Health Care Opportunities in Asia

09/24/2009 11:40 am EST

Focus: STOCKS

Yiannis Mostrous

Editor, The Capitalist Times

Yiannis G. Mostrous, editor of Silk Road Investor and associate editor of Personal Finance, finds a stock that profits from the health care boom in Asia, especially China.

Health care is becoming the industry of the future as the world’s population lives longer. Until recently, investors focused on aging trends in developed economies, where life expectancies were generally higher and household incomes were sufficient to support health care spending.

But more and more businesses and investors are finding opportunities in Asia. Believe it or not, four of the ten countries with the fastest aging populations are Asian. And although Japan, Singapore, South Korea, and Hong Kong are at the top of the heap, even China and Thailand’s elderly populations are increasing more rapidly than those in France, Spain, the US, or the UK.

Equally important, Asia’s economic development enables more people to afford better health care. Studies indicate that the proportion of gross domestic product (GDP) spent on health care increases as economic development progresses.

As China, India, Indonesia, and other emerging economies expand their urban centers and household incomes rise, the population’s propensity to consume health care should increase.

Two of the fastest growing health care segments in China are orthopedics and disposable medical products. China’s orthopedics market is worth roughly $2.2 billion a year and has grown around 20 percent annually over the past five years. We expect that growth rate to remain strong: Penetration is still low, and rising household incomes should prove a boon to business.

According to industry experts, the market size of China’s low-priced disposable medical products is nearly $3 billion. The market for medical needles is particularly attractive, offering high margins and growing 20% to 25% each year. High-end medical needles are a $480-million business. Blood purification (a popular treatment for uremia) likewise has grown 30% to 35% in recent years.

Mindray Medical International (NYSE: MR) develops, manufactures, and markets medical devices in China, a market that accounts for 45% of its revenues. The company operates three business segments: patient monitoring and life support products; in-vitro diagnostic products, and medical imaging systems.

It sells its products primarily to distributors; the balance goes directly to hospitals, clinics, government agencies, original design manufacturer (ODM) customers, and original equipment manufacturer (OEM) customers.

The firm continues to add to its lineup of high-quality products, introducing comprehensive operating-room solutions and enhanced ultrasound products to its patient monitoring segment. Buy Mindray up to $35. (It closed below $33 Wednesday—Editor.)

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