As stock markets rallied higher Monday after consolidation and pullback over the last couple of days, one ETF was making some considerable moves on the foreign asset front as well.
The KraneShares MSCI All China Health Care Index ETF (KURE) was up more than 3% on Monday, amid hopes that the coronavirus may be beginning to peak somewhat in New York and other hard-hit areas.
The pharmaceutical industry in China has been burgeoning over the past few years, and healthcare continued to be a sweet spot for investment in China. Different sectors of the healthcare industry are expanding at a rapid pace in China. The reasons for this rise include urbanization, an aging population, a continuous rise in wages and living standards for Chinese citizens, as well as more innovation in high-tech and broader access to healthcare.
China is one of the fastest-growing major healthcare markets in the world with a five-year compound annual growth rate of 11%, compared to just 4% in the United States, and -4% in Japan. The country, which has been a hotbed of activity since the coronavirus was first discovered in December, is the second-largest healthcare market globally with total healthcare expenditure reaching $558 billion in 20161, a number prognosticated to hit $1.1 trillion by 2020.
There is still an opportunity for considerable growth in China’s healthcare market with per capita health spending at just $398, in contrast to an average of over $6,500 for the world’s top eight healthcare markets in terms of per capita expenditure.
KURE, which is a 100% healthcare concentrated fund, seeks to measure the performance of MSCI China All Shares Health Care 10/40 Index. The Index is a free float-adjusted market capitalization weighted index designed to track the equity market performance of Chinese companies engaged in the health care sector. The securities in the Index include all types of publicly issued shares of Chinese issuers, which are listed in Mainland China, Hong Kong, and the United States. Issuers eligible for inclusion must be classified under the Global Industry Classification Standard as engaged in the healthcare sector. The issuers included in the Underlying Index may include small-cap, mid-cap, and large-cap companies.
For investors looking to get their feet wet in Chinese healthcare, KURE offers several benefits, according to KraneShares:
- Exposure to Chinese companies listed in the Mainland, Hong Kong and the United States that are involved in the healthcare industry, specifically: patent and generic pharmaceuticals, hospital administration, biotechnology, medical equipment production, healthcare IT, and traditional Chinese medicine.
- Exposure to companies that benefit from China’s growing middle class and aging population.
- Access to leading Chinese pharmaceutical companies that have been recipients of favorable policy and market conditions for research and development and the invention of new medicines and devices.
KraneShares partnered with famed technical analysis and research provider Nasdaq Dorsey Wright late last year to release the KraneShares China Rotation Model, created to offer varied exposure to China with downside risk protection.
“As China’s importance within global asset allocation continues to expand, we have seen strong demand from our clients for risk-controlled China portfolios,” said CEO of KraneShares, Jonathan Krane. “With Nasdaq Dorsey Wright’s reputation as an industry-leader within financial modeling and $74 billion tracking their smart-beta indexes, we are confident this collaboration will provide our investors with the volatility and drawdown protection they seek in their China-specific allocation.”
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