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23. September 2020 | Ad - News

Why Autocallable BRC on Swatch Group currently generates a high coupon

  • Of all the watchmaking companies, Swatch Group is most strongly focused on China and Hong Kong. In recent weeks, shares have benefited from the improved sentiment on the markets and, according to Vontobel analysts, have exhausted their price potential.
  • The concern of a second corona wave has also brought volatility to the stocks.

This makes the shares interesting for yield enhancement products: Barrier reverse convertibles bring higher coupons in this phase. For example, a one-year Autocallable Barrier Reverse Convertible (1230) on Swatch Group generates a coupon of up to 9.40% p.a. with an American barrier of 65% and an Autocall Level of 100% on quarterly observation.

The reasons for our assessment

  • Swiss watch exports were severely affected by the Covid-19 lock-down. In the four months from March to June, they fell globally by around 45%.
  • From a low of -96.8% in May, watch exports gradually recovered, reaching -11.9% year-on-year in August.
  • China is the market that has recovered the fastest, with an increase of 1.6% in the first eight months. This positive development has to be put somewhat in the context of the very strong decline in tourism. For example, Chinese consumers currently travel less in general, but significantly less to Hong Kong in particular. As a result, exports to Hong Kong, once the largest export market for Swiss watches, have fallen by 48% in the year to date. If the two markets are taken together, the decline is around 20%.
  • Of all the watchmaking companies, Swatch Group is most strongly focused on China and Hong Kong. Accordingly, the titles have benefited from the improved mood in recent months, particularly in China. A second wave of Corona could interrupt this positive trend.
  • Furthermore, the structurally negative trend in the lower price segment, which is driven by the shift to smart watches, is likely to continue.
  • In view of these factors, Vontobel analysts believe that the share’s upside potential is currently limited.

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This blog post is deemed to be marketing material within the meaning of Article 68 of the Swiss Financial Services Act (FINSA) and for informational purposes only, does not represent an investment recommendation or advice and contains neither an offer nor an invitation to make an offer. It does not replace the qualified advice necessary before any purchase decision, in particular as regards all associated risks. We will be happy to provide you with the legal binding documents such as the key information sheet or additional information as well as the information brochure “Risk Involved in Trading Financial Instruments” at any time and free of charge. Before purchasing derivative products, investors should read the relevant product documentation.

The scenarios presented in this publication do not provide any information about the real performance of the underlying and are only illustrative examples and are not the result of a financial analysis.

This blog post contains an indication of past performance. Past performance is not a reliable indicator of future results.

This blog post contains information on future performance. Such forecasts are not a reliable indicator of future performance.

This blog post was prepared by the Structured Products unit of our institution and is not the result of financial analysis.

Structured products are not regarded as collective investment schemes within the meaning of the Federal Act on Collective Investment Schemes (CISA) [status as of 1 July 2016], and are therefore not subject to the approval or supervision of the Swiss Financial Market Supervisory Authority FINMA. The value of structured products may depend not only on the performance of the underlying, but also on the creditworthiness of the issuer. The investor is exposed to the risk of the issuer / guarantor defaulting.

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