Swiss Balance of Payments and International Investment Position: Q1 2018

Current Account

Swiss Balance of Payments Q1 2018

Source: snb.ch - Click to enlarge

Financial account

The following is from the official press release and gives more details on the other parts of the financial account.

Net acquisition of financial assets

Overall, the assets side of the financial account showed a net reduction of CHF 14 billion (Q1 2017: net acquisition of CHF 24 billion). The other investment item posted a net reduction of CHF 33 billion (Q1 2017: net reduction of CHF 30 billion). The decrease was above all attributable to finance and holding companies in Switzerland, which  significantly reduced their foreign assets in light of the tax reforms in the US. By contrast,  portfolio investment recorded a net acquisition of CHF 15 billion (Q1 2017: net acquisition CHF 4 billion). Resident investors acquired both equity securities and debt securities of foreign issuers. In the case of direct investment, the transactions balanced each other out (Q1 2017: net acquisition of CHF 15 billion). Although resident parent companies increased their investment in the equity capital of their non-resident subsidiaries and reinvested the earnings generated, they also reduced the volume of loans granted to their non-resident subsidiaries. Reserve assets recorded a net acquisition amounting to CHF 3 billion (Q1 2017: net acquisition of CHF 36 billion).

Net incurrence of liabilities

The liabilities side of the financial account registered a net reduction  totalling CHF 27 billion (Q1 2017: net incurrence of CHF 13 billion). This was primarily attributable to direct investment, where there was a net reduction of CHF 34 billion (Q1 2017: net incurrence of CHF 16 billion). This came against the backdrop of non-resident parent companies withdrawing funds in the form of equity capital from resident finance and  holding companies in light of the tax reforms in the US. Portfolio investment showed a net reduction of CHF 7 billion (Q1 2017: net reduction of CHF 4 billion), as non-resident investors sold shares of resident issuers. As regards the other investment item, the net incurrence of liabilities totalled CHF 15 billion, compared with Q1 2017 when transactions balanced each other out. Although the SNB reduced its foreign liabilities, companies and commercial  banks recorded a marked rise in theirs, with liabilities increasing in the interbank business in  particular.

Net

As in the first quarter of 2017, the financial account balance came to CHF 12 billion. This figure is calculated as the sum of all net acquisitions of assets minus  the sum of all net incurrences of liabilities plus the balance from derivatives transactions. The financial account balance corresponds to the change in the net investment position  resulting from cross-border investment.

Switzerland Financial Account

Extract from the Balance of Payments Q1 2018 Source: snb.ch - Click to enlarge

Switzerland’s International investment position

Assets

Compared with the previous quarter, stocks of assets declined by a total of CHF 35 billion to CHF 4,733 billion. This decrease was primarily attributable to the other investment  item, where stocks were down CHF 31 billion to CHF 827 billion, mainly as a result of transactions. Stocks were also lower in the case of portfolio investment, declining by CHF 12 billion to CHF 1,363 billion, this despite the fact that the transactions reported in the financial account showed a net acquisition. The decrease was partly due to valuation  losses stemming from lower prices on foreign markets, and in part also to exchange rate losses  on assets in US dollars. Stocks in reserve assets declined by CHF 7 billion to CHF 785 billion owing to valuation losses. Meanwhile, direct investment stocks were CHF 11 billion higher at CHF 1,670 billion and stocks of derivatives rose by CHF 4 billion to CHF 87 billion.

Liabilities

Stocks of liabilities were CHF 60 billion lower quarter-on-quarter at CHF 3,861 billion. Besides the transactions reported in the financial account (net incurrence of  liabilities), this decrease was above all attributable to valuation losses. The latter were  particularly prevalent in the case of portfolio investment, where stocks declined by CHF 62 billion to CHF 1,113 billion owing to the lower share prices on the Swiss Exchange. Stocks of direct investment decreased by CHF 12 billion to CHF 1,440 billion. Stocks rose in the remaining components, however, with other investment recording a CHF 10 billion increase to CHF 1,217 billion on the back of transactions and derivatives rising CHF 5 billion to CHF 91 billion.

Net international investment position

Given that stocks of liabilities showed a more pronounced decline than stocks of assets (CHF –60 billion vs CHF–35 billion), the net international investment position increased by CHF 25 billion to CHF 872 billion.

Switzerland International Investment Position

Switzerland International Investment Position - Q1 2018 Source: snb.ch - Click to enlarge