Photographer: Wang Zhao / AFP / Getty Images
Photographer: Wang Zhao / AFP / Getty Images
While technology stocks continue to rally Asia’s equities, one hot spot since 2020 has fallen to the bottom of the board of directors: healthcare.
Almost flat so far, the region’s measure is the worst performing in Asia, dropping the region’s benchmark by eight percentage points. It is on track to meet MSCI Asia Pacific Index performance for the third straight month, the longest losing streak in three years.
A growing expectation that it will return to normal for the global economy has prompted investors to make a protective bet made through the pandemic, such as health care – the release of last year’s second-best player . Energy stocks have bounced back in crude prices, and finances have strengthened as a result of rising bond yields.
“The market is reflecting reopening and recovery prospects, which are supportive of cyclical sectors rather than healthcare,” said Kieran Calder, head of Asian equities research at Privee Ubp USA’s Union Banker.
Hefty valuations are also a concern, according to Calder. The industry gauge trades just under 30 times on earnings, the highest rate among all sectors, according to data compiled by Bloomberg. The criterion is just 18 hours.
Fading Retail Fading
Wholesale frenzy in markets like South Korea has also contributed to the recent weakness of the healthcare sector. Shin Poong Pharmaceutical Co., a company that develops Covid-19 treatment, has declined 36% this year after non-professional investors helped surge by 1,600% in 2020. Celltrion Pharm Inc ., another vaccine-related stock, has fallen 32% after raising more than 500% last year.
“One of the most prominent features of the South Korean stock market is retail investors actively trading stocks and strong herd behavior,” said Seo Sang-Young, market strategist at Kiwoom Securities. “Unless there are additional events or employment improvements, such as new drug developments for pharma or bio-companies, stocks tend to go back to where they came from.”
Teflon Tech
On the other hand, strength in technology stocks has expanded into the new year, with a number of communications services announcing the top winner in Asia.
Global Value Circulation has run into run risk at any cost
Some of the lock-in winners who experience long-term growth issues in countries like China will continue to perform better, according to Stephen Kam, head of product management for Asia ex-Japan Equities at Schroders.
“Technical hardware is one such industry, as people continue to work from home through 2021,” Kam wrote in a recent note.