Bellevue Asia Pacific Healthcare (Lux)

Volatility remained high in May. Rising costs in the wake of supply chain constraints and deglobalization trends on the one hand and worries that the US economy is slipping into a recession on the other were mainly to blame for the heightened uncertainty. Central bankers face the daunting task of taming inflation by tightening their monetary policy without choking the economy. Company results for the first quarter were generally much better than consensus had expected, which was pleasing to see, but, not surprisingly, management boards were more cautious regarding their guidance for the full year than they were earlier in the year. Besides the higher input costs, companies are struggling with a tight labor market, especially in the US, and wage costs are rising as a result. The MSCI World Index closed the month 0.2% higher in USD. Asia-Pacific stocks performed better and returned about 1.3%. Regional healthcare stocks were likewise 0.2% higher mom.

After an almost two-month lockdown, Shanghai is opening up again. Authorities announced that the hard lockdown would end on June 1 and that the restrictions would be eased in stages. Bus and subway lines are operating again, and even supermarkets have reopened. The reopening will proceed in stages through the month of June, after which all restrictions should have been lifted.

Aier Eye Hospital, China's leading ophthalmology hospital group, reported very solid annual results. Revenues were up nearly 26% and net profit almost 35%, despite the difficult market environment. The company also reported good first-quarter profit growth of just over 26%, despite the resurgence of COVID-19 cases in China and the resulting lockdowns in several cities. The fastest top-line growth was in the optometric services and refractive surgery units, while the cataract surgery and eye disease businesses continued to show a steady recovery.

Olympus, the world's leading manufacturer of endoscopes, published excellent quarterly results and increased its guidance for the full year. Although Olympus mentioned some difficulties securing chips for its endoscope solutions, the company expects record sales and operating profits for the fiscal year ending March 2023. This indicates that its latest product launches have been successful and that its ongoing multi-year restructuring program is delivering the intended effects sooner than expected.

JD Health and Dr. Reddy's were added to the portfolio during the past month and shareholdings of Olympus, Terumo and Daiichi Sankyo were increased. Metropolis, Apollo Hospitals, Tigermed and Pharmaron are no longer in the portfolio and the fund's positions in Sun Pharma and M3 were trimmed.

Asia is the most dynamic growth region in the world and it accounts for more than half of the world's population. Asian emerging markets are forecast to account for more than 50% of global GDP by 2050. As household incomes rise, the economic growth model of Asian countries will shift from manufacturing to the services sector. A growing middle class fuels demand for modern medicine. Healthcare ranks increasingly high on their wish list. Billions are being invested in infrastructure, technology and research to modernize the healthcare systems in emerging market countries. This is giving a greater swath of the population access to better healthcare. Meanwhile rapid population aging is also stoking demand for healthcare. In 30 years’ time there will be 400 to 500 million people over 60 in China alone, and they will have a growing need for modern health services and medicines.

Japan, which has been referred to as “the world's demographic laboratory”, has championed cutting-edge innovation for decades. The Land of the Rising Sun boasts technology leadership in numerous fields, ranging from therapeutic antibody technology, immunotherapy and robotics to digitalization, diagnostics and medical imaging systems.

The fund offers defensive access to Asian emerging markets as well as exciting investment opportunities in technology leaders throughout the entire region. It invests in the entire healthcare system value chain, from generic drug producers and biotechnology companies to medical device manufacturers and digital health specialists.