1 Opportunities From Emerging Healthcare Markets KraneShares Emerging Market Healthcare Index ETF (Ticker: KMED) KMED KMED 03/31/2019 info @ kraneshares.com
2 Introduction to KraneShares About KraneShares Krane Funds Advisors, LLC is the investment manager for KraneShares ETFs. Our suite of China focused ETFs provides investors with solutions to capture China’s importance as an essential element of a well-designed investment portfolio. We strive to provide innovative, first to market strategies that have been developed based on our strong partnerships and our deep knowledge of investing. We help investors stay up to date on global market trends and aim to provide meaningful diversification. Krane Funds Advisors, LLC is majority owned by China International Capital Corporation (CICC).
3 In emerging markets, rapid urbanization and rising income are fueling growth in the demand for healthcare services and treatments. Dieleman, Joseph L et al., “Future and potential spending on health 2015– 40: development assistance for health, and government, 1. Exposure to companies that benefit from EM demographic shifts Access to emerging market innovators in healthcare and pharmaceutical research. Specifically: pharmaceuticals, biotechnology, healthcare administration services, and medical equipment. Exposure to the Emerging Market (EM) healthcare industry with a low correlation to US healthcare equities. KMED Features: 2030 Plan” to meet the growing demand for healthcare. Emerging markets governments are enacting policies such as India’s “National Health Protection Mission” and China’s “Healthy China demand for healthcare services. Cases of non-communicable diseases (NCDs) such as diabetes and cancer are rising steadily in emerging market countries, driving KMED prepaid private, and out-of- pocket health spending in 184 countries”, The Lancet , Volume 389 , Issue 10083 , 2005 - 2030 Healthcare Index. The index seeks to track the equity market performance of companies engaged in the health care sector in various Investment Strategy: By 2040, emerging market countries on average are projected to increase healthcare spending as a percent of GDP by 24.4% compared KraneShares Emerging Market Healthcare Sector Highlights: management, pharmaceutical manufacturing, and biotechnology, among other sub-industries. emerging markets. The issuers include small-cap, mid-cap, and large-cap companies involved in hospital management, healthcare Emerging Market to just 9.8% in developed markets over the same time period 1 . KMED seeks to provide investment results that, before fees and expenses, track the performance of the Solactive Emerging Markets Healthcare Index ETF • • • • • • •
4 The populations of emerging market countries are growing and aging over 588 million people aged 65 or more 1 . to rise. 1. United Nations, “World Population Prospects: The 2017 revision”. Retrieved 3/31/2019. 2. World Bank Data. Retrieved 3/31/2019. The sum of South Africa, India, Malaysia, Brazil, China, Thailand, and South Korea’s pr ojected population totals. 2015-2050 2 Projected Total Population Size for Emerging Market Countries • The UN predicts that, by 2050, world population will exceed 9.7 billion people 1 with emerging market countries accounting for over one third of total population and having • For example, by 2020, China’s 65+ demographic could rise by 50% 1 which would cause an increasing demand for domestic healthcare services as life expectancy continues Projected Change in 65+ Population in EM Countries from 2015-2050 1 3.5 40% Population Aged 65 or Older (% of total) 35% 3.4 Total Population (Billions) 30% 25% 3.3 20% 15% 3.2 10% 5% 3.1 0% South Africa India Malaysia Brazil China Thailand South Korea 3.0 2015 2050 2015 2020 2025 2030 2035 2040 2045 2050
