As the Chinese healthcare authority looks into the impact of listed for-profit medical institutions on the development of healthcare in the country, investors are concerned that the interest in the sector may spark another crackdown, similar to that of the Chinese education sector.

According to the National Health Commission of China, it will be assessing the situation from three aspects, says DBS Group Research analyst Rachel Tan.

First, is the equity fundraising by listed for-profit medical institutions in line with the healthcare industry’s policy direction?

Next, are there any negative impacts due to the equity fundraising?

And finally, will equity fundraising via the stock market cause a disorderly expansion in the healthcare industry?

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The way Tan sees it, private healthcare helps to play a part in easing the government’s healthcare cost burden. The sector also provides healthcare resources during emergencies during the Covid-19 pandemic, she adds.

“The curtailment of one funding source (funding via equity market) could partially stifle the development and expansion of private healthcare,” writes Tan in her report dated March 16. “However, we acknowledge that it is difficult to determine China’s stance in view of its drive towards ‘common prosperity’.”

On this, the uncertainty on the sector may cause on overhang on Singapore-listed healthcare companies that have expanded into China, such as IHH Healthcare, Q&M Dental and Raffles Medical.

“Currently, it is still too early to determine if this would have any impact on the foreign-listed healthcare companies currently in China,” says Tan.

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“Would the bilateral economic co-operation between China and Singapore be able to shield some of the impact should China choose to execute any potential crackdown? Meanwhile, the uncertainty may cause an overhang on the share price until there is more clarity.”

Uncertainty on Chinese healthcare may cause overhang on stocks like IHH Healthcare, Q&M Dental and Raffles Medical

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Uncertainty on Chinese healthcare may cause overhang on stocks like IHH Healthcare, Q&M Dental and Raffles Medical

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