SNB’s 2024 Direct Investment Report Tilts the Scales — Why markets should pay attention

Quick market takeaway: an inward tilt that changes the flow

The Swiss National Bank’s 2024 direct investment release landed with a clear, market‑relevant message: cross‑border equity links shifted toward Switzerland. In plain terms, more foreign capital ended up owning Swiss companies than the other way around. That matters because these flows affect the franc, Swiss asset prices and bank exposures. For traders and portfolio managers the immediate signal is straightforward — net foreign demand for Swiss assets is now a meaningful support for the franc and for local equities, and it raises fresh questions about valuation, concentration and how the SNB will manage any exchange‑rate side effects.

Main figures and surprises in the SNB bulletin

The SNB’s bulletin breaks direct investment into the stock of holdings and the annual flow of transactions. For 2024 the headline pattern was a noticeable swing toward inward investment: foreign investors increased their stakes in Swiss firms while Swiss outward stakes rose more slowly. The SNB also reported revisions to previous years, with the update nudging prior balances in one direction, which highlights the difficulty of pinning down cross‑border holdings in real time.

Two facts stood out. First, inward flows were broad‑based: both new acquisitions and reinvested earnings helped push the stock of foreign direct investment higher. Second, outward investment from Switzerland slowed relative to recent years, suggesting that Swiss companies and investors were more interested in domestic or nearby opportunities than making fresh big bets abroad. Together, these pushed the net position in favor of foreign owners.

There were a couple of surprises. The SNB’s upward revision to the previous year reduced a prior deficit and made the 2024 net inward reading look even larger in context. And the data showed concentration in a handful of sectors and source countries — not a steady, even flow across the economy. Those two points matter because they affect how persistent the inflows are likely to be and how sensitive the Swiss system could be to a reversal.

How markets should react: FX, rates, equities and banking links

Start with the franc. Net inward direct investment is a natural source of franc demand: foreigners need francs to buy Swiss equity stakes or to fund local subsidiaries. That creates a tailwind for the currency. Practically, expect the franc to be supported by this flow backdrop unless other forces — notably global dollar strength or risk shocks — dominate.

On rates, steady capital inflows tend to ease pressure on sovereign yields by increasing demand for Swiss financial assets and making it cheaper for Swiss borrowers to refinance. So the immediate impulse is mildly downward pressure on Swiss yields, or at least a cap on upside. However, the effect is partial: monetary policy, inflation trends, and global rate moves remain the main drivers.

Equities should feel the most positive and direct impact. Net foreign buying supports prices and can lift multiples, especially in sectors where foreign ownership rose the most. That said, higher foreign ownership can also magnify volatility if a few large foreign holders move in sync when sentiment shifts.

Finally, cross‑border bank exposures deserve attention. A rise in inward investment often means larger intra‑group claims and more complex funding channels across borders. That increases operational and liquidity risk for banks if flows reverse. Risk managers should therefore treat the new stock positions as a balance‑sheet reality, not just a headline number.

Sectors and source countries driving the 2024 shift

The bulletin highlighted that the flow into Switzerland was not uniform. A small number of sectors — notably tradable, export‑oriented industries and financials — accounted for a large share of the inward move. That pattern is logical: foreign investors often target established Swiss firms with cash flows tied to global demand and strong brand value.

On the country side, most of the new inflows came from advanced‑economy investors rather than emerging markets. That matters because advanced‑economy portfolios tend to be more stable; they are driven by long‑term allocation decisions rather than volatile frontier flows. Still, concentration by source country increases the chance of a correlated exit if a common shock forces global deleveraging.

Where systemic vulnerability shows up is in concentration: heavy exposure in a few sectors and large positions owned by a small set of foreign investors raises the risk that swings in sentiment or policy abroad could have outsized effects on Swiss asset prices and local banks’ balance sheets.

Investor checklist: how to position and what to hedge now

For investors and risk managers the SNB release is not an instruction to buy or sell, but it is a practical cue to rebalance with the new flow picture in mind.

• Currency exposure: if you hold foreign assets and the franc strengthens, hedging currency risk becomes more important. Consider trimming unhedged franc exposure or using short‑dated hedges to manage near‑term moves.
• Duration and rates: given the potential dampening effect on Swiss yields, avoid chasing long Swiss duration. Keep duration light to neutral and be prepared to add duration if yields weaken further.
• Equity positioning: the report is broadly positive for Swiss equities, especially exporters and financials with higher foreign ownership. But beware concentration risk—balance sector bets and favour diversified exposure within Swiss markets.
• Bank risk checks: for corporate treasuries and bank risk teams, re‑map counterparty exposures tied to direct investment links and run stress scenarios where foreign holders exit or asset valuations drop sharply.
• Monitor the SNB: watch for signs of FX intervention or commentary on valuation and capital inflows — the SNB’s reaction function is a key next data point.

What the SNB counts and important caveats to bear in mind

The SNB defines direct investment as cross‑border equity stakes where an investor has a lasting interest, plus reinvested earnings and intra‑company loans. That means the numbers mix real deals with accounting entries like retained profits and valuation changes. Two caveats matter.

First, timing and valuation can make year‑to‑year comparisons noisy. The SNB routinely revises past figures as better data arrive, so headline swings can reflect information updates as much as new economic behaviour. Second, concentration and valuation effects mean the stock figure can change sharply without a corresponding wave of fresh cash crossing borders.

For anyone who wants to dig deeper, the SNB publishes the full tables and metadata with detailed definitions. Those tables let you separate equity transactions from reinvested earnings and intra‑company lending — essential steps if you want to judge how durable these flows are.

Bottom line: the SNB’s 2024 direct investment data point to a decisive inward tilt that supports the franc and Swiss equities, but concentration and data revisions raise the risk of a sharp reversal. Investors should treat the bulletin as a signal to rebalance currency and sector exposures and to tighten risk checks on cross‑border banking links.

Sources

• snb.ch