Bellevue Emerging Markets Healthcare

Emerging markets in Asia delivered strong gains in May, with the Hang Seng rising +4.8%, the CSI 300 increasing +3.0%, the Nifty 50 advancing +0.8%, and the Kospi surging +8.9%. Brazil’s benchmark index, the Ibovespa, also posted a positive performance, climbing +0.9%. Consequently, the broader emerging markets equity market closed the month on a positive note, gaining +4.3%.

The emerging markets healthcare equity sector (+0.6%) underperformed the broader market. Negative rhetoric from the US government regarding its Most Favored Nation (MFN) pricing model and the prospect of tariffs on biopharma products weighed on pharmaceutical and biotech stocks, while hospital names offered little support. The Bellevue Emerging Markets Healthcare Fund (+0.7%) marginally outperformed its benchmark.

CSPC (+30.7%), Rede D’Or (+17.4%), Innovent (+14.0%), Sino Biopharma (+12.6%), and WuXi Biologics (+8.2%) were among the top contributors to the fund’s absolute performance. CSPC gained on management’s guidance regarding three new business development collaborations planned for 2025, including an EGFR-ADC for lung cancer and two platform technologies, with a total transaction value exceeding USD 5 bn. Rede D’Or, the Brazilian hospital group, continued its strong performance. Its impressive insurance results in Q1 were driven by lower medical cost and reduced general and administrative expenses. Despite weaker hospital operations during the quarter, the positive outlook is supported by higher acuity procedures and the expansion of new hospitals. Innovent continued its upward trend ahead of the anticipated approval and launch of mazdutide (a GLP-1/GCG dual agonist for weight loss and type 2 diabetes) in China by the first half of 2025. The company also holds strong business development potential with IBI363, a first-in-class PD-1/IL-2 alpha fusion protein targeting melanoma and potentially colorectal cancer. Similarly, Sino Biopharma has at least three pipeline candidates with out-licensing potential, which could support a recovery from post-VBP pressures. WuXi Biologics recovered from previous lows by divesting a plant and shifting its manufacturing focus to Singapore.

Legend (-17.2%), Sun Pharma (-9.5%), Bangkok Dusit (-7.9%), BeOne Medicines (-5.8%), and Bumrungrad (-2.3%) were the largest detractors from the fund’s absolute performance. Legend weakened due to rising competition against Carvykti in multiple myeloma; however, the outlook remains positive, supported by Carvykti's move into earlier-line treatment and improving supply capacity. Sun Pharma was weighed down by uncertainty surrounding the MFN pricing model, and its weak FY26 guidance offered little support. BeOne derives the majority of its revenue from Brukinsa, a blood cancer treatment with majority of revenues coming from the US, which pressured the stock. The shares were also impacted by uncertainty surrounding the MFN pricing model. Bumrungrad declined due to weak international revenue and the impact of the Ramadan period.

All performance figures in USD, with fund performance based on the B share (USD).

Emerging markets include the world's most dynamic growth countries, home to more than half of the world's population. By 2050, the Asian emerging economies are also expected to account for more than 50% of global economic output. Economies with rising incomes are shifting their growth model away from the industrial sector and toward the service sector. With the growing middle class, demand for modern medicine is increasing. Health is increasingly high on people's wish lists. Billions of dollars in investments in infrastructure, new technologies, and research are driving the modernization of the healthcare system. This gives people broader access to better healthcare. Demand is also rising due to a rapidly advancing aging population. In China alone, in 30 years, there will be 400 to 500 million people over the age of 60, who will increasingly require modern healthcare services and medications.

In addition to Asia, attractive investment opportunities are increasingly opening up in beneficiaries of Brazil's rapidly growing private healthcare market. Since the public healthcare system in Brazil is no longer acceptable in terms of quality and waiting times for many well-off Brazilians, they are increasingly turning to the private sector for new services. Hospital chains in their own vertically integrated ecosystem are just one example of the beneficiaries of this sustainable development.

The fund offers defensive access to the above-average growth of emerging markets. We invest in the entire healthcare value chain, from hospital chains, drug and device manufacturers, and research to digital health companies.