The Swiss Stock Market Plunged After SNB Decision To Repeal Currency Ceiling

(RTTNews) - The Swiss stock market ended Thursday's session with a massive loss after the Swiss National Bank unexpectedly decided to discontinue its currency ceiling. The SNB abandoned its currency "ceiling" of CHF 1.2 per euro as it considers it "no longer justified" in the new situation. The bank also lowered interest rates further into negative territory to make sure that the termination of the "minimum exchange rate does not lead to an inappropriate tightening of monetary conditions."

The SNB also slashed the interest rate on sight deposit account balances that exceed a given exemption threshold by 0.5 percentage points, to -0.75 percent.

The currency ceiling was introduced in September 2011 when the Swiss franc was exceptionally overvalued. The SNB said the currency ceiling protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate.

The announcement sparked a very turbulent trading session, with an 80 percent increase in the volatility index. The Swiss Market Index declined by 8.67 percent Thursday and finished at 8,400.61. The SMI reached an intraday high of 9,277 points and a low of 7,932 points. The Swiss Leader Index dropped by 9.37 percent and the Swiss Performance Index lost 8.58 percent.

The SNB decision had a negative impact on exporters. Swatch Chief Executive Nick Hayek called the decision a "tsunami" for the country. Richemont plunged by 15.5 percent and Swatch sank by 16.4 percent. Shares of Lonza also dropped by 18 percent.

Among the index heavyweights, Roche dropped by 8.6 percent and Novartis lost 8.7 percent. Shares of Nestle also fell by 6.2 percent. Credit Suisse, UBS and Julius Baer all suffered losses between 11 and 12 percent.

Holcim sank by 11 percent Thursday. Aryzta, Givaudan and Geberit also finished down by around 10 percent. Kuehne + Nagel, Clariant, Syngenta and ABB finished down by about 9 percent. Swisscom was the only positive performer Thursday, with a gain of 1.0 percent.