China Stock Market Bubble -- Or Not?

Robert Hsu, August 25, 2009

In this Issue:

Is There a Bubble in China?
Limited Downside for the Rest of 2009
Keeping Up with China's Growing Demand for Energy
An Aggressive Acquisition Strategy
Opportunities in Healthcare

Opportunities in Healthcare

There's no denying that healthcare reform has been one of the hottest topics around the world this year. Policymakers worldwide are striving to provide affordable and high-quality medical services to its citizens. And this coupled with the fact that healthcare is a defensive industry has created profitable opportunities in the medical sector.

In fact, because of the profitable opportunities that I'm seeing in this industry – especially in China with its healthcare reform plan -- I've loaded the China Strategy portfolio with unique ways to profit from medical services. Take a look…

Medical Play #1: The number-one medical device manufacturer in China has benefited nicely this year from China's proposed healthcare reform plan and the economic turnaround in the country. With the majority of sales coming from China, this company produced a solid second quarter, as we discussed on August 11, with revenues increasing 19%. Looking ahead, I'm expecting double-digit growth over the next several years as China boosts spending in healthcare. Shares are up 72% year to date.

Medical Play #2: China's largest retail drugstore chain is comparable to Walgreens here in the U.S. It has grown from a single shop to the largest retail drugstore chain in China in just 14 years. China's healthcare reform plan is set to eliminate hospital pharmacies, and the Chinese government is already encouraging patients to fill their prescriptions at independent drug stores rather than at hospitals. This company is directly in line to profit from this trend. Shares have gained 44% already year to date.

Medical Play #3: Along with China's largest drugstore chain, our third medical play is also a bet on China's pharmaceutical industry since it's booming today. This company, though, is one of the largest and most successful pharmaceutical outsourcing companies in China today. Rising medical costs have become a huge burden to pharmaceutical companies – it can cost more than $1 billion to develop a new drug. So companies are turning to outsourcing, with nearly a third of their drug R&D spending now outsourced. As a result, China's pharmaceutical R&D outsourcing industry is expected to grow at least 15% to 20% a year over the next five years. And this company is grabbing the lion's share of that pie. Shares are up 56% year to date.

As you can see, there are incredible ways to profit in China's healthcare industry today. And even though these companies' shares have already jumped significantly year to date, there's still plenty of room to run – especially when you consider that China's healthcare reform plan is still be developed and implemented.

Don't miss out on the incredible opportunities in China's medical industry today -- join China Strategy!

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