With China’s economy recovering from a real estate development crisis and rising COVID-19 cases in 2022, it only sets up growth potential for 2023. One area of interest that exchange-traded fund (ETF) investors may want to consider is the biotech sector.
The sector could also benefit from an economic re-opening after the government had to force lockdowns in order to curb rising COVID-19 cases. This could bring more foreign investment into China’s biotech sector, which could give the overall economy an infusion of capital.
According to a South China Morning Post article, “Hong Kong’s life sciences and healthcare (LSHC) sectors are poised for growth in 2023 after the city and mainland China remove the final restrictions on cross-border travel, enabling the broader economy to return to pre-Covid-19 growth, according to speakers at an industry conference and a sector study published by Deloitte.”
Capturing Growth in Biotech Innovation
Investors have a plethora of options when consider the Chinese biotech sector. However, an easier strategy is to look at ETFs that can focus on this specific growth niche like the Global X China Biotech Innovation ETF (CHB).
“China’s biotech industry is expected to continue its trajectory, fueled by a series of tailwinds such as changing domestic consumption patterns and demographics, greater access to capital, and national legislation encouraging biotech innovation,” Global X noted.
CHB seeks to provide investment results that correspond generally to the price and yield performance of the Solactive China Biotech Innovation Index. Overall, the fund seeks to invest in companies that are directly involved in China’s biotechnology industry.
“Biotechnology has become a hot topic in LSHC,” said Albert Yu, chair of the non-profit Hong Kong Biotechnology Organization (HKBIO). “The continuous improvement of Hong Kong’s technological strength cannot be separated from the support of its motherland. It must fully integrate into the development of the Greater Bay Area [GBA] and not only rely on its own capital to enter biotechnology’s global stage.”
CHB gives investors:
High Growth Potential: Forecasts suggest China’s biotech market could grow from nearly $23bn in 2020 to more than $35bn by 2025.
Structural Tailwinds: Health care expenditures in China have grown at an annualized rate of 20% since 2003. We believe biotech companies are well-positioned to benefit from further growth in this sector.
Targeted Exposure: In contrast to other funds that offer global or broader health care sector exposure, CHB specifically targets the biotech industry in China.