When it comes to healthcare stocks and ETFs, investors typically hone in on domestic fare, bu the Global X MSCI China Health Care ETF (CHIH) is proving that it can be rewarding to consider the international side of the sector.
Up 6.54% year-to-date, CHIH follows the MSCI China Health Care 10/50 Index and is proving it’s a winning coronavirus investment idea.
“Firms in the Health Care sector received praise from Beijing for their efforts on the frontlines combating COVID-19 and received support for aggressive R&D investments focused on containing and eliminating the outbreak,” said Global X analyst Chelsea Rodstrom in a recent note. “Health Care tech and biotech companies, as well as medical equipment and suppliers, we’re all encouraged by Chinese authorities to help respond to the outbreak of COVID-19.”
Predictably, CHIH has benefited from the coronavirus outbreak as some market observers speculate one or more of the fund’s holdings could put an end to the virus, but there’s more to the CHIH story.
Healthy Outlook for CHIH
Another advantage of CHIH is that the fund isn’t beholden to the same political pressures – drug prices, Medicare for All, etc. – as U.S. equivalents. Like the U.S. healthcare sector, China’s healthcare industry is largely focused on the domestic economy, reducing its vulnerability to trade tensions.
Plans to enhance efficiencies in China’s healthcare system could also be a boost to CHIH and perhaps as soon as this year.
“Health Care Technology firms like Alibaba and Ping An, as well as medical software provider, Winning Health Technologies, stepped in to facilitate telemedicine doctor visits and consultations during the outbreak and containment of COVID-19 in China, and are among China’s best performers YTD,” notes Rodstrom. “Ping An’s Good Doctor telemedicine platform, for example, became so popular that the user base increased nine-fold from December 2019 to January 2020 alone.”
China is taking other steps to improve prevention and treatment and those trends could benefit CHIH components going forward. Additionally, the country has one of the fastest-growing healthcare markets in the world, a theme that could benefit some of CHIH’s techier components.
“These firms provided critical services, rapidly responding to provide necessary supplies and equipment, ramped up R&D investments, and helped solidify the emerging role technology is playing in China’s health care space with the online distribution of goods and telemedicine services,” according to Rodstrom.
The Chinese health care industry may be a growth opportunity, especially given China’s large population. The health industry in China is also far less developed than those in Western countries, so the emerging Asian country will have to invest and expand its health care facilities and infrastructure to meet the growing demand from a large population.
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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.