Market Overview

The Chinese are Getting Older: How to Trade (LFC, CISG, CMED, MR, SCR, WX, SSRX, CHIQ)

According to the results of a census that were released on Thursday, the Chinese population is aging and becoming more urban.

Although the census that was conducted last year showed that the population of China increased by 73.9 million over the last decade, the growth rate was actually quite low when China's huge population of 1.34 billion people was taken into account.

The low Chinese birthrate is said to be due to the country's one-child per family official policy, but the rule only applies to a minority of Chinese married couples living in urban areas. Still, the policy seems to have been effective in slowing the growth rate of the Chinese population.

China's one child policy has led to an aging population, with Chinese citizens of 60 years and older now making up 13% of the country's population, up from just 10% of the population a decade earlier.

Children now make up a much smaller portion of the population, with the proportion of those age 14 and younger falling more than 6% over the past decade, down to 16.6% of the population.

There have also been unexpected side effects of the one-child policy, the most alarming of which is that while the population is aging, the ratio of young men to young women is growing. This is thought to be caused by the preference for male offspring in many Chinese families. Millions of young Chinese men are facing a future where they have little hope of ever starting a family of there own.

China's aging population presents a number of opportunities for investors who hold a long-term view.

Insurance companies like China Life Insurance Company (NYSE: LFC) and CNinsure Inc. (Nasdaq: CISG) may see demand for their products rise along with the average age of the Chinese population.

Chinese pharmaceutical and biotechnology companies like Simcere Pharmaceutical Group (NYSE: SCR), Wuxi Pharmatech Inc. (NYSE: WX) and 3SBio Inc. (Nasdaq: SSRX) could also see share prices climb because of China's changing demographics.

Medical device makers could also see their fortunes rise along with people's ages. Two companies in that sector to take a look at are China Medical Technologies, Inc (Nasdaq: CMED) and Mindray Medical International Ltd (NYSE: MR).

It's also worth noting that yesterday's announcement that Johnson & Johnson would purchase Synthes, Inc. for $21.3 billion has led to speculation that the company's rivals may look to grow by acquisition as well. Chinese medical device makers may become attractive targets for companies that want access to a market that has the unusual combination of a booming economy and an aging population.

Investors who prefer to invest in a broader range of companies might want to consider the Global X China Consumer ETF (NYSE: CHIQ), which could benefit from the growing middle class in China's cities.

Posted-In: Long Ideas News Sector ETFs Specialty ETFs Small Cap Analysis Emerging Market ETFs Events Global

 

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