Looking for trade war-proof stock ideas? China’s large pharma firms might be good medicine for investors’ portfolios, analysts say

China’s pharmaceutical sector – a growth industry primarily driven by domestic consumption, policy support and reform – is a smart bet for investors at a time when other sectors are being pounded by the protracted US-China trade war and China’s economic slowdown, experts say.

Some investors are reluctant to take big risks by putting their money in biotechnology firms that were allowed to list in Hong Kong without any profit or even revenue. Those firms’ drugs can take a decade to get to market at a cost of more than US$1 billion.

So large generic drug producers in China that are also developing new drugs are a good alternative, analysts said.

“Many foreign investors look for three things when investing in China – whether an industry will consolidate, whether there is innovation and technological upgrade and whether there is pro-growth policy reform and support,” said John Yung, Citi head of Asia health care research. “Pharmaceutical is probably the only sector that has all three.

“While biotech stocks are getting greater interest, the research and time costs are too high for retail investors … whereas the big pharmaceutical firms can offer steady growth from their existing business with potential upside from new drugs development.”

Citi’s top picks include Sino Biopharmaceutical, the nation’s second largest drug maker by sales with a 2.3 per cent market share, third-ranked Jiangsu Hengrui Medicine and eighth-ranked Jiangsu Hansoh Pharmaceutical.