Citigroup says big pharma preferred by foreign investors as China reopens, appetite for pre-revenue biotech firms wanes
- Foreign investors are looking for firms with a track record of profit making and direct beneficiaries of China’s reopening, Citi analyst says
- So-called chapter 18A companies may not benefit much as their financial figures are not solid, Everbright Securities analyst says
“[Firms with a] track record of profit making and direct beneficiaries of the reopening are what foreign investors are looking for now,” said John Yung, head of Asia healthcare research at the US-investment bank. With caution prevalent, big drug and device manufacturers and large private hospitals will be their top picks, he added.
Wuxi AppTec, considered China’s biggest contract research organisation, for instance, gets Citi’s is recommendation, as it is expected to increase its earnings as operations go back to normal.
Beijing will roll out more pro-growth measures to steady the economy, China’s State Council said last month. The country has scrapped most of its Covid-19 controls and reopened its borders for international travel on Sunday.
“Most of such companies’ earnings expectations were adjusted down last year, before the country set a clear stance on reopening. Now, we are seeing [the possibility of] better-than-expected operations in 2023,” Yung said. Most foreign investors are, however, still on the sidelines and are expected to build their positions in Chinese firms by the end of January, he added.
“They want to make sure the country’s Covid-19 policy is consistent after the Lunar New Year holiday”, when the country will see a huge amount of travel and rising cases, Yung said.
