Swiss bank news signals another grim day on the markets

(By Anthony Miller) If there was any doubt left at all that we are in a global financial crisis, Swiss stalwarts UBS and Credit Suisse put paid to that notion, the former announcing it is to raise 6bn Swiss Francs from the government and in effect pass up to $60bn of ‘toxic’ assets to the central bank, the latter reporting a 1.3bn Swiss Franc loss. This follows another horrible day on global capital markets and, judging by the boards as I write this piece (8:30 am), today will be no better.

Company results and trading updates seem to reflect market volatility, with the likes of shining star Autonomy yesterday reporting a “record-breaking” 3Q and “accelerating organic growth” (see here), yet its stock still fell 1%, starkly contrasting with today’s announcement that AIM-listed smart card systems player, ID Data, is to bring in the administrators (see here). Somewhere in between is escrow solutions and testing firm, NCC Group, advising it is “on track to deliver the anticipated levels of profitability” in spite of deferrals in financial services, retail and house building sectors (see here). NCC is bravely implementing an across-the-board 8%+ price hike next month for new clients, and from January for renewals. It’s almost inconceivable they won’t get push-back from clients so they will require a stiff back-bone to push these increases through.

I think it would be fair – if not obvious – to say that valuations for the ‘quality’ software and IT services companies have, in the main, become totally decoupled from their underlying fundamentals. Nothing you can do about it while the markets are sentiment-driven, so management just needs to hunker down and concentrate on running the business in line with realistic demand expectations, and hope that their stock will shine through when some semblance of stability returns to the markets. Unfortunately I think we are still a long way off that point.