Over the last year, the stock market has taught us many things. One of those lessons: Don’t time the market – a
costly lesson people tend to learn time and time again.
Investors commonly see emerging markets as an asset class that requires market timing. That it comes in and out of
fashion like turtlenecks and corduroys – just a short-term fad. However, don’t look for reasons this latest investment
trend will soon end up in the donation pile. We believe emerging-market investing has tailwinds for growth and a
Health care is not a fad or trend, it's a necessity
In recent history, emerging markets have taken on
certain characteristics of the developed world. This has
improved life for many but is not without consequence.
Specifically, incidences of certain diseases, previously
more common in developed nations, have plagued
emerging countries and have continued to grow in
relevance. We could point to many health issues, but one
concerning example is diabetes.
Most new cases of diabetes, for which there will be many,
are expected to reside in emerging markets. And the costs
associated with managing the disease is anticipated
Despite these concerns, we are encouraged by the manner
emerging-market companies are stepping up to address
these issues. Historically, much of the emerging population
did not have access to, or could not afford therapeutics to
address their needs. This is changing as local companies
are developing both proven and novel therapeutics to treat
diseases, while selling them at a lower cost.
For example, a lesser known company in South Korea,
EOFlow, has released a new wearable insulin pump in
the form of a patch. It is the second insulin patch on the
market globally. While only currently approved in South
Korea, it will likely become available across the globe.
Given trends in diabetes, the market for these types of
devices is huge. Afterall, the ability to make life more
comfortable is a main goal health care innovation strives
to achieve. We believe a company like EOFlow is well
positioned for many years.
Source: Novo Nordisk (Q3 2020 report), Bloomberg (2019 Diabetes Outlook), 1Global, regional, and national burden and trend of diabetes in 195 countries and territories: an analysis from 1990-1995 (9/8/2020)
Innovative health care doesn't care about geopolitics
Cancer affects people globally. While the standard of
care for developed countries – chemotherapy – has
become more widely available in emerging markets, the
level of care has a ways to go in order to lower the
incidences of death.
Source: World Health Organization
On top of chemotherapy, companies in emerging markets
have entered the race to develop more advanced
treatments. BeiGene is a China-based biopharmaceutical
company that develops novel therapeutics as well as,
through partnerships, markets foreign drugs within China.
Beyond China, the company has one FDA approved
treatment in the U.S. and more under review by regulatory
bodies across several developed market countries. Patient
needs must be met, regardless of borders.
The health care sector will grow in relevance
In emerging markets, the health care sector is in its
relative infancy. It represents a proportionately small
allocation of the MSCI EM Index. Like more “advanced”
industries before it, overtime, the sector will likely grow
more in-line with other major indices. Investing in
underdeveloped industries like health care is one of the
unique characteristics of emerging markets.
Health care % of major indices
Source: Bloomberg. Data as of 12/31/2020.
As the sector matures, active management may prove to
have an advantage. There is a long runway for growth,
and expertise will likely be the best approach to this
specialized sector, particularly as it becomes more
We believe health care is exciting, not only from an
investment point of view, but because of its potential to
improve the quality of life for the world’s largest
population and beyond. We are eager to continue to
explore and discover investments in this sector.
The opinions expressed in this article are those of Ivy Investment Management Company and are not meant to predict or project the future performance of any investment product. The opinions are subject
to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a
recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs,
risk tolerance and time horizon.
Risk factors: Investment return and principal value will fluctuate and it is possible to lose money by investing. International investing involves additional risks, including currency fluctuations, political or economic
conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investments in countries with emerging economies or
securities markets may carry greater risk than investments in more developed countries. Political and economic structures in many such countries may be undergoing significant evolution and rapid development, and
such countries may lack the social, political and economic stability characteristic of more developed countries.
The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises
caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined