Re­forms make pharma stocks funds’ hot picks

China Daily (Hong Kong) - - BUSINESS - By CAI XIAO caix­iao@chi­nadaily.com.cn

State-owned fi­nan­cial in­sti­tu­tions and pri­vate fund man­agers are in­vest­ing in phar­ma­ceu­ti­cal shares, which are seen ben­e­fit­ing from a series of re­forms.

Both State-owned funds and pri­vate ones owned 12 com­mon A-share stocks, out of which four were of phar­ma­ceu­ti­cal com­pa­nies.

Each fund has as­sets worth more than 10 bil­lion yuan ($1.5 bil­lion) un­der man­age­ment. And each has al­lo­cated sub­stan­tial funds to the pharma sec­tor from Septem­ber to March, ac­cord­ing to in­vest­ment con­sul­tant plat­form Qiantougu.

The stocks in­cluded Yun­nan Baiyao Group Co Ltd, Zhe­jiang NHU Co Ltd, Sany Heavy In­dus­try Co Ltd and China Yangtze Power Co Ltd.

“China’s lat­est re­forms in phar­ma­ceu­ti­cals are shap­ing the in­dus­try and in­vestors pay at­ten­tion to re­lated A-share listed com­pa­nies with good per­for­mance,” said Zhang Jinyang, an an­a­lyst at Dongx­ing Se­cu­ri­ties.

One of the re­forms was by the Na­tional Health and Fam­ily Plan­ning Com­mis­sion that said in Jan­uary that all pub­lic hos­pi­tals will stop adding their cost to drug prices and start sell­ing them to pa­tients at cost price this year.

This is ex­pected to boost sales of drugs, and prof­its of the com­pa­nies con­cerned, as more pa­tients may be able to af­ford the medicines.

In May, the China Food and Drug Ad­min­is­tra­tion un­veiled four draft reg­u­la­tions to en­cour­age in­no­va­tion and re­search in the phar­ma­ceu­ti­cal in­dus­try, which is ex­pected to mod­ern­ize the in­dus­try, mak­ing it world-class and im­prov­ing its fu­ture prospects.

In March, the CFDA re­leased a draft reg­u­la­tion giv­ing new for­eign drugs eas­ier ac­cess to the Chi­nese mar­ket at the same time as they en­ter other mar­kets. Com­pe­ti­tion from world­class drugs is ex­pected to raise stan­dards of lo­cal com­pa­nies.

“State-owned fi­nan­cial in­sti­tu­tions bought shares with good qual­ity and low risk in the first quar­ter, and pri­vate as­set man­age­ment com­pa­nies made the move ear­lier,” said Zhang Xuan, chief in­vest­ment con­sul­tant at Qiantougu.

Eight of the 12 com­mon stocks held by State-owned and pri­vate in­sti­tu­tions have risen this year. For in­stance, shares in Yun­nan Baiyao Group Co Ltd and Sany Heavy In­dus­try Co Ltd rose about 20 per­cent each from early Jan­uary to June 16.

State-owned fi­nan­cial in­sti­tu­tions bought six A-share stocks in the fourth quar­ter last year, fol­lowed by large pri­vate fund man­age­ment com­pa­nies, data of Qiantougu showed.

In the first quar­ter of this year, State-owned fi­nan­cial in­sti­tu­tions led by Cen­tral Hui­jin In­vest­ment Ltd and China Se­cu­ri­ties Fi­nance Co Ltd pur­chased 73 A-share stocks. More than 40 per­cent of them were listed on the small and medium-sized en­ter­prise board and the ChiNext board.

The State-owned in­vestors cashed out from 52 shares dur­ing the same pe­riod and al­most 60 per­cent of them were listed on the SME and ChiNext boards.

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