Bellevue Emerging Markets Healthcare

Emerging markets rallied in September, with major benchmarks across Asia and Latin America posting strong gains. Hong Kong’s Hang Seng Index climbed 7.8%, while China’s CSI 300 advanced 3.5%. Brazil’s Ibovespa added 5.6%, and South Korea’s Kospi rose 6.4%. India’s Nifty 50 was little changed. Overall, the MSCI Emerging Markets Index gained 7.2% for the month.

Emerging-market healthcare stocks lagged in September, rising 2.1% and underperforming the broader market. Sentiment was weighed down by growing concerns over the most-favored-nation (MFN) pricing model in the US and reports of a draft executive order from the Trump Administration that would impose significant restrictions and new oversight on drug licensing and development deals involving Chinese biopharma companies. The Bellevue Emerging Markets Healthcare Fund gained 2.0%, roughly in line with its benchmark.

WuXi XDC (+38.6%), WuXi Biologics (+23.6%), BeOne Medicines (+11.6%), WuXi AppTec (+10.6%), and Rede D’Or (+9.7%) ranked among the top contributors to the fund’s absolute performance. WuXi XDC and WuXi Biologics drew investor interest on the back of a positive H2 growth outlook. In addition, amid concerns over MFN rules and Chinese out-licensing, contract development and manufacturing organizations such as the WuXi companies were seen as safe havens. BeOne, a high-quality Chinese biotech firm that generates most of its revenue in the US, regained investor favor under the current geopolitical backdrop. Rede D’Or extended its post-earnings momentum, supported by steady growth in its hospital and health insurance operations, driven by rising demand for healthcare services in Brazil.

Akeso (-9.2%), CSPC Pharmaceutical (-6.8%), Divi’s Laboratories (-7.9%), Cipla (-6.1%), and Max Healthcare (-4.1%) were the largest detractors from the fund’s absolute performance. Akeso fell after releasing mixed data on its flagship lung cancer therapy AK112, fueling concerns over whether its US partner, Summit, has the resources to run global clinical trials. CSPC slid amid draft rules on out-licensing, which could complicate pending deals. Indian stocks came under pressure on the back of rumors the US may impose a 100% tariff on pharmaceutical imports. Contract drug manufacturers such as Divi’s Laboratories and generic drugmakers with heavy US exposure, including Cipla, declined. Hospital operators, including Max Healthcare, were also dragged lower amid concerns that their relatively rich valuations left them vulnerable to shifting sentiment.

All performance data in USD/B shares.

Emerging markets are home to some of the world’s most dynamic growth economies and more than half of the global population. By 2050, Asian emerging economies are expected to generate over 50% of global economic output. As incomes rise, many of these economies are shifting from industrial-led growth toward service-driven models. A growing middle class is fueling demand for modern medicine, as health becomes an increasingly important priority. Massive investments in infrastructure, technology, and research are accelerating the modernization of healthcare systems, broadening access to higher-quality care. At the same time, demographic shifts are adding to demand. In 25 years’ time, China alone is expected to have nearly 400 million people over the age of 65, creating a significant need for advanced health services and medicines.

Beyond Asia, attractive investment opportunities are also emerging in Brazil’s rapidly expanding private healthcare market. As the public healthcare system struggles with quality and long waiting times, many affluent Brazilians are increasingly turning to private providers for better services. One notable example of beneficiaries of this trend can be found in hospital chains, which are building vertically integrated ecosystems to capture sustainable long-term growth.

The fund provides defensive exposure to the above-average growth potential of emerging markets. Our investments span the entire healthcare value chain, including hospital chains, pharmaceutical and medical device manufacturers, research organizations, and digital health companies.