5 Rapid urbanization and rising income look to increase consumption in emerging markets In EM countries, the total population living in urban areas has increased by over 337 million people in just 10 years 1 Asian countries like China, Thailand and Malaysia are experiencing particularly rapid urbanization rates 1 Urbanization in emerging markets has been accompanied by a sharp rise in average GDP per capita which more than doubled from 2004 to 2017 1 The McKinsey Global Institute estimates that 91% of global consumption will come from cities between 2015 and 2030, and the global distribution of consumption wealth is tilting towards the emerging markets. Consumers living in emerging market cities are predicted to contribute 56% (or $14.1 trillion) to global consumption growth, compared to 35% (or $8.8 trillion) for consumers in developed market cities from 2015-2030 2 . 1. World Bank Data. Retrieved 3/31/2019. 2. McKinsey Global Institute, “Urban World: The Global Consumers to Watch,” 2016. Retrieved 3/31/2019. • • • • Urban Population in Emerging Market Countries GDP Per Capita in Emerging Market Countries 2003-2017 1 2003-2017 1 30000 100 90 25000 GDP per Capita (current US$) 76% 80 Urban Population (% of total) 71% 20000 70 65% 58% % 60 53% 49% 15000 50 44% 40% 40 35% 10000 30 20 5000 10 0 0 2003 2010 2017 2003 2010 2017 India Thailand China South Africa Malaysia South Korea Brazil India China Thailand Brazil South Africa Malaysia South Korea
6 Data from Bloomberg as of Dec 31 2016. Retrieved on 3/31/2019. 2000 1990 1982 1964 Population in Millions China Urban Population Growth 3 1. Xinhua.net, “30 Percent of Chinese Adults Overweight”, Published on 5/25/2017. Retrieved 3/31/2019. 2. World Health Organization’s Global Cancer Observatory, “China Population Fact Sheet”. Data as of March 2019. Retrieved 3/31/2 019. 3. 4. 2016 Data from Bloomberg as of Dec 31 2017. Retrieved on 3/31/2019. 500 1100 1700 2300 2900 3500 4100 4700 5300 5900 USD ($) 2010 900 As China’s population moves to cities and wages increase, healthcare is becoming a greater focus 459 As average household income and urbanization rates have risen, Chinese citizens have greater access to healthcare knowledge and have a greater ability to pay for medical- related costs. However, rising incomes and urbanization have given rise to China’s current obesity problem as more citizens adopt western ea ting habits. Today, about 30% of Chinese adults, approximately 320 million people, are overweight, while 11.9% of adults are obese 1 . Additionally, instances of cancer in China are rising, with 4.3 million new cancer cases in 2018 alone 2 . In 2016, the government responded to growing healthcare concerns by launching the “Healthy China 2030 Plan”, which is a natio nal initiative that promotes diet, exercise, and access to healthcare services. 794 800 666 302 212 700 600 500 400 Per Capita Disposable Income of Urban Households in China 4 300 200 100 0 133 • • • • •
7 could rise from US $8 trillion in 2018 to over $18 trillion in 2040 3 . Health care spending is on the rise in other emerging market economies 4. World Health Organization, Global Health Expenditure Database as of 12/31/2016, last updated on 4/23/2019, retrieved on 4/24/2019 Dieleman , Joseph L et al., “Future and potential spending on health 2015– 40: development assistance for health, and government, prepaid private, and out-of- pocket health spending in 184 countries”, The Lancet , Volume 389 , Issue 10083 , 2005 - 2030 3. Deloitte, “2018 Global Health Care Outlook: the evolution of smart health care” 2. 1. UBS, “Longer Term Investments: Emerging Market Healthcare” 3/28/17 Global health care spending is projected to increase at an annual rate of 4.1% from 2017-2021 2 , and recent estimates suggest that global expenditures on healthcare emerging market countries, presenting a growth opportunity for innovators in the healthcare space 1 . Moreover, due to urbanization and the resulting lifestyle changes it brings, cases of non-communicable diseases (NCDs) such as diabetes and cancer are rising steadily in healthcare services and treatments 1 . Urbanization is placing many in emerging market countries within reach of modern healthcare services, and aging populations are fueling growth in the demand for • • • Total Healthcare Expenditure per Capita in EM ($US mil) 4 2,500 2,000 1,500 USD ($) 1,000 500 0 2000 2010 2016 India China Thailand Malaysia South Africa Brazil South Korea
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