China healthcare shares plunge as anti-graft campaign widens

CHINA’S healthcare stocks slumped as sentiment took a hit after authorities widened an anti-graft crackdown on the sector.

The CSI 300 Healthcare Index declined as much as 3.4 per cent on Monday (Aug 7) to underperform all the other sectors on the onshore benchmark gauge. The biggest losers included Huadong Medicine and Shenzhen Mindray Bio-Medical Electronics.

Investors have been on guard since the nation’s top graft buster said last month that authorities would conduct a year-long nationwide crackdown to root out corruption in the pharmaceutical sector. As of Jul 26, at least 155 officials at hospitals nationwide were being probed for allegedly violating laws and regulations, more than double 2022’s total tally, according to a local media report, which didn’t provide details of the investigations.

The decline in pharmaceutical shares was mainly due to the crackdown, Topsperity Securities analysts including Chen Tielin wrote in a note. The campaign looks to be deepening with more short-term uncertainties on the horizon, they said.

Five of the 10 biggest decliners on the MSCI Asia Pacific Index as of 2:04 pm in Hong Kong were linked to the Chinese pharmaceutical industry. China Traditional Chinese Medicine Holdings and Livzon Pharmaceutical Group plunged at least 12 per cent each in Hong Kong while Betta Pharmaceuticals slid almost 14 per cent on the mainland.

“The pharma crackdown is specifically targeting corruption and unfair business practices,” said Manish Bhargava, fund manager at Straits Investment Holdings in Singapore. “It is possible that it could lead to increased uncertainty and volatility in the short term.” BLOOMBERG