The SGX All Healthcare index, a benchmark index for Singapore’s listed healthcare companies, generated a total return of 12.7% in the last 12 months, outperforming the regional benchmark MSCI AC Asia ex Japan Healthcare Index’s total return of 0.8%, but lagging the STI’s 10.8%.

Several trends favour the healthcare industry, namely Asia’s rapidly ageing population, rising disposable incomes and increasing per capita healthcare spending. Many SGX-listed healthcare players have recognised these trends, and are already expanding into regional markets to meet the growing demand for healthcare services.    

Singapore’s 10 largest healthcare stocks averaged a 7.3 % return in the 2017 YTD. In calendar year 2016, they averaged a total return of 22.1%. The top three performers YTD are Talkmed Group (+53.4%), Singapore O&G (+11.1%), and Haw Par Corp (+11.0%).

The SGX All Healthcare Index, a benchmark index for Singapore’s listed healthcare companies, has generated a total return of 4.3% in the year-to-date. This compares with the MSCI AC Asia ex Japan Healthcare Index and the MSCI World Healthcare Index, which generated total returns of 4.6% and 5.2% respectively, and the benchmark Straits Times Index (STI), which generated a total return of 10.8%, over the period.

On a 12-month basis, the SGX All Healthcare Index outperformed the regional indexes, registering a total return of 12.7% versus the MSCI AC Asia ex Japan Healthcare Index’s 0.8% and the MSCI World Healthcare Index’s 11.8%.

12 month Price Moves

Index Chart

Source: SGX, Bloomberg & SGX StockFacts (data as of 5 April 2017)

Constituents in the SGX All Healthcare Index comprise stocks that report at least half their revenues from healthcare in the last financial year, as well as REITs with investments in healthcare facilities. More information on the Index can be found on page 7 of the Index Fact Sheets found here.

Singapore’s healthcare stocks, widely regarded as defensive plays, have underperformed the benchmark Straits Times Index (STI) since the start of 2017, as fund flows rotated into cyclical stocks. According to industry analysts, overall sentiment remains positive on the sector, due to its relative resilience and multi-year growth prospects.

Key Drivers Underpinning Growing Healthcare Services Demand

Singapore

Singapore, with a population of about 5.7 million, has boosted its healthcare spending in recent years as its population ages, and amidst the rise of lifestyle-related illnesses, such as cardiac disease, obesity, diabetes and cancer.

However, healthcare spending in the city-state remains relatively low as a proportion of gross domestic product – averaging about 4% of GDP, below the average 6.6% of GDP for countries in Asia and Australasia, according to data from the Ministry of Health, the World Bank and the World Health Organisation. This proportion is expected to increase to over 5% of GDP by 2020, reflecting robust growth in government spending on healthcare infrastructure and higher subsidies for public health insurance schemes.

Asian Demographics

As for the rest of Asia, demographics and infrastructure are favourable for longevity and healthcare spend.

  • Average life expectancy at birth across Asia has increased by as much as seven years to reach 73.4 years old between 1990 and 2012, driven by rising living standards, better nutrition, water and sanitation, as well as greater access to quality health services, OECD data showed.
  • The OECD expects the share of population aged over 65 years in Asia to quadruple in the next four decades, reaching 26% in 2050 from 7% in 2012, surpassing the global average.
  • Asia has 1.2 doctors per 1,000 people, compared to 3.2 for the OECD average, and 2.8 nurses per 1,000 people, compared to 8.7 for the OECD average.
  • The number of hospital beds per person in Asia is almost a third less than the OECD average.

Regional healthcare spending has also been gathering momentum – between 2000 and 2012, the growth rate in per capita health spending in real terms was 5.6% in Asia, outstripping average GDP growth of 4.3%, OECD data showed.

Asia’s demographics, coupled with the current shortfall in comparative services, supplies and technology, offer Singapore healthcare providers increased opportunities to participate in the region’s burgeoning demand.

Rising Disposable Incomes

According to OECD estimates, the global middle class – defined as households with daily expenditures of US$10-$100 per person in 2005 purchasing power parity terms – will surge to 4.9 billion people by 2030, from 1.8 billion in 2009. Two-thirds of the global middle-class will be residents of the Asia-Pacific region, up from 28% in 2009, with China home to the largest share of this demographic, according to data from OECD and EY.

The rapid emergence of the middle class in Asia could turn the region into a consumption powerhouse, and have far-reaching implications on demand for healthcare products and services.

Regional Expansion and Moving Up the Value Chain

Recognising the increasingly lucrative opportunities in the region, many SGX-listed healthcare players such as IHH Healthcare, Raffles Medical Group, Q&M Dental are already expanding into overseas markets with larger populations, such as Indonesia, India, Myanmar, Vietnam and China.

Many healthcare players are also moving up the value chain by tapping niche specialty treatments or differentiated medical procedures that are more price inelastic. Such moves have become more critical with the gradual erosion of Singapore’s status as a medical tourism hub, as regional economies narrow the gap with improved infrastructure and lower treatment costs.

Singapore’s 10 Largest Healthcare Stocks

Singapore’s 10 biggest healthcare stocks have a smaller market capitalisation as compared with their 10 largest peers in Asia Pacific – S$28 billion vs S$354 billion – but have generated higher one-year total returns at 7.3% vs -0.4% in 2016, maintain higher dividend yields of 2.3% vs 1.6%, and have posted better returns on equity (ROE) of 19.5% vs 16.1%.

The table below details the 10 largest Singapore healthcare stocks, sorted by market capitalisation. Click on the stock name to see its profile page on StockFacts.

Name Last Price S$ SGX Code Market Cap S$M Total Return YTD % Total Return 2016 % ROE % Dvd Ind Yld % P/E GICS® Sub Industry Name
IHH Healthcare 1.895 Q0F 15,599 -11.4 1.9 2.8 0.5 80.5 Healthcare Provider
Raffles Medical Grp 1.450 BSL 2,538 1.4 4.4 11.1 1.4 35.7 Healthcare Provider
Tianjin ZhongXin Pharma 1.388 T14 2,505 9.6 -13.3 11.7 1.4 12.3 Pharmaceutical
Haw Par Corp 10.090 H02 2,216 11.0 14.9 5.0 2.0 17.5 Pharmaceutical
Top Glove Corp 1.650 BVA 2,068 1.6 N/A 15.5 2.9 21.9 Medical Equip/ Supplies
Talkmed Grp 1.565 5G3 1,028 53.4 11.2 62.4 2.9 27.6 Healthcare Provider
RHT Health Trust 0.900 RF1U 726 -1.6 28.3 19.2 8.0 5.7 Healthcare Asset Owner
Q&M Dental Grp 0.695 QC7 554 -2.8 3.4 27.4 1.6 19.8 Healthcare Provider
Health Management Intl 0.645 588 529 1.2 86.3 12.6 0.4 58.2 Healthcare Provider
Singapore O&G 1.305 41X 311 11.1 62.1 26.8 2.4 34.9 Healthcare Provider
Average 7.3 22.1 19.5 2.3 31.4  

Source: SGX, Bloomberg & SGX StockFacts (data as of 5 April 2017)

SGX’s healthcare sector comprises 30 listed healthcare companies and healthcare-related trusts with a combined market capitalisation of S$34 billion. Healthcare Providers form the largest sub-industry within the sector, with 12 companies and a combined market capitalisation of S$23 billion. The remaining 18 healthcare companies fall under various sub-industries, such as Medical Equipment and Supplies, Pharmaceutical, Biotechnology and Healthcare Asset Owners.


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