India, U.S. mini trade deal unlikely before Aug 1, CNBC-TV18 reports
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Reuters
16 minutes ago
- Reuters
Five years after COVID, pharma shares languish in US policy limbo
MILAN, July 23 (Reuters) - Global healthcare stocks have not been this cheap in decades and fund inflows into the sector are picking up, yet the shares remain in the doldrums, highlighting uncertainty over drug pricing policies since Donald Trump returned to the White House. Pharma companies' earnings outlook is being obscured by concerns over revived "most-favored-nation" drug pricing rules in the lucrative U.S. market and potential 200% tariffs on pharma imports into the U.S. Money flooded into drugmakers' shares during the COVID-19 pandemic but more recently there has been an exodus as investors shifted into Big Tech, leaving the sector cheap but unloved. At 15.9 times forward earnings, healthcare (.MIWO0HC00PUS), opens new tab trades 11% below its long-term average and 20% below global equities (.MIWO00000PUS), opens new tab, its steepest discount in 16 years, just above a record discount in 2009, based on LSEG Datastream data. "We've moved from cautious optimism to cautious pessimism," said Stephanie Aliaga, global market strategist at J.P. Morgan Asset Management in New York. "Valuations have gotten even cheaper, but for a reason," she added, referring to intensifying U.S. policy risks. But some investors are starting to look past the Washington policy fog and at long-term positive drivers, such as aging populations, RNA-based therapeutics, and breakthroughs in weight-loss and diabetes drugs. Alberto Conca, CIO at Swiss wealth manager LFG+ZEST, has been adding exposure to pharma, biotech and medtech in recent weeks, drawn by strong cash-flow yields and the prospect of U.S. rate cuts boosting this rate-sensitive sector. Interest rate cuts typically support healthcare by lowering R&D funding costs and boosting the value of future cash flows. "These are quality companies with good growth and defensive features being priced as if we're heading into an 'Armageddon scenario', which I believe is unlikely," he said. UK-based M&G Investments has also been selectively adding to healthcare, according to its latest allocation report. Healthcare funds have seen net inflows since 2024, more than reversing the outflows from late 2022 through 2023, fund tracker EPFR data shows. Although year-to-date, inflows total $7.2 billion, down 41% from last year. Innovation is accelerating, pipelines are maturing and M&A is showing signs of picking up - yet stock prices are unmoved. Whether that represents a buying opportunity or a value trap hinges on how and when the policy uncertainty clears, investors said. Historically, healthcare has traded at a modest premium to world stocks, thanks to its defensive profile and steady earnings. But that narrative has unravelled under political pressure from Washington and investors' love of Big Tech. Over the past three years, U.S. healthcare (.SPXHC), opens new tab has underperformed the S&P 500 (.SPX), opens new tab by more than 60 percentage points, making it the worst sectoral performer on Wall Street. Its valuation has deepened to a near-record 27% discount, from parity to the S&P in 2023. "Markets don't like uncertainty, and that shows up in valuations," said Eddie Yoon, healthcare sector leader and portfolio manager at Fidelity Investments in Boston. "Being cheap isn't necessarily a reason to buy. You need a catalyst." For now, that catalyst is elusive. The policy uncertainty makes it difficult to forecast future earnings, he said, though he hopes for more clarity by year-end - potentially also paving the way for more M&A in the industry. Talks with the Trump administration have yet to clarify how and when drug prices will fall, executives from Eli Lilly (LLY.N), opens new tab and Merck (MRK.N), opens new tab said at a May industry conference. Yoon, who has typically been underweight Big Pharma due to patent expiry risks, notes smaller, innovative firms are becoming profitable. "We're seeing companies go from unprofitable to very profitable," he said, citing Alnylam (ALNY.O), opens new tab and Penumbra (PEN.N), opens new tab as examples he owns. "Historically, that's been a very good time to own healthcare stocks." LFG+ZEST's Conca, who favours U.S. names like Abbott (ABT.N), opens new tab, Edwards Lifesciences (EW.N), opens new tab, and AbbVie (ABBV.N), opens new tab, along with Sanofi ( opens new tab and Recordati ( opens new tab in Europe, said interest rate cuts could be a major catalyst. In Europe, healthcare (.SXDP), opens new tab is even cheaper than U.S. pharma, trading at 14.3 times forward earnings. A 55% drop in shares of Novo Nordisk ( opens new tab in the last year, related in part to concerns over competition in obesity drugs, along with tariff-driven production shifts to the U.S., has weighed on valuations. "The sector will adapt," wrote Arnaud Cadart, healthcare analyst at France's CIC Market Solutions. But that will come "at the cost of rebalancing its revenues and probably transforming its organisations." AstraZeneca (AZN.L), opens new tab, for example, has unveiled a $50 billion U.S. investment. For now, the sector remains in limbo: cheap, but lacking enough visibility to trigger a broad re-rating. "Healthcare has endured a lot of pain," said J.P. Morgan's Aliaga. "We're not sure if that pain is done, but the worst is likely over, given how extreme the exodus has been."
Reuters
18 minutes ago
- Reuters
SNAPSHOT Wall Street opens higher as US-Japan trade deal lifts sentiment
July 23 (Reuters) - Wall Street opened higher on Wednesday after President Donald Trump struck a trade deal with Japan, shoring up expectations of further agreements ahead of the fast-approaching August 1 deadline. The Dow Jones Industrial Average (.DJI), opens new tab rose 158.7 points, or 0.36%, at the open to 44661.12. The S&P 500 (.SPX), opens new tab rose 17.3 points, or 0.27%, to 6326.9, while the Nasdaq Composite (.IXIC), opens new tab rose 73.8 points, or 0.35%, to 20966.467.
Reuters
18 minutes ago
- Reuters
IndusInd Bank to raise up to $3.5 billion, allow Hindujas to nominate two board seats
July 23 (Reuters) - India's IndusInd Bank ( opens new tab will raise up to $3.47 billion and allow promoters to nominate two board directors, the private sector lender said on Wednesday, as it seeks to restore confidence after a $230 million accounting lapse. IndusInd is looking to secure 300 billion rupees in funding, comprising a 200 billion rupees debt issue on a private placement basis and a 100 billion rupees capital increase through issue or placement of securities. The bank's net worth took a $230 million hit in the fiscal year ended March 31 due to years of misaccounting of internal derivative trades, prompting the resignations of CEO Sumant Kathpalia and deputy Arun Khurana in April. The UK-based Hinduja family own a 15.82% stake in the bank and are listed as its promoters, a regulatory classification in India for large shareholders who control key decision-making. The Hindujas can now nominate up to two directors on IndusInd's board, the bank said, adding that the move was approved by India's central bank. Promoters previously did not have representation on the board. IndusInd, currently run by an executive committee, has shortlisted three senior bankers - Rajiv Anand, Rahul Shukla, and Anup Saha - for the position of CEO, Reuters reported last month. Saha resigned as non-bank lender Bajaj Finance's managing director on Monday. IndusInd will report its first-quarter results on July 28. ($1 = 86.3730 Indian rupees)
