Capitals to embrace various investment opportunities in health resource

Stimulated by the news that “Health China” might be upgraded as a national strategy, stocks related to medical health nearly all soared to the daily 10 percent limit yesterday (Oct.22). During the interview by SSN, relevant person from the National Health and Family Planning Commission (NHFPC) further points out that “the coming Fifth Plenary Session of the 18th Communist Party of China Central Committee meeting might further discuss specific work about “Health China”. Under the context that the State encourages development of medical service industry, the “Health China” concept will be upgraded as a national strategy and implemented throughout government’s administrative idea. It will become one part of “China Dream” ”.

Investment opportunities lie in “medical insurance, medical treatment and medicine”

According to the work of compiling a health China construction plan for the period from 2016 to 2020 initiated by the NHFPC, “Health China” will start with the medical treatment and public health industry and the grand health industry, highlight the focus on human health, implement “Health China” strategy and integrate it into economic and social development as well as realize the development goal on health through comprehensive policies and measures.

The journalist interviewed several experts on medical system reform and insiders of securities traders on Oct. 22 to further figure out the investment idea behind “Health China”: center on deepening comprehensive reform of the medical and health care institutions at the grass-root level, strengthen the construction of general medical practitioner system and improve layered medical treatment system; fully roll out relevant work concerning the comprehensive reform on county-level public hospitals. The industrial belt formed by medical insurance, medical treatment and medicine will be further supported by national policies and be concerned by industrial capital in the long run.

It is noteworthy that the medical service market, to reach 10 trillion yuan in the future, will be the main field competed by capital investment. Huge opportunities lie in three segmented areas, namely, hospital, medical facilities and medicine. First of all, in the process of encouraging diversified forces in establishing medical institutions and optimizing allocation of medical service resources, professional hospital management groups, private hospitals and etc. will embrace rapid development.

As for listed companies, Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (600196.SH; 02196.HK) has invested a lot in the medical service industry dominated by private hospitals. The company now holds four hospitals, including Jimin Hospital and Guangji Hospital, and has acquired shares of United Family Healthcare, an institute providing high-end medical services. In the first half of this year, the company saw its revenues in medical services reach as high as 674 million yuan, up by 22.55 percent year on year. In addition, China Resources Sanjiu Medical & Pharmaceutical Co., Ltd. (000999.SZ) and PKU HealthCare Corp., Ltd. (000788.SZ) are also among the first ones making investment in private hospitals which have now developed China Resources and PKU group hospitals along with Fosun Pharmaceutical. In the past two years, listed companies’ merger and investment in private hospital have accelerated the development of private hospitals.

Some experts disclosed in earlier interviews that another opportunity brought by the “Health China” strategy lies in commercial health insurance. The medical insurance has played an excessively strong role in medical fundraising. Although China uses 40 percent of per capita income for social security, people still have much difficulty in getting medical treatment and have to pay high cost for that. “The problem of medical reform is lacking of business opportunity.” Experts further pointed out that if we reduce the proportion of fundraising through medical insurance and make commercial insurance to cover the reduced part to let the market allocate medical resources, the above-mentioned problem will be solved. It is learnt that the commercial insurance market will reach a scale of 1 trillion yuan in 2020, yet the current scale is even less than 200 billion yuan now.

Health service posts new investment opportunities

Apart from the industrial belt formed by medical insurance, medical treatment and medicine, the diversified health service industry, including pension service, traditional Chinese medicine healthcare service and health management and physical examination service, will post new opportunities for capital investment.
Some experts on medical reform indicated that as China is gradually entering an aging society, it accords with the core idea of “Health China” to fully include healthy concept in pension service. From the perspective of capital market, a great number of listed companies have embarked on real estate for the aged, expanded construction of pension industrial parks and communities, and actively stepped into home-based care equipment for the aged such as nursing care and rehabilitation care for the elderly. They are expected to further benefit from the detailed policies in the future and the silver economy nurtured by “Health China” will embrace significant benefits. 

As China’s featured health industry, the health care service of traditional Chinese medicine (TCM) cannot be ignored. According to the State Council’s Opinions on Promoting the Development of Health Service Industry, China will give full play to the advantages of TCM medical treatment, prevention and healthcare, improve primary TCM service capability, and strive to equip all of the community health service institutions, health clinics in towns and 70 percent village clinics with the TCM service capability. Some listed companies such as Zhejiang Dian Diagnostics Co., Ltd. (300244.SZ), Renhe Pharmacy Co., Ltd. (000650.SZ), Shanghai New World Co., Ltd. (600628.SH) and others all adjust their strategic planning for this year targeting the construction of “big health ecosystem”, which attracts extensive attention from the market.

In addition, thanks to the rapid development of Internet medical industry, the health management-oriented innovative commercial model is favored by capitals. The market opportunities of health service industries such as chronic disease management, physical examination and light inquiry, which are extended from health management, are enlarging gradually. The industrial giants and listed firms led by BAT, namely Baidu Inc. (NASDAQ: BIDU), Alibaba Group Holding Limited (NYSE: BABA) and Tencent Holdings Ltd. (00700.HK), have made aggressive deployment in health management field since the beginning of this year. Several companies including Andon Health Co., Ltd. (002432.SZ) and Lepu Medical Technology (Beijing) Co., Ltd. (300003.SZ) shift their businesses from home-based care equipment to chronic disease management. Meinian Onehealth Healthcare (Group) Co., Ltd. intends to conduct backdoor listing through Ciming Checkup Management Group Co., Ltd. aiming to be leading in the health examination market. The BAT tycoons make huge investment in health service industry. It is quite anticipating that who can benefit most from “Health China” as the strategy is put in place in the future.