e e e Swiss equities Preference: neutral ; SMI (24 Oct): 6,627 (last publication: 6,540) Recommendations UBS View . 7 . . . Smal fEmenth target): 6,700 Tactical (6 months) e We stay neutral on Swiss equities relative to global ones. Swiss companies are internationally well ° We favor large caps over small caps. diversified, with about 2/3 of revenues generated in the US and in emerging markets. This provides the ° We like stocks paying high and basis for solid revenue and earnings, despite economic weakness in Europe. . - ; ; ; = ; ; sustainable dividends. ¢ Swiss companies are trying to mitigate concerns about global economic prospects and a strong Swiss ® iWithin detensives. we faverthe franc using tight cost controls. This should protect operating margins. : , Healthcare and Consumer Staples ¢ While the Swiss franc remains overvalued, the currency is not longer a drag. In fact, after depreciating sectors since summer versus the USD and related currencies, Swiss companies’ earnings will show positive currency , A . . . : mong the cyclical companies, we translation and margin effects. fer th ith a broad . e Especially in an environment of low economic growth we like the properties of decent earnings growth, prefer those with a broad emerging- solid balance sheets and a reasonable valuation. markets exposure and/or cheap valuation, including insurers. A Positive scenario SMI (6-month target): 7,500 . . . . . a: : . 2 ; ; Strategic (1 to 2 years) e Eurozone economic growth is reaccelerating considerably, providing further relief to Swiss financials as ; : ; . at . : e We favor leaders in regards to the two well as Swiss exporters. Defensive sectors would likely be left behind in a strong global relief rally. In this key Swi factors: i ti d scenario, we would expect the equity market P/E to be re-rated to 15x and earnings to grow by 5% over EY SWISS SUCCESS Taras: INNOVaLIOn an the next six months. globalization. & Negative scenario SMI (6-month target): 5,600 . . 2 e