of CHF 19 billion (Q2 2016: net acquisition of CHF 23 billion). By contrast, direct investment recorded a net reduction of CHF 15 billion (Q2 2016: net reduction of CHF 5 billion). This was attributable to the fact that companies in Switzerland reduced their loans to affiliates abroad. In portfolio  investment, resident investors’ purchases and sales of securities issued by non-residents were on a par, as in the year-back quarter.

Net Incurrence of Liabilities

Overall, the liabilities side of the financial account registered a net incurrence of CHF 40 billion (Q2 2016: net incurrence of CHF 34 billion). This net incurrence was mainly attributable to corporate acquisitions: non-resident investors purchased majority interests in companies resident in Switzerland that had been previously held in free float by resident and non-resident investors. These transactions dominated both direct investment and  portfolio investment. Direct investment posted a net incurrence of CHF 48 billion (Q2 2016: net reduction of CHF 11 billion). The corporate acquisitions were particularly evident in equity capital. The net reduction of liabilities in portfolio investment of CHF 27 billion (Q2 2016: net acquisition of CHF 1 billion) reflected the sale of free-float shares by former non-resident investors. Other investment posted net incurrence totalling CHF 19 billion (Q2 2016: net incurrence of CHF 44 billion). This was largely caused by an increase in the liabilities of commercial banks in Switzerland towards non-resident banks.

Net

The financial account balance came to CHF 12 billion (Q2 2016: CHF 7 billion). This is calculated as the sum of all net acquisitions of assets minus the sum of all net  incurrence of liabilities plus the balance from derivatives transactions. This positive financial  account balance corresponds to the increase in the net international investment position resulting from cross-border investment.

Switzerland Financial Account

Extract from the Balance of Payments Q2 2017 Source: snb.ch - Click to enlarge

Switzerland’s International Investment Position

Foreign Assets

Stocks of foreign assets were up CHF 12 billion on the previous quarter to CHF 4,512 billion. Whereas the transactions reported in the financial account (net acquisition of  financial assets: CHF 52 billion) contributed to the increase in foreign assets, exchange rate losses on assets denominated in US dollars led to a decline. A reclassification was a significant factor in the main items on the assets side: As part of a group restructuring, loans which were previously reported under other investment were now reported under direct investment. This notwithstanding, stocks of direct investment fell by CHF 2 billion to CHF 1,554 billion due both to high exchange rate losses and to disinvestment. Despite the  reclassification, stocks of other investment increased by CHF 15 billion to CHF 828 billion, in particular as a result of the high levels of transactions (net acquisition of financial assets: CHF 49 billion). Reserve assets grew by CHF 8 billion to CHF 739 billion. The assets under portfolio investment fell by CHF 9 billion to CHF 1,300 billion, largely due to exchange rate losses.  Derivatives remained virtually unchanged at CHF 90 billion.

Foreign Liabilities

Stocks of foreign liabilities rose by CHF 32 billion to CHF 3,692 billion compared to the previous quarter. This was mainly attributable to the increase in direct investment  stocks, which rose by CHF 46 billion to CHF 1,306 billion as a result of the large volumes of transactions reported in the financial account. Despite the high net reduction in  liabilities, portfolio investment stocks declined by just CHF 9 billion to CHF 1,116 billion, due to price gains on the Swiss stock exchange of shares held by non-resident investors. Other investment decreased by CHF 6 billion to CHF 1,178 billion. Derivatives remained virtually unchanged, as on the assets side, at CHF 91 billion.

Net International Investment Position

The net international investment position declined by CHF 20 billion to CHF 820 billion compared with the previous quarter, since foreign liabilities (up CHF 32 billion) advanced more strongly than foreign assets (up CHF 12 billion).

Switzerland International Investment Position

Switzerland International Investment Position - Q2 2017 Source: snb.ch - Click to enlarge