Time to ride with the Chinese aging population

China is rapidly growing in its economic development  and has drastically changes in the past 20 years. While it is very successful economically, many huge problems have inevitably emerged, one of which is healthcare-related. One particular area that is alarming is the fast increase of cancer patients in China. See some statistics below:

·         The world registered 14 million new cancer cases and 8.2 million deaths in 2012, and the numbers for China were 3.07 million and 2.2 million respectively, according to the World Cancer Report 2014, released by the World Health Organization earlier this year

·         China accounted for about 22 percent of the world's new cancer cases in 2012 and 27 percent of cancer deaths globally

·         In early 2013, an annual report issued by the National Central Cancer Registry estimated there were 3.12 million new cancer cases and 2 million cancer deaths annually on the Chinese mainland, which means one death from cancer every six minutes

With a fast aging population, urbanization and tobacco usage, environmental pollution, food contaminants and a high-pressure lifestyle, this trend is unfortunately going to become even worse in the next 5-10 years. So what does this mean from the investment point of view. Well, the healthcare for managing cancer patients will obviously be very needed but it is currently very much in shortage as you can imagine. China has a large number of cancer patients and the number is increasingly large. The medical resources in the public hospitals are so limited that patients cannot obtain multidisciplinary treatment solutions to effectively manage their illness. If we can find some business involved in this area, the potential will be huge and astonishing. I find one such company actually.

The company is called Concord Medical Services (CCM), which is listed in the US stock market.  Concord Medical operates a network of radiotherapy and diagnostic imaging centers in China. They have just got partnership with global leading investment company The Carlyle Group LP and US hospital MD Anderson Cancer Center to set up cancer treatment hospitals in China that will use multidisciplinary diagnosis and care to cure Chinese patients. Under the terms of its cooperation with Chinese public hospitals, Concord Medical Services now has 144 facilities around China and also owns 52 percent of Chang'an Hospital in Xi'an, Shaanxi province, via an acquisition in 2012. Chang'an Hospital has reached a strategic alliance with Fox Chase Cancer Center to focus on the oncology department. The hospital will be transformed to focus on oncology and other related departments. Foreign investors are particularly interested in Chinese hospitals, which, like hospitals across Asia, offer especially attractive margins. Foreigners are now limited to 70% stakes in Chinese hospitals, but that cap is expected to be removed eventually. Meanwhile, in the Shanghai Free Trade Zone, investors are allowed to set up 100% foreign-owned hospitals. That’s why the prospect is really great for CCM.  Concord Medical Services forecast its net revenue in 2013 was between 930 million and 975 million yuan, representing a 40 percent to 47 percent increase from 2012.

As you can easily understand, this is not a short-term trading idea but a long-term investment. Using dollar-averaging and buy & hold is the best way to invest in this booming business in China. Right now, CCM is experiencing quite significant correction, declining almost 30% in the past month. This is a great opportunity to buy CCM!