Asian Health Care Equities: All Dressed Up, But Nowhere to Go (Yet)

Templeton Global Equity reviews trends and opportunities in this sector.

Roman Aliev, CFA

Roman Aliev, CFA Research Analyst, Templeton Global Equity Group

Peter Sartori

Peter SartoriVice President and Portfolio Manager, Templeton Global Equity Group

Preview

After varying stages of virus-related lockdown, most everyone can relate to the frustrations of suspended animation. The waiting game is an all-too-familiar experience for value investors, who are often relegated to the sidelines when the price ascribed to optimism becomes too rich. Such is largely the case today in Asian health care. We believe the sector is attractively positioned with numerous cyclical and secular tailwinds, which we discuss here in detail. Yet for the most part, it remains prohibitively expensive, in our view.

Navigating the current opportunity set in Asian health care requires patience and preparation. At Templeton Global Equity Group (TGEG), we have focused on building up a “reserve list” of stocks that we are eager to buy once volatility again creates opportunity, as it did earlier this year. Abraham Lincoln said, “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” Investment managers do not work with axes, but we have been sharpening our pencils on the Asian health care sector. In this paper, we introduce some of the trends that should eventually underpin the long-term investment opportunities in the sector. We show how deep fundamental research, proactive analysis, and a large team with local knowledge are critical to preparing for, and ultimately capitalizing on, the opportunities on the horizon.

Download the PDF to continue reading the article.


WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. To the extent a strategy focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a strategy that invests in a wider variety of countries, regions, industries, sectors or investments.

The companies and case studies shown herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The opinions are intended solely to provide insight into how securities are analyzed. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the portfolio selection and research process. Factual statements are taken from sources considered reliable but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice or as an offer for any particular security. Past performance does not guarantee future results.