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  • Emerging Markets Equity

    Look to Healthcare for Emerging Markets Growth

    David Semple ,Portfolio Manager
    March 10, 2016

    In the emerging markets, the topic of healthcare has become increasingly important as the middle class continues to grow and begins to face many of the health-related issues that the West has wrestled with over the last several decades. Government leaders in many emerging countries have become ever more focused on healthcare. Whether it’s Russian President Vladimir Putin engaging in well-publicized sporting activities to promote health, Indian Prime Minister Narendra Modi advocating for sanitation, or China expanding efforts to improve its air quality, emerging markets are shining the spotlight on healthcare more and more. 

    Countries such as Mexico, Egypt, and the United Arab Emirates (UAE) have astonishingly high obesity rates (Fig.1). Mexicans drink the most sparkling beverages (including soda) per capita in the world1, and people in the Gulf States suffer from high levels of cardiovascular diseases largely due to the wealth and lifestyle created by petrodollars.2 Although India has relatively low obesity levels, it has experienced an explosion in the number of people diagnosed with diabetes (Fig. 2).

    Figure 1: Prevalence of Obesity (%) Ages 18+

    Source: World Health Organization, Global Health Observatory data. As of 12/31/15.

    Figure 2: Population of India with Diabetes (millions)

    Source: International Diabetes Federation, U.S. National Institutes of Health. As of 12/31/15.

    Meanwhile, HIV prevalence in sub-Saharan Africa persists at alarmingly high levels. Nearly 20% of the 18-49 age group in South Africa is HIV positive. While the number of patients receiving antiretroviral (ARV) therapy to battle HIV has increased, there is still a long way to go and the costs associated with direct treatment and the related complications remain extremely high.

    Demographics also play a key role in why healthcare is taking center stage in emerging countries. Populations are aging rapidly in East Asia, particularly in South Korea and China, and Eastern Europe (Fig. 3). We expect these regions to require greater healthcare spending, and with fewer working-age adults, the private sector will likely need to take on even more responsibility. 

    Figure 3: Percentage of Population Over Age 60

    Source: United Nations Population Fund (UNFPA). As of 12/31/15.

    Will healthcare be the antidote to emerging market stasis? While emerging market countries are quite disparate across socioeconomic factors, there appears to be a growing demand for healthcare services from most countries. In our opinion, the public sector is ill-equipped to accommodate a huge growth in demand and the private sector is likely to be called upon, whether it is hospital operators, health insurers, or pharmaceutical companies that are needed. We believe there is potential for healthcare to experience tremendous growth.

    Post Disclosure  

    1 Coca Cola Icecek, Merrill Lynch Turkish Equity 1-1 Conference, January 19, 2015
    2 World Health Organization, Gulf Cooperation Council (GCC)
    3 Joint United Nations Programme on HIV and AIDS (UNAIDS)