Zurich — The citizens of Zurich gave Dr. Nicolas J. B"ar good news earlier this month. They approved the money for construction of a new stock exchange building in Zurich. ``Finally we will have enough space,'' says Dr. B"ar, chairman of the Zurich Stock Exchange.
That's not the only good news for the Zurich exchange. Stock prices are up, on average, some 12 percent since the end of last year.
This gain is considerably less than in Paris, Italy, or West Germany. B"ar comments, ``Like everything in Switzerland, it [the price rise] is less extreme.''
Thus, Swiss shares are also less expensive in terms of the average price of a share compared with earnings of the 121 listed Swiss companies. Zurich's price/earnings ratio is about 81.
``We are, internationally speaking, one of the cheapest exchanges,'' maintains B"ar, who is also chairman of Bank Julius B"ar & Co., a 2.4 billion Swiss franc (almost $1 billion) bank here.
Zurich's 24 exchange members are also happy that the volume of trading -- and thus commissions -- has grown rapidly in Zurich. Last year, the exchange enjoyed a turnover of 308 million Swiss francs in the value of shares, up from 190 million in 1982. This year B"ar figures the turnover should exceed 400 million.
That upturn in business is one reason the new building is needed. Another is that it would be difficult to introduce more-modern electronics into the old building, opened in 1930 at the corner of Bleicher Weg and Tal Strasse in the center of the financial area.
But the new building, to be built several blocks away from Parade-Platz, Zurich's tidy banking center, will not be completed until around 1991. Although the financing of the new 116.5 million-franc ($46 million) building is now settled, final planning, construction, and so on will take a while.
Meanwhile, the rival, smaller stock exchanges in both Basel and Geneva will move into new buildings next year.
``We are five years behind,'' B"ar notes. ``It is a big disadvantage.''
At this time, the Zurich Stock Exchange does about half of its total trading in Swiss stocks. Nonetheless, the members worry somewhat about competition from the six other Swiss exchanges. They are also concerned about the rapid internationalization of trading in stocks, bonds, and money market securities.
Hans J. Mast, chief economist of Credit Suisse, does not see one massive global market for stocks and bonds and other financial instruments developing in New York or London. Rather he sees national financial centers open to foreign borrowers that are interconnected and overlapping ``like the Olympic rings.''
Credit Suisse, for instance, has a link with First Boston Corporation in New York and London. It has also bought into a brokerage in London and two banks in West Germany -- Credit Suisse Grundig Bank and Effectenbank-Warburg.
Credit Suisse and Union Bank of Switzerland are among the nine major foreign banks just granted trust banking licenses in Japan. They will be able to manage pension trust funds for Japanese corporations.
``We believe, given floating exchange rates, that you need the ability to function in all important financial centers,'' Mr. Mast says.
But in London, Paul Neild, chief economist at the brokerage firm of Phillips & Drew, holds that the continental European markets ``have been pretty well left behind. We [London] have a distinct advantage over other European centers.''
He figures London, New York, and Tokyo will be the major forces in the worldwide financial market of the future.
Interestingly, Union Bank of Switzerland has bought 29.9 percent of Phillips & Drew. With the recent vote of the London Stock Exchange to permit full ownership by foreigners of brokerage houses, Union Bank will probably buy 100 percent ownership next year.
B"ar maintains that Switzerland has lost something of its appeal as an investment haven.
``Today if you want to be safe, you go to the United States,'' he says, adding: ``The likelihood of a world disaster has probably receded.''
At the moment Switzerland has no law against insider trading, a situation that can make foreigners anxious about buying stocks in Swiss companies, particularly smaller ones. But a law to ban bank insider trading has started to move through the federal parliament and will probably be enacted by 1987, Dr. B"ar says.
In the meantime, anyone trying to pull off some shady stock manipulation ``might get rapped on the knuckles nonetheless,'' B"ar notes. The Zurich canton's stock exchange commission can charge inside traders or others under another law regarding ``dishonest handling of affairs.'' The commission looks over the stock turnover books of the banks each afternoon.
In another move to make the Swiss financial markets more competitive internationally, a group of 19 parliamentarians among the 49 in the States Council, Switzerland's upper house, have just moved to cut or scrap taxes on various money-market instruments. They would also remove the sales tax on gold.
The Canton of Zurich made 15 million Swiss francs in taxes on the exchange during the first five months alone of this year.
The Zurich exchange is also planning to install a computer system to trade the less-active 2,300 bond issues it lists. The computer system will also eventually handle some less-active stocks. The exchange lists 188 Swiss stocks issued by 121 companies and 181 foreign stocks of 175 foreign companies.
Since B"ar expects the dollar to fall in value as well as the price of these stocks to rise, he figures American investors will do especially well on the Swiss stock exchanges.