Bellevue Emerging Markets Healthcare

The MSCI World Index lurched 4.4% lower in March in USD. The tariffs the Trump Administration has imposed on various trading partners continue to overshadow the market. Uncertainty regarding the future path of the US economy and inflation has clearly increased even more. Investors have taken profits in tech names as well as in high-flyers within the healthcare sector and reinvested the proceeds elsewhere, particularly in safe havens such as gold or in defensive Swiss stocks, led by Nestlé. Somewhat surprisingly, investors have also shown greater interest in emerging market stocks. This reflects their historically low valuation multiples. In the wake of these capital inflows, the MSCI Emerging Markets Index bucked the general trend and closed the month 0.6% higher. Emerging-market healthcare stocks performed even better, closing more than 1% higher mom. Announcements of several new cooperation agreements with Western healthcare companies and strong quarterly earnings led these stocks to higher ground.

Quarterly results reported by CSPC as well as traditional older Chinese drug makers such as Hansoh, Sino Biopharma and Jiangsu Hengrui met or exceeded expectations. Sales of innovative products within their product ranges are growing at faster-than-average rates and steadily increasing their share of total reported sales, which is further grounds for optimism.  This indicates that these drug makers are slowly mastering the tremendously difficult transition from manufacturing just generics to marketing innovative drugs after many difficult years.

Wuxi Biologics and Wuxi Apptec, two leading pharmaceutical services providers, also demonstrated that customers based in the US and Europe continue to place trust in their services despite the currently difficult geopolitical situation.

Innovent, a high-profile representative of China's biotech industry, reiterated its sales target of RMB 20 bn (USD 2.8 bn) for 2027 in its presentation of annual results for 2024. This corresponds to a sales growth rate of more than 30% p.a. for the next three years and comes after Innovent turned a profit for the very first time in 2024, one year earlier than forecast. 

Existing positions in Sino Biopharmaceutical and Rede D’Or were topped up during the past month and a new position in CSPC was opened. Shareholdings of HLB, Bumrungrad and Max Healthcare were reduced and the position in Ali Health was closed.

The fastest growing countries in the world can be found in emerging markets, and they contain more than half of the world's population. Asian emerging markets are also forecast to account for more than 50% of global GDP by 2050. It is known that the economic growth model of countries shifts from manufacturing to the services sector as household incomes rise. A growing middle class fuels demand for modern medicine. Healthcare ranks increasingly high on their wish list. Billions are being invested in infrastructure, technology and research to modernize the healthcare systems in emerging market countries. This is giving a greater swath of the population access to better healthcare. Meanwhile rapid population aging is also stoking demand for healthcare. In 30 years’ time there will be 400 to 500 million people over 60 in China alone, and they will have a growing need for modern health services and medicines.

Outside Asia, Brazil’s rapidly expanding private-sector healthcare market offers a range of interesting investment opportunities. The quality and long waiting times of the country’s public health system are no longer acceptable to many higher-income Brazilian households, and they are increasingly embracing these new services offered by private-sector healthcare providers. Hospital chains embedded in a fully integrated ecosystem are but one example of the beneficiaries of this structural change.

The fund serves as a defensive vehicle for capturing the above-average growth potential emerging markets offer. It invests in the entire healthcare system value chain, from hospital chains, drug developers and device manufacturers to medical research specialists and digital health companies.