NEW YORK ( TheStreet) -- Swiss equities were surprisingly weak versus other markets Wednesday, but the Swiss franc looks to have room for an upside move in the near future
Wednesday saw another selloff in global equities, and Swiss equities, usually a staple of stability, sold off more than their peers. The issue lies in a potential legal scandal among the companies that comprise the Swiss index.
Allegations have been made that major European banks colluded to manipulate the foreign-exchange market. Regulators are looking into UBS (UBS) and the Swiss National Bank. Both are heavily weighted in the iShares MSCI Switzerland Capped Index (EWL) shown below.
If the scandal continues to affect those companies, then even if global equities hit a bottom and begin to trend higher, Swiss shares may stay suppressed.On a technical level, the index broke higher out of a reverse head-and-shoulders pattern in September. With Swiss equities crashing back into the pattern in October, expect selling until both global equities strengthen and issues regarding Swiss banks are resolved. Follow @AndrewSachais This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.