City widens search for safe haven

IT is a constant lament in these torrid markets. Where should I put my cash? Which are the safe industries offering the promise of security and growth?

Drug shares were always supposed to be safe havens in falling markets. After all, everyone needs medicine at sometime. But the latest collapse has turned the theory on its head. US and European pharmaceutical groups have been savaged. The US drug and biotech sector has crashed 28% this year.

Across Europe the fall is around 10%. UK heavyweights GlaxoSmithKline and AstraZeneca have seen billions wiped off their value.

Even at current levels, analysts remain cautious. They say the market under-estimated the financial impact of the loss of patents on key drugs allowing cheap rival products to enter the market. The US drug watchdog is also taking a tougher line on waving through new products.

'We expect the above factors to continue through the summer,' says Merrill Lynch. The concern over an official probe into sales practices at US group Bristol-Myers Squibb provides an uphelpful backdrop to the sector. So, too, is the increasingly aggressive line taken by governments on the pricing of drugs.

Ironically, one of the best investments over the last 25 years has been tobacco shares. They have consistently outperformed European markets - proving better for your pocket than your health.