China Healthcare:Drug consumption growth moderated in October

11.9% YoY growth in October, vs. 12.4% YoY in YTD9m17.

    Retail drug consumption recorded growth of 11.9% YoY in October vs. 12.4% inYTD9m17 and 11.6% in October 2016. On a quarterly basis, growth in 3Q17 was14.6%, compared with 14.8%, 10.7%, 10.7%, 11.1% and 11.6% in 2Q17, 1Q17,4Q16, 3Q16 and 2Q16 respectively. We remind investors that drug consumptiondata have high correlation with hospital drug sales.

    We remain constructive on the sector.

    We remain constructive on the healthcare sector in 2017 on the back of improvedregulatory environment, increased reimbursement coverage and decreasingpricing pressure from drug tenders. We advise investors to focus on companieswith new product launches and existing products with limited pricing pressuresuch as Sino Biopharm (1177.HK) and Hengrui (600276.SS).