- Nestlé (20th), Roche (30th) and Novartis (50th) represent Switzerland in the top 100
- Apple and Saudi Aramco are the highest valued companies in the world
- Five of the ten most expensive companies have a digital business model
- The largest technology companies nevertheless have lost 28 percent of their market value
The recent turbulence on international financial markets have destroyed trillions in the current year: The market capitalization of the 100 most valuable companies in the world – i.e., the value of the shares in those companies traded on stock markets – fell 17 percent or USD 6.1 trillion over the course of the first half of 2022. The group of the 300 most valuable companies saw a drop of as much as 20 percent. Technology companies were especially hard hit, with their market capitalization collapsing by 28 percent.
The only segment that was able to buck the trend and rise was the energy sector: The oil and gas companies that have made it into the top 100 increased their market value by 19 percent. With a market capitalization of USD 2.3 trillion, oil producer Saudi Aramco is the second most valuable company worldwide – just after Apple.
US companies dominate – Switzerland with three companies in the top 100
Little has changed overall with regard to the dominance of US companies. The number of US companies that have taken up a position among the 100 most valuable companies in the world stands at 60. Switzerland takes fourth place after the USA, China/Hongkong and Saudi Arabia for the cumulative value of the market capitalization of their companies in the top 100. Food company Nestlé takes 20th place as the most valuable European company with a market valuation of around USD 322 billion in June 2022. At the end of 2021, this company, which is headquartered in Vevey, still had a market capitalization of USD 384 billion. In Roche (30th place) and Novartis (50th place), Switzerland has two other companies in the top 100. While the Swiss companies operate in the pharmaceuticals and food sectors – being traditional industries – five of the ten most valuable companies reflect digital business models; these include brands such as Microsoft, Google’s parent company Alphabet, Amazon and Tencent.
“Although Switzerland is very progressive and liberal with regard to innovative and digital business models, Switzerland has yet to produce a really large company in this sector,” says Stefan Rösch-Rütsche, Country Managing Partner of EY Switzerland. Switzerland is, nevertheless, a popular location both for major tech companies and for a growing fintech ecosystem.
Europe is losing ground on the world’s stock markets
Prior to the financial crisis – at the end of 2007 – 46 of the 100 most valuable companies still came from Europe. Now there are just 16. Europe’s significance on global stock markets is shrinking, with the balance shifting even further in the direction of the USA. China’s importance has recently increased again – the number of Chinese companies among the top 100 rose from ten to 16 since the beginning of the year. The framework conditions have become overcast for European companies. The current economic and political situation, coupled to an impending energy crisis, is discouraging investors. “In many cases, international investors see more prospects for growth in companies from other regions, as well as a stronger risk profile,” explains Stefan Rösch-Rütsche.
It is obvious that practically all sectors have lost ground with regard to their market capitalization. “The great political and economic uncertainties and irritations seen over the last few months have caused prices on international capital markets to plummet and have led to the current all-pervasive sense of insecurity,” says Stefan Rösch-Rütsche. Despite falling market capitalizations, many of the top companies are still returning high profits. Specifically, oil and gas companies were able to benefit from the sharp rise in energy prices and saw their share prices rise.
Technology equities under pressure
In light of the reversal of the interest rate policy, it was most of all the highly priced high-growth companies that came under pressure – the technology companies that had long enjoyed the favor of investors faced massive falls in prices, in some cases after having previously recorded considerable growth in value following the pandemic. The number of tech companies ranking among the top 100 has fallen from 27 to 23 since the beginning of the year.
According to Stefan Rösch-Rütsche, it is investors’ expectations that have changed most of all. Now that money is no longer quite as readily available, the expectations and demands investors place on a company and its financial metrics have increased. Rösch-Rütsche, nevertheless, also sees positive trends for the coming year: “Digitalization, which received another powerful boost across all industries during the pandemic, will remain an important driver of the economy and the stock exchanges over the coming years.” It is self-evident that technology companies will continue to play a predominant role.
Energy companies are undergoing a renaissance on the stock markets
Until recently, it seemed that the heyday of multinational oil companies on stock markets was over. At the end of 2011, for example, there were still four oil companies among the top 10 worldwide. The most expensive company in the world at that time was Exxon. Since then, the balance has shifted massively towards technology companies. The number of energy companies that made it into the top 100 sank over a period of ten years from 20 (at the end of 2011) to five (at the end of 2021) – and then rose again to nine in the first half of this year.
Europe’s belief in secure energy supplies has been shaken by the war in Ukraine and the resulting turbulence on the energy markets. “An impending shortage of gas is turning out to be a serious threat to many major economies, although Switzerland is slightly less dependent on gas than other countries in Europe.” On account of these influencing factors, the prices of oil, gas and electricity are likely to remain high for the foreseeable future.
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