Investors considering healthcare exposure often focus on domestic stocks and exchange traded funds, but there are some compelling opportunities with this sector outside the U.S. China is one of those destinations to consider.
The China healthcare investment thesis is accessible with some new ETFs, including the KraneShares MSCI All China Health Care Index ETF (NYSEArca: KURE), which debuted earlier this year.
The KraneShares MSCI All China Health Care Index ETF will try to reflect the performance of the MSCI China All Shares Health Care Index, which is comprised of the various China share classes from Chinese companies engaged in the healthcare sector. Fundamental points underscore the potential benefits of KURE over long holding periods.
“China’s ongoing health reforms are now focused on addressing this imbalance and establishing an adequate primary healthcare infrastructure,” said Markit in a recent note. “County-level hospitals have been the chief beneficiaries, and are playing a more substantial role in diagnosis, delivering maintenance therapy, and refilling prescriptions. Tier 2 and Tier 1 hospitals are assuming more responsibility for healthcare delivery in China, which is driving demand for more of these institutions.”
Inside KURE ETF
KURE invests in a variety of publicly traded shares of Chinese issuers, including A-Shares, B-Shares, H-Shares, P-Chips and Red Chips – the portfolio essentially includes companies listed on Mainland China, Hong Kong and the U.S. Furthermore, the Chinese health care companies must be classified under the Global Industry Classification Standard. The index may also include small-, mid- and large-cap companies.
“China currently has the fastest growing major healthcare market in the world with a five-year compound annual growth rate of 17%, compared to just 4% in the United States, and -2% in Japan,” according to KraneShares.
China is taking other steps to improve prevention and treatment and those trends could benefit KURE components going forward.
“Grass-roots institutions provide primary public and clinical health care to rural communities in China. Comprising community and village clinics, township centers, and outpatient departments, grass-roots facilities possess only basic health equipment and lack funding, technology, and properly trained healthcare professionals,” according to Markit.
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