AS THE sharemarket slides, one sector is rising above the rubble.
The $4.3 billion listed healthcare industry which includes the globally renowned Cochlear and ResMed, as well as drug wholesalers, hospital owners and the condom maker Ansell is defying the rout.
As Goldman Sachs has pointed out, the ASX 200 declined 7.3 per cent last month, erasing the gains made this year, but healthcare, utilities and telecommunications outperformed.
Healthcare was also the third-best performing sector on Friday, up 0.6 per cent versus a 0.3 per cent fall in the benchmark index.
Its definitely interesting times in terms of what people are willing to pay, a healthcare analyst, who declined to be named, said. Eighteen months ago, Ramsay [Health Care] was not far off $12.
The private hospital operators shares closed at $21.60 on Friday, a new high.
Andrew Goodsall, a healthcare analyst with UBS, said investors were embracing the sectors reputation for reliability, even though it was dependent on government support, and each company had its challenges. In context, its probably looking more reliable than other sectors, he said.
But the Wilson HTM healthcare analyst Shane Storey said the sector had simply risen on weak equity markets, rather than on fundamentals.
We are getting a bit of love, but I dont think its because people have said that healthcare is going to keep growing and growing and growing.
The rise is driven partly by a safe harbour reputation and partly by company specifics, an investor said, noting that investors were flooding to the blood plasma company CSL for its dominant position, good revenue outlook and important technology. CSL was the second-best performer last month.
More speculative companies such as the respiratory drug maker Pharmaxis and the stem cell company Mesoblast, both down on Friday, and those in preventive rather than life-saving fields were also more harshly marked.
Mr Storey said because the sharemarket is unlikely to post a recovery over the next six months, the health sector would continue its rally in the short term but gains would be short-lived once the market recovered.
People are using stocks like Ramsay as cash, basically, because healthcare is safe and is immune to commodity prices, so its been a pretty good place to hide, he said.
But as soon as you see the market turn positive, therell be a lot of money that will flood out of healthcare stocks. In a good equity market, then youd have to be much more specific about the companies youd walk at and youre back to fundamentals.
But Mr Goodsall is not so sure that a sharemarket rally will automatically lead to a cooling off in healthcare share prices. The market is so volatile, maybe people will be willing to leave money there for longer.
Frequently Asked Questions about this Article…
Why are Australian healthcare stocks outperforming while the ASX falls?
The article says healthcare has a “safe harbour” reputation and investors are treating the sector as more reliable than others during a market slide. While the ASX 200 fell 7.3% last month, healthcare — along with utilities and telecommunications — outperformed, helped by company-specific strengths (for example CSL’s dominant position) and the sector’s perceived stability.
Which healthcare companies were mentioned as driving the sector rally on the ASX?
The article highlights companies including Ramsay Health Care (shares at $21.60 and at a new high), CSL (a blood‑plasma company and the second‑best performer last month), Cochlear, ResMed, Ansell, and more speculative names such as Pharmaxis and Mesoblast.
How did healthcare perform recently compared with the ASX 200 benchmark?
According to the article, the ASX 200 declined 7.3% last month. Healthcare was the third‑best performing sector on a recent Friday, rising 0.6% while the benchmark fell 0.3% that day.
Is the recent healthcare rally supported by fundamentals?
Analysts in the article disagree. Wilson HTM’s Shane Storey suggests the rally is driven by weak equity markets and safe‑haven flows rather than underlying fundamentals. UBS analyst Andrew Goodsall, however, says investors are embracing the sector’s reputation for reliability, even though companies have individual challenges and rely on government support.
Are some healthcare companies considered more speculative than others?
Yes. The article notes more speculative firms such as respiratory drug maker Pharmaxis and stem‑cell company Mesoblast were down, and companies focused on preventive rather than life‑saving fields were more harshly marked.
Why are investors treating stocks like Ramsay Health Care as a cash-like option?
The article reports investors view certain healthcare stocks as safe and relatively immune to commodity price swings, so they’re being used as a place to ‘hide’ money — acting like cash — during weak equity markets.
Will healthcare stock gains last once the broader sharemarket recovers?
Views differ. Shane Storey expects gains to be short‑lived and predicts money may flow out of healthcare when markets turn positive, making fundamentals important again. Andrew Goodsall cautions that because markets are volatile, investors might leave money in healthcare for longer, so a cooling is not guaranteed.
What should everyday investors keep in mind about investing in healthcare stocks right now?
The article suggests investors recognise both the sector’s safe‑haven appeal and company‑specific risks: healthcare firms depend on government support, each has its own challenges, and some names (like CSL) benefit from strong market positions while others are speculative. As markets recover, investors may need to be more selective and focus on fundamentals.
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