Pharma stocks plunge as Switzerland discontinues fixed-price peg to euro
- Pharma stocks, including shares of Roche, Novartis, and Actelion fell precipitously in the hours after Switzerland un-pegged the Swiss Franc (CHF)—which had been pegged at CHF 1,20 to one euro since 2011—from the euro, allowing the Swiss franc to rise rapidly, in-Pharmatechnologist reports.
- The Swiss central bank's underlying rationale was based on the fact that the dollar has become stronger versus the euro, and therefore maintaining an artificial exchange rate no longer makes sense.
- While the CHF rose aggressively (by as much as 30%) in the hours after the announcement, the exchange rate has since stabilized. It stood at about 0.99 euros per franc as of press time.
Swiss National Bank Chairman, Thomas Jordan, summed up the situation: "Recently, divergences between the monetary policies of the major currency areas have increased significantly—a trend that is likely to become even more pronounced."
When the currency peg was put in place in 2011, the SNB was attempting to stave off the trend of people and organizations buying Swiss francs to hedge against the euro, which was viewed as a weaker currency.
That approach no longer makes sense, as the monetary agency points out. But for companies such as Actelion, Novartis, and Roche, as well as the service firms like Lonza and SGS, the consequences were not positive. It will likely take some time for the markets to adjust to this new monetary paradigm.
- in-Pharma Techologist Swiss franc movement sees Roche, Novartis, Actelion and Lonza shares plummet