How to Invest in a Breakout Healthcare Industry in China

The China healthcare industry is expected to experience exponential growth, putting the focus on exchange traded funds (ETFs) like the Global X MSCI China Health Care ETF (CHIH), which is up 20% YTD.

With CHIH, investors get unique exposure to a healthcare system that is structurally different from the United States. The ETF thus opens up unique opportunities for U.S. investors, ones that they can’t get domestically.

CHIH seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI China Health Care 10/50 Index. The fund invests at least 80% of its total assets in the securities of the underlying index and in ADRs and GDRs based on the securities in the underlying index.

The underlying index tracks the performance of companies in the MSCI China Index (the ‘parent index’) that are classified in the healthcare sector, as defined by the index provider.

Overall, the fund gives ETF investors:

  • Targeted Exposure: CHIH is a targeted play on the healthcare sector in China – the world’s second largest economy by GDP.
  • ETF Efficiency: In a single trade, CHIH delivers access to dozens of healthcare companies within the MSCI China Index, providing investors an efficient vehicle to express a sector view on China.
  • All Share Exposure: The Index incorporates all eligible securities as per MSCI’s Global Investable Market Index Methodology, including China A, B, and H shares, Red chips, P chips, and foreign listings, among others.

CHIH Chart

A “Golden Age” for China Healthcare?

A South China Morning Post article covered one of CHIH’s holdings—Shenzhen Mindray Bio-Medical Electronics, which currently comprises about 2% of the fund’s net assets. The stock has been one a shining star amid a vast Chinese equities landscape.

Discussing the exponential growth of Shenzhen Mindray Bio-Medical Electronics, the South China Morning Post article noted that as “China’s health care industry enters its ‘golden decade’, its 70-year-old billionaire founder Li Xiting has pledged to deliver more to expand its global footprint.”

“Medical equipment needs replacement and upgrading, so the demand is not a problem [even after the pandemic]because many new hospitals are being built globally and many others are expanding their sizes,” founder and chairman Li Xiting said in an interview with the Post. “A double-digit growth in sales and profits can be sustained at least over the next three years.”

For more news and information, visit the Thematic Investing Channel.