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Introduction To The Healthcare Industry

stethoscopeThe health care industry is a resilient one. Even during a recession, someone who falls still sick has to go and visit a doctor. Unlike many other industries, healthcare tends to satisfy “needs” rather than “wants”.

According to the Singapore Economic Development Board, Singapore prides itself as the “world’s 4th best healthcare infrastructure (World Competitiveness Yearbook 2010, IMD) while spending less than 4% of GDP on healthcare and providing universal coverage for Singaporeans with multiple layers of care.

In Singapore, there are a total of 23 stocks listed as part of the Industrial Classification Benchmark’s (ICB) Healthcare Industry. They include IHH Healthcare  (SGX: Q0F), Raffles Medical (SGX: R01) and Eu Yan Sang (SGX: E02).

Under this industry classification, there are two sectors – Health Care Equipment & Services and Pharmaceuticals & Biotechnology. The sectors are further sub-divided into subsectors. Under the Health Care Equipment & Services sector, there are three additional subsectors – Health Care Providers, Medical Equipment and Medical Suppliers. Under the Pharmaceuticals & Biotechnology sector, there are two subsectors – Biotechnology and Pharmaceuticals.

The various companies and market capitalisation (as of 7 August 2013) can be found from the table below:

Singapore Healthcare

Source: SGX My Gateway and Writer’s input)

From 2008 to 2012, the FTSE ST Health Care Index (SGX: FSTAS4000) has returned 35% more than the Straits Times Index (SGX: ^STI). Even though the FTSE ST Health Care Index does not include all of the above stocks, it is a good representation of the quoted healthcare industry.

FTSE ST HEqalthcare Index

(Source: Yahoo! Finance Singapore)

Catalysts

With the burgeoning ageing population, there will be an increased demand for the health care providers. The percentage of residents aged 65 and above out of the overall population has been increasing consistently from 6.0% in 1990 to 9.9% in 2012 as seen below.

aging pop

(Source: Singapore Department of Statistics)

Increasing medical tourism into Singapore also bodes well for this industry. Singapore boasts a team of high-standard medical expertise and the cost is still cheaper than United States or Europe. The local hospitals are also well equipped with state-of-the-art facilities.

Risks

One of the major risks impacting this industry currently is rising costs. In March 2012, Ministry of Health revealed the “Healthcare 2020 Masterplan” and it said doctors will see an increase of around 20% to their total pay by 2014. Dentists, pharmacists, nurses, allied health professions and associate consultants in hospitals will also see pay increases.

Foolish Bottom Line

Investing in the health care industry can be attractive due to its resilient nature. The silver tsunami and the increase in medical tourists should bode well for the health care providers. However, investors should also be mindful of risks such as rising costs, though.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.