In some form or fashion, hundreds of exchange traded funds offer exposure to Chinese equities. As the world’s second-largest country has evolved, so have the related ETF offerings. Gone are the days when investors had to rely solely on broad market funds for accessing China.
Today, investors can get tactical at the sector and industry levels, just as they do with domestic stocks. China is one of the most vibrant healthcare markets in the world, indicating the KraneShares MSCI All China Health Care Index ETF (NYSE:KURE) is a potentially useful for idea for investors seeking international diversification.
Just over three years old, KURE tracks the MSCI China All Shares Health Care 10/40 Index and is something of a quiet success story, with over $244 million in assets under management. That’s an admirable sum for an ex-U.S. sector strategy and one that confirms there’s appetite for the right international sector ideas. KURE is also an avenue to growth not found in domestic healthcare funds.
“China is one of the fastest growing major healthcare markets in the world with a ten-year compound annual growth rate of 13%, compared to just 3% in the United States and 2% in Japan,” according to KraneShares research.
The KURE ETF: Some Similarities, Some Differences
As is the case with U.S. equivalents, KURE is in part supported by the aging population thesis. Older patients have more health demands, for everything from prescription drugs to healthcare facilities and more. In fact, China’s broader healthcare market ascended above the $1 trillion mark last year.
Further underpinning the KURE growth thesis is that per capita healthcare spending in the world’s second-largest economy is just $398, compared with an average north of $6,500 in the other eight largest economies, according to KraneShares data.
Like the U.S. healthcare funds many investors are so fond of, KURE features exposure to pharmaceuticals, biotechnology, medical device, and healthcare facilities companies, among others. And as is the case with its domestic equivalents, KURE’s biotech exposure is relevant for similar reasons, including out-performance potential and patent cliffs faced by pharmaceuticals developers.
“The blooming biotechnology industry was on full display in 2020 thanks to vaccine development, innovative drug approvals, record fundraising, and a record number of licensing deals with multinational companies including Roche and Novartis,” notes KraneShares. “While we believe pharmaceuticals, particularly biotechnology, present the greatest upside potential, all of China’s health care sub-industries enjoyed a year of growth and positive change.”
Over the past year, KURE is up 66%, as compared to 25% for the S&P 500 Health Care Index.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.