What might the Biotech stock bubble mean for investors?
In a nutshell, it’s been a turbulent few months for investors: Biotech stocks have dropped by 22%, and a global equity sell out followed China’s surprise yuan devaluation. The value of the SPDR S&P Biotech ETF, an investment fund that reflects the value of Biotech companies, has since sunk 33% in just 10 weeks. So what's behind the crash, and, more importantly, what does the plunge mean for investors and international money transfer?
The turning point
Earlier this year, Hillary Clinton – now running for the US presidency – tweeted that she would regulate the pharmaceutical industry if elected. This was in response to a decision by Martin Shkreli, CEO of Turing Pharmaceuticals, to raise the price of an AIDS drug called Daraprim by 5000%. The Nasdaq Biotechnology index in New York has since fallen by 14%.
Additionally, recent news of a deal between the Trans-Pacific Partnership pact (comprising the US and 11 other Pacific nations) could reduce the exclusivity period for biotech drugs – adding more fuel to the Biotech sell out. The proposal also sets out to standardise the price of specialised drug treatments, which will lower costs for “new biologic drugs for anything from cancer to Crohn’s disease." While this is great news for consumers and patients in low-income countries, Biotech firms may struggle to cover investment costs in the long term.
Some observers think that the Biotech bubble is due to burst, and are advising investors to get out while they can. Others, however, suggest taking advantage of falling stock prices – investing instead with firms that stay relatively stable during market downturns. If you decide to invest in Biotech companies that aren’t listed in your country, you can use our currency comparison tool to make sure you’re getting a good deal on your conversion fees.
Additionally, consider setting up a forward contract with your broker to lock a future money transfer into the current exchange rate. This adds some security from the stock market’s unpredictability – so you only have one variable to contend with, not two.
The bigger picture for international money transfer
Despite the struggles within the Biotech industry, global stocks are starting to recover from their worst quarter since 2011. Currencies have rallied alongside this, with the Indonesian rupiah and Russia’s ruble both up by 6% this week. However, the IMF’s recent decision to cut global growth forecasts, especially in emerging countries, could mean prolonged volatility in the foreign exchange market. Check the Money Cloud for the latest updates on the best ways to transfer money online, should you decide to diversify your investment portfolio.