We focus on Chinese healthcare companies with long-term growth potential based on industry leadership, competitive advantage, clear business strategy and transparent corporate governance.
Our selections are mainly in the following subsectors:
1. Medical devices
Companies in this area are benefiting from the following factors:
2. Contract Research Organizations/Contract Development and Manufacturing Organizations
CROs and CDMOs are businesses that serve other companies in the healthcare industry on a contract basis, providing services ranging from drug development to manufacturing. They are enjoying robust demand from global and domestic customers seeking to upgrade their products through increased R&D. Chinese contract businesses have key cost advantages, reflecting their ability to draw on a huge pool of graduates with a biology or chemistry background, and a vast patient base for clinical trials.
3. Innovative drug makers
We prefer drug makers with strong pipelines of innovative drugs over generic drug makers, since the former benefit from much stronger pricing power than the latter.
4. Vaccine makers
These businesses enjoy:
The vaccine market in China is currently worth around RMB 40 billion (US$5.9 billion) – a figure that is expected to rise to as much as RMB 100 billion (US$14.7 billion) over the next 10 years. While the Chinese population is four times larger than that of the US, expenditure on vaccines is only 5% of that in the US. This suggests considerable potential for growth, given that overall vaccine expenditure is highly correlated with population size.
5. Medical services
Businesses with a strong cash position are well placed to grab market share during the pandemic.
The strategy aims to achieve long-term capital growth by investing primarily in a concentrated portfolio of 30 to 40 Chinese healthcare companies.
Our investment strategy combines a deep understanding of key industry drivers and a robust bottom-up stock-selection approach.
We focus on Chinese healthcare companies with long-term growth potential based on industry leadership, competitive advantage, clear business strategy and transparent corporate governance.
The strategy encompasses businesses of all sizes, from small to large-cap, which have unique competitive advantages in different subsectors.
However, the fund has higher exposure to CRO/CDMOmedical devices and medical services, as well as selected exposure to pharmaceutical companies with strong pipelines of innovative drugs.
Senior Portfolio Manager Chris Liu, who leads our China Healthcare Strategy, has over 17 years’ experience in asset management and has spent over 10 years researching and investing in China’s A shares.
Robust income growth and an ageing population are driving the fastest-growing major healthcare market in the world, according to the Economist Intelligence Unit (EIU).
Invesco recognized China’s huge investment potential early, launching its first Chinese equity fund back in 1992, and establishing the first Sino-American joint venture - Invesco Great Wall (IGW) Fund Management Company Limited in 2003.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
As a large portion of the strategy is invested in less developed countries, you should be prepared to accept significantly large fluctuations in value.
As this strategy invests in a particular geographical region, you should be prepared to accept greater fluctuations in value compared to a strategy with a broader investment mandate.
Investment in certain securities listed in China can involve significant regulatory constraints that may affect liquidity and/or investment performance.
The strategy invests in a limited number of holdings and is less diversified, and therefore this may result in large fluctuations in value.
As this strategy is invested in a particular sector, you should be prepared to accept greater fluctuations of the value than for a strategy with a broader investment mandate.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
This article is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.
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