70% Profits by Yearend: 04-16-09

Robert Hsu, April 16, 2009

Dear Fellow Investor,

Over the past couple of years, we've watched one of the greatest demographic shifts in U.S. history start. I'm talking about baby boomers -- those who were born between 1946 and 1964 -- turning 60.

Baby boomers are the largest demographic group in the U.S. and account for more than a quarter of the total U.S. population -- and an even much greater proportion of the U.S. economy. So the aging of this massive population is going to put a lot of pressure on the healthcare system.

I've been betting on this trend for years now, because it won't just affect the U.S. healthcare system. The aging baby boomer will likely cause medical costs around the world to rise sharply.

But rising healthcare costs wasn't the only trend revealed by the aging U.S. baby boomers. Light was also shed on the fact that many countries needed to drastically reform their healthcare systems in order to care for not just their elderly patients but for patients of all ages.

China, in particular, realized the need for a better healthcare system as the country transitioned to a market economy. So over the years, the country's Communist healthcare model of central government sponsorship shifted to more of a pay-for-service model like here in the U.S.

As a result, China's healthcare costs are growing even faster than its economy. In fact, between 1978 and 2007, healthcare spending in China has increased a whopping 4,000%!

And this is just the beginning.

A Lack of a Social Safety Net

While China started to adapt a U.S.-style pay-as-you-go healthcare system in the 1980s, it failed to have the same social safety net that the U.S. has. Only half of all Chinese citizens are covered by basic health insurance, and this coverage is inadequate. It averages only $18 per person a year.

Up Nearly 90% in 5 Months

While now is an incredible time to be taking advantage of the increase in healthcare spending in China, my China Strategy subscribers have already been benefiting from this trend. In fact, one of my favorite China Strategy recommendations is the largest medical device manufacturer in China, and it is up nearly 90% in the past five months!

And I am certain that China's healthcare reform will sharply increase demand for this company's medical equipment in the upcoming months and years. So join China Strategy today, and receive my top two picks to benefit from China's rise in healthcare spending.

And although most hospitals in China are still government owned, they are under pressure to balance their budget and turn a profit. That's why healthcare costs have increased so dramatically in recent years -- a hospital stay in China is about $800, or equal to 33% of urban and 92% of rural annual average per capita income.

This shortfall in China's healthcare system is one of the main causes behind the country's high savings rate and under consumption. Because it is not uncommon to see ailing and dying patients denied medical treatment for lack of funds at Chinese hospitals.

So, Chinese need to create their own safety net, saving large portions of their paychecks in case a medical emergency arises.

A Much-Needed Healthcare Reform Plan

The Chinese government realized that in order to boost economic growth and consumer spending in the country, it needed to take action by increasing a social safety net and enticing Chinese to save less and consume more. So, as part of China's massive $586 billion stimulus plan, Chinese policymakers proposed increasing healthcare spending in the upcoming years.

And on April 6, the Chinese government unveiled its final draft of the highly anticipated healthcare reform plan. Here are the key points of the plan:

An increase in government healthcare spending of $125 billion (or 3% of GDP) over the next three years;
Expand basic medical insurance to 90% of the population by 2011, with an increase in insurance subsidies from 80 RMB per person to 120 RMB per person;
Upgrade medical facilities;
Create a prescription plan with medications covered by insurance and costs controlled by government involvement in production and distribution;
Improve public healthcare in rural regions by reducing the discrepancy between rural and urban medical services;
Build 5,000 central health clinics in towns, 2,000 county level hospitals and 2,400 community healthcare centers.

Now, while the precise budget allocations for China's healthcare reform plan are yet to be determined, I think this is a step in the right direction. Also, we'll likely see further clarity on these plans revealed during the National People's Congress in October.

How to Profit

China's healthcare reform focuses largely on medical spending, making medical services and products more affordable and accessible to the country's 1.3 billion people So one thing is certain: The plan will boost the healthcare sector nicely in the coming months and years.

What areas will benefit the most? I look for China's medical device and diagnostics industry to be a top beneficiary of the country's increase in healthcare demand.

That's why I recommended a China-based medical device company today! It was the first company in China to develop an enhanced chemiluminescence immunoassay for diagnosing diseases.

Over the past couple years, the company has made some strategic acquisitions. One such acquisition gave it new diagnostic technology that can better spot prenatal disorders as well as cancers in adults. And the most recent acquisition gave the company technology that will better address the clinical needs for HPV testing.

This company has only been around for 10 years, but it's been growing at a rapid pace and taking the Chinese medical industry by storm. Revenues soared from $7.7 million in 2002 to $70.8 million in 2006. That's annual growth for more than 74%.v

What's even better is that the company has been able to post solid results even during the global economic recession. In the first quarter of 2009, the company reported that revenue increased 51% to $33 million.

So, is it any wonder that this company's shares are turning around? Shares have gained momentum since the beginning of March, up 41%!

Now is definitely the time to get on board, as China's increase in healthcare spending and the company's strong earnings growth will only drive this stock higher. In fact, I'm expecting at least a 70% gain by yearend.

Don't miss out on this great opportunity! I just recommended this company to my China Strategy subscribers today. So if you join China Strategy today, you'll receive the whole story on this medical company, my specific buy advice, and you won't miss out on a single bump higher in the shares. Act now!

Sincerely,

Robert Hsu