Despite being scalded during the dotcom meltdown, investors in Hong Kong are venturing into the murky waters of biotechnology funds, a highly risky and volatile investment move, hoping to reap the same high returns that the sector has yielded in the past two years.
Kurt von Emster, fund manager of the Franklin Biotechnology Discovery Fund, said biotech stocks, similar to straight technology stocks, involved high risks and the market was very volatile - hence were not suitable for every investor.
'The stock can lose up to 80 per cent in a single day,' he said.
Of the 400 publicly traded biotech companies in the United States, 240 are very small (less than US$1.5 billion) with only one or two products.
Biotech funds, which would only appeal to high-risk takers and those who had a time horizon of at least three years, should only be part of an investors' portfolio as a diversification - at the most 5 per cent to 10 per cent - said Mr von Emster, who has more than 10 years' experience in the sector.
As an example of the sector's volatility, Mr von Emster pointed to Amgen, Britain's largest publicly listed biotech company.