Pharma stocks now hot picks for funds

State-owned financial institutions and private fund managers are investing in pharmaceutical shares, which are seen benefiting from a series of reforms.

State-owned funds and private ones own 12 common A-share stocks, out of which four are pharmaceutical companies.

Each fund has assets worth more than 10 billion yuan ($1.5 billion; 1.36 billion euros; ￡1.14 billion) under management. And each has allocated substantial funds to the pharma sector from September to March, according to investment consultant platform Qiantougu.

The stocks included Yunnan Baiyao Group Co, Zhejiang NHU Co, Sany Heavy Industry Co and China Yangtze Power Co.

"China's latest reforms in pharmaceuticals are shaping the industry, and investors pay attention to related A-share listed companies with good performance," says Zhang Jinyang, an analyst at Dongxing Securities.

One of the reforms was by the National Health and Family Planning Commission, which said in January that all public hospitals will stop adding to drug prices and start selling them to patients at cost price this year.

This is expected to boost sales of drugs and profits of the companies concerned, since more patients may be able to afford the medicines.

In May, the China Food and Drug Administration unveiled four draft regulations to encourage innovation and research in the pharmaceutical industry, making it world-class and improving its prospects.

In March, the CFDA released a draft regulation giving new foreign drugs easier access to the Chinese market at the same time as they enter other markets. Competition from world-class drugs is expected to raise the standards of domestic companies.

"State-owned financial institutions bought shares with good quality and low risk in the first quarter, and private asset management companies made the move earlier," says Zhang Xuan, chief investment consultant at Qiantougu.

Eight of the 12 common stocks held by State-owned and private institutions have risen this year. For instance, shares in Yunnan Baiyao Group Co and Sany Heavy Industry Co rose about 20 percent each from early January to June 16.

State-owned financial institutions bought six A-share stocks in the fourth quarter last year, followed by large private fund management companies, data of Qiantougu showed.

In the first quarter of this year, State-owned financial institutions led by Central Huijin Investment and China Securities Finance Co purchased 73 A-share stocks. More than 40 percent of them were listed on the small and medium-sized enterprise board and the ChiNext board.

State-owned investors cashed out from 52 shares during the same period, and almost 60 percent of them were listed on the SME and ChiNext boards.

caixiao@chinadaily.com.cn