Switzerland's SMI Index Falls, Led by ABB; Oerlikon Declines

By Daniela Silberstein

Oct. 22 (Bloomberg) -- Swiss stocks dropped for a second day, led by industrial companies, as concern deepened that corporate earnings will deteriorate as the global economy heads toward a recession.

ABB Ltd., the world's biggest builder of power networks, sank 7.6 percent. OC Oerlikon Corp. AG declined to the lowest in almost four years after the largest maker of spinning machines cut its full-year forecast for operating profit.

The Swiss Market Index of the largest and most actively traded companies slid 224.84, or 3.6 percent, to 5,960.64 at 2:20 p.m. in Zurich as all shares retreated. The broader Swiss Performance Index dropped 177.21, or 3.5 percent, to 4,925.25.

The Swiss benchmark index is down 30 percent this year as credit-related losses and writedowns topped $660 billion in the worst financial crisis since the Great Depression.

ABB slumped 1.38 Swiss francs, or 7.6 percent, to 16.9. The power-grid maker may paint a grimmer picture for future orders when it reports third-quarter results tomorrow.

U.S. rivals Honeywell International Inc. and Eaton Corp., which both supply controls and switches for electricity grids, lowered full-year forecasts this month, citing slowing economies. ABB will probably see government orders fall as the economic slump cuts investment in power networks, according to Thomas Lusetti, an investment strategist at Verwaltungs- & Privat Bank in Zurich, who helps manage about $26 billion.

Earnings for companies in the pan-European Dow Jones Stoxx 600 index are expected to fall 4.4 percent in 2008, down from 11 percent growth predicted at the start of the year, according to analysts' estimates compiled by Bloomberg.

Oerlikon Declines

Oerlikon sank 15.7 francs, or 14 percent, to 100.3, the lowest since November 2004, after cutting its earnings outlook following a slump in textile-equipment demand. Earnings before interest, taxes and one-time items may total 250 million francs ($214 million) from an earlier prediction of 330 million francs, Chief Executive Officer Uwe Krueger said. Closing factories and other measures will lead to costs of 100 million francs, more than double the prior estimate.

Smaller rival Rieter Holding AG tumbled 17.75 francs, or 6.6 percent, to 252.25, the lowest in more than five years. Goldman Sachs Group Inc. downgraded shares of the supplier of car interiors to Honda Motor Co. to ``sell'' from ``neutral.''

Financial shares declined across Europe after Bank of England Governor Mervyn King said Britain's worst banking crisis since World War I is likely to push the economy into a recession.

Economists at UBS AG forecast U.S. economic output to contract for at least four quarters, pulling the global economy into recession and prompting central banks to cut interest rates further. A recession in Europe is ``inevitable,'' UBS said. Swiss economic growth will probably slow to 0.2 percent in 2009 after reaching 1.9 percent this year.

UBS lost 50 centimes, or 2.8 percent, to 17.7 francs. Switzerland's biggest bank, Merrill Lynch & Co. and JPMorgan & Chase Co. are telling senior bankers in Asia to fly coach on short-haul flights and reduce non-essential travel as they step up cost cuts to survive the credit-market meltdown, officials at the firms said.

Credit Suisse Group AG, the second-largest Swiss bank, slipped 78 centimes, or 1.6 percent, to 47.72 francs.

Julius Baer Holding AG decreased 3.04 francs, or 6.2 percent, to 45.86. Citigroup Inc. cut its price estimate for shares of Switzerland's biggest independent wealth manager to 61 francs from 80, citing market sensitivity.

The following stocks also rose or fell in Swiss trading. Stock symbols are in parenthesis.

Clariant AG (CLN VX) lost 43 centimes, or 5.7 percent, to 7.09 francs, a record low. Bank Vontobel cut its price estimate for shares of the world's largest supplier of printing-ink additives to 9 francs from 12.5, citing deteriorating economic conditions.

Ems-Chemie Holding AG (EMSN VX) slid 4.7 francs, or 4.4 percent, to 103. Vontobel downgraded shares of the chemical maker to ``reduce'' from ``hold'' and slashed its price estimate to 85 francs from 150 after nine-month sales fell short of analysts expectations.

Inficon Holding AG (IFCN SW) retreated 3.5 francs, or 2.9 percent, to 116.5. Vontobel lowered its share-price projection for the supplier of portable poison-gas detectors to the Beijing Olympics to 180 francs from 230 after the company yesterday reported lower-than-estimated third-quarter earnings.

Logitech International AG (LOGN VX) sank 84 centimes, or 4.6 percent, to 17.41 francs. UBS slashed its price estimate for shares of the world's biggest maker of computer mice by 29 percent to 29 francs after the company yesterday cut its forecasts for sales and profit.

Petroplus Holdings AG (PPHN VX) advanced 82 centimes, or 2.7 percent, to 30.76 francs. UBS upgraded shares of Europe's biggest independent refiner by capacity to ``buy'' from ``neutral,'' citing the outlook for third-quarter earnings and the company's balance sheet.

Temenos Group AG (TEMN SW) gained 30 centimes, or 2 percent, to 15.65 francs. The banking software maker whose clients included Fortis NV said third-quarter revenue increased 42 percent to $100.4 million.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.