KraneShares launches emerging markets healthcare ETF

Sep 10th, 2018 | By | Category: Equities

KraneShares has launched the KraneShares Emerging Markets Healthcare Index ETF (KMED US) on NYSE Arca, providing exposure to healthcare stocks from emerging markets.

KraneShares launches emerging markets healthcare ETF

The ETF currently provides exposure to 84 emerging market stocks from firms operating in the health care sector.

The ETF issuer, best known for its range of China-focused strategies, notes that healthcare expenditure in emerging markets as a percentage of GDP currently lags developed markets, suggesting that there is significant room for growth in the sector.

It further points to research from the medical journal Lancet that states that by 2040 emerging market countries on average are projected to increase healthcare spending by 24.4% compared to just 9.8% in developed markets.

“In emerging markets, rapid urbanization and rising income are fueling growth in demand for healthcare,” said Jonathan Krane, Chief Executive Officer of KraneShares. “We believe this a strong growth trend across broad emerging markets.”

“Emerging market healthcare companies are global growth leaders in areas including biologics, hospital administration, pharmaceuticals, and medical equipment manufacturing,” added Brendan Ahern, Chief Investment Officer of KraneShares. “Additionally, the emerging market healthcare sector has a low correlation to US healthcare equities. We believe KMED can help investors diversify their US healthcare sector or emerging market allocations.”

The fund tracks the Solactive Emerging Markets Healthcare Index which includes large-, mid-, and small-cap companies involved in biotechnology, pharmaceuticals, hospital management, and healthcare management, among other sub-industries.

China and South Korea make up the two largest country exposures with weights of 38.3% and 25.9% respectively with stocks from India also having a significant say with a weight of 16.0%.

The index currently contains 84 constituents, which are weighted by float-adjusted market capitalization. The largest of these are Sun Pharmaceutical (6.1%), Samsung Biologics (5.6%), Celltrion (5.3%), and Jiangsu Hengrui Medicine (4.1%).

The ETF comes with an expense ratio of 0.79%. Income from the portfolio is distributed to investors on a semi-annual basis.

The ETF may strike a chord with investors given there are currently no other US- or Europe-listed ETFs targeting the emerging markets health care sector following the delisting of the db x-trackers MSCI Emerging Markets Healthcare TRN Index UCITS ETF from London Stock Exchange in July 2017.

For those who wish to home in on China while playing the emerging markets healthcare theme, KraneShares also offers the KraneShares MSCI All China Health Care Index ETF (KURE US). KURE is also listed on NYSE Arca and comes with an expense ratio of 0.79%.

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