CHICAGO, US - INVESTORS have been wondering about the next shoe to drop in the United States subprime housing crisis, but few would have expected drug company Bristol-Myers Squibb to be wearing it.

Bristol-Myers' announcement on Thursday - that its fourth-quarter loss included a US$275 million (S$389 million) charge related to investments in mortgage-backed and other securities hurt by the credit crisis - is likely to be followed by other corporations outside the financial sector in coming quarters.

'Whenever corporations have a substantial amount of cash on the books they look for ways to sweeten with investments with decent returns,' said Mr Peter Jankovskis, chief investment officer with OakBrook Investments.

The good news is these write-downs are not expected to bring nonfinancial corporations down. But the bad news for investors is that bad mortgage-backed investments will take a bite out of profits.

'The damage will be contained because companies like Bristol do other things than just make loans,' said Mr Henry Asher, president of the Northstar Group, a New York-based money manager. 'It should not affect their ability to make drugs, but it will lower profits.'

'But it boggles the mind that they would invest in something so foolish,' he added. 'It shows that the same level of delusion that infected Wall Street also affected some of America's boardrooms.'

Investors say that sectors to watch in particular are pharmaceutical and tech-related, which tend to have more cash to invest. Pension funds, whether in-house company operations or the massive public employee funds, may also take a hit.

'I would guess that most pension funds had some exposure, however small,' said Mr Dan Castro, managing director and chief credit officer in structured finance at GSC Group in New York. 'Generally they diversify into almost everything.'

Once the dust settles, the originators of troubled mortgage-backed securities may face lawsuits, as could the rating agencies that gave them a clean bill of health. -- REUTERS