China healthcare lags Hong Kong and global markets in 2026

It posted the largest decline in price-to-earnings.

China's healthcare sector has underperformed broader markets through 2026 year-to-date, despite a strong 2025 rally, according to a CGS International report. 

The Hang Seng Healthcare Index has underperformed the Hang Seng Index by 7.4% in 2026-YTD, even after delivering 18.9% excess returns versus the HSI over the combined 2025-26 YTD period. 

Healthcare also trailed global markets in 2026-YTD, a sign of fund outflows that CGSI attributes mainly to stronger performance in tech and artificial intelligence (AI) sectors. 

The sector posted the largest decline in price-to-earnings multiples amongst all regions analysed from 2025 to 2026-YTD.

CGSI identifies four specific pressures weighing on the sector beyond competition from tech and AI stocks. First, expectations of Federal Reserve rate hikes have hit biotech valuations, given the historical negative correlation between US interest rates and biotech share prices. 

Second, southbound net inflow into the healthcare sector has shrunk and turned to outflow since October 2025, reducing sector liquidity. 

Third, US-China tensions have widened beyond contract research organisations to the broader biotech sector, with the newly proposed US Biotech Investment National Security Act raising regulatory risk. 

Fourth, China's intensified anti-corruption campaign has stoked market concerns over second-quarter and first-half 2026 revenue growth.

Biotech stands out as the best-performing subsector, posting high revenue growth and narrowing net losses, followed by medtech and healthtech. CGSI expects biotech revenue and net profit growth to accelerate further in 2026.

By contrast, sectors tied to domestic consumption — including healthcare services, medical devices, vaccines, and pharmacies — posted weaker earnings, weighed down by sluggish growth in medical insurance and soft supportive policies in China.