HK health IPOs a shot in the arm for investors

09:37, May 21, 2010      

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Hong Kong has become a top choice for healthcare companies looking to raise cash thanks to the high valuations investors give new listings as China promises to spend billions to reform its antiquated medical system.

Analysts say pharmaceuticals and medical technology are set to become a new focus for investors disenchanted with property and inspired by the example of a pharmaceutical researcher who became China's richest man this month after the listing of his drug firm, Shenzhen Hepalink Pharmaceutical.

London-listed Chinese medical device maker China Medical System Holdings last month filed an application for a Hong Kong listing to help fund an expansion of its sales network. Others may do so soon, including Chinese generic drugs maker Hailing Pharmaceutical and China Central Pharma, a Chinese medicine distributor and wholesaler, according to sources.

Investor appetite for Chinese medical stocks has grown as China promises to create a national healthcare safety net and as the sector's relative immunity to economic cycles offers shelter in times of turmoil.

"Weak sentiment in April did not change the market's view of the pharmaceutical sector, but further strengthened investors' belief that it is a defensive play in a volatile market," said Linus Yip, a strategist at First Shanghai Securities.

Although healthcare stocks in Hong Kong have largely outperformed during the recent downturn, both Hepalink and Lansen Pharma have fallen after their impressive debuts, Hepalink by 22 percent and Lansen by 5 percent.

While a number of major Hong Kong IPOs have been put off recently, healthcare listings remain on track.

"Pharmaceuticals are not a cyclical business," said an investment banker handling one healthcare IPO.

Source: Global Times


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