Emerging markets (EM) took their lumps from the Covid-19 pandemic, but as these economies re-emerge, look to strength in the healthcare sector with the KraneShares Emerging Markets Healthcare Index ETF (KMED).
An increase in healthcare spending could boost the sector as the overall global population starts to age. As such, a demand for medical services will increase, pushing revenues higher for healthcare companies that can meet this demand.
“From cancer screening to hip replacements and cataract surgery, countless medical procedures have been postponed since the virus took hold,” a Bloomberg article said. “As this changes, global healthcare spending is projected to bounce back in 2021, rising 5.8% to $8.8 trillion, according to IHS Markit.”
For example, one specialized section of the healthcare industry is hearing aid devices. According to Morgan Stanley, sales for hearing aids will re-strengthen this year after a decline in 2020.
“The large contingent of developed countries that have universal health coverage is being joined by an increasing number of developing markets that are establishing and/or expanding universal health-care systems, especially in emerging Asian markets,” said Mirabaud’s Narula.
An EM Fund to Capture the Trends
KMED seeks to provide investment results that track the price and yield performance of the Solactive Emerging Markets Healthcare Index. The index is a free float adjusted market capitalization weighted index designed to track the equity market performance of emerging market companies engaged in the healthcare business.
The fund is up over 34% within the past year. The short-term technical analysis looks strong with the 50-day moving average ($35.53) moving higher than the 200-day moving average ($34.06), while the relative strength index is below overbought levels.
Other highlights of this healthcare sector, according to the KraneShares website:
- By 2040, emerging market countries on average are projected to increase healthcare spending as percent of GDP by 24.4% compared to just 9.8% in developed markets over the same time period.
- In emerging markets, rapid urbanization and rising income is fueling growth in the demand for healthcare services and treatments.
- Cases of non-communicable diseases (NCDs) such as diabetes and cancer are rising steadily in emerging market countries, presenting a growth opportunity for innovators in the healthcare space.
- Emerging markets governments are enacting policies such as India’s “National Health Protection Mission” and China’s “Healthy China 2030 Plan” to meet the growing demand for healthcare.
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