China ETFs

Accessing Chinese Health Care Companies

(Note: third in a series on pharmaceutical ETFs)

It seems like health-care-related topics and stocks are all the rage these days.

After all, the world is still battling the COVID-19 surge, and everyone is trying to predict which biotech company will be the first to cut the Gordian knot and develop a safe and effective vaccine against the coronavirus. Meanwhile, even though the status of domestic health sector stocks is well known and has been well covered by analysts, foreign health stocks are less familiar to Americans.

One country’s health care stocks have particularly fallen by the wayside. I am, of course, speaking about Chinese health care stocks. While China’s role in the COVID-19 pandemic may be a large part of the reason for this shunning, it is also important to note that the country has several traits that will continue to make it one of the fastest-growing health care markets in the world.

According to kraneshares.com, China’s health care sector has a five-year compound annual growth rate of 11%, compared to just 4% in the United States. Similarly, health care spending in China was $558 billion in 2016, compared to a projected $1.1 trillion in 2020. The facts are that the country’s population is aging, its middle class is growing and its expanded urbanization will only increase the importance of this sector in China.

An exchange-traded fund (ETF) called the KraneShares MSCI All China Health Care Index ETF (NYSEARCA: KURE) provides access to the world of Chinese health care companies, regardless of whether they are based in the People’s Republic or the United States. KURE tracks an index of all types of publicly issued shares of Chinese companies that are engaged in the health care sector. A large part of its portfolio is dominated by pharmaceuticals.

Some of this fund’s top holdings include Jiangsu Hengrui Medicine Co., Ltd. Class A (SHE:600276), Wuxi Biologics (Cayman) Inc. (OTCMKTS: WXXWY), Shenzhen Mindray Bio-Medical Electronics Co., Ltd. Class A (SHE: 300760), Sino Biopharmaceutical Limited (OTCMKTS:SBMFF), CSPC Pharmaceutical Group Limited (OTCMKTS:CHJTF), Chongqing Zhifei Biological Products Co., Ltd. Class A (SHE: 300122), WuXi AppTec Co., Ltd. Class A (OTCMKTS:WUXIF) and Alibaba Health Information Technology Ltd. (OTCMKTS: ALBHF).

This fund’s performance has been strong, partially due to investor interest in pharmaceutical stocks. As of Aug. 18, KURE has been up 4.18% in the past month and 24.13% for the past three months. It is currently up 51.36% year to date.

Chart courtesy of www.stockcharts.com

The fund has amassed $105.91 million in assets under management and has an expense ratio of 0.65%.

While KURE does provide an investor with a chance to tap into Chinese health care companies, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

Remember, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.