Mindray Says China Health Reforms Will Boost Demand (Update1)
March 12, 2010, 2:20 AM EST(Adds fund manager comment in sixth paragraph.)
March 12 (Bloomberg) -- Mindray Medical International Ltd., the largest Chinese health-care equipment maker by market value, said it will benefit from government plans to boost health care spending in rural areas.
“There’s a lot of need in China for increased medical spending because today most of the spending comes from individuals,” Ronald Ede, chief financial officer of Mindray Medical, said in a Bloomberg Television interview in Hong Kong. “We cater to the vast majority of the rural and poor areas, which are one of the targets for this investment by the government.”
Shenzhen, China-based Mindray’s American depositary shares have gained 12 percent this year in New York trading, compared with 2.4 percent for the USX China Index, which tracks U.S.- listed companies that derive the majority of their sales from the world’s third-biggest economy.
The State Council, or cabinet, approved a plan last January to spend 850 billion yuan ($124 billion) by 2011 to provide basic health-care services throughout the country, including expanding medical insurance coverage for rural and urban residents.
The moves are part of reforms aimed at pushing back some of the free-market changes of the 1980s, which replaced China’s free health care with private hospitals and a user-pay medical system.
Outperformance
“There will be plenty of homegrown companies that will benefit,” Hugh Young, Singapore-based managing director of Aberdeen Asset Management Asia, which oversees $25 billion in the region. “Such policies are long overdue to give rural areas a bit more of a boost.”
A gauge of health-care companies in the CSI 300 Index has slipped 0.7 percent this year, the second-best performer among the 10 industry groups. The CSI 300 has fallen 9.4 percent and the Shanghai Composite Index has dropped 7.8 percent.
Demand for medical services will increase with rising incomes and as diseases such as diabetes and cancer become more prevalent, Mindray’s Ede said. He expects the company to introduce about the same number of products this year as in 2009.
--Chua Kong Ho in Shanghai, Maryam Nemazee in Hong Kong. With assistance from Mariko Ishikawa and Zhang Shidong. Editors: Allen Wan, Richard Frost
To contact the editor responsible for this story: Linus Chua at kchua6@bloomberg.net
