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Australian healthcare sector held strong in 2020 despite COVID-19 pandemic

Though it was smashed in mid-March, the ASX healthcare sector recovered and held up better than most of the market, according to experts.

Australian healthcare sector held strong in 2020 despite COVID-19 pandemic
The outlook for the sector this year is positive, particularly as COVID-19 vaccines begin to roll out.

The ASX healthcare sector, like every other sector and facet of life in the face of the COVID-19 global pandemic, stumbled significantly in March, but it held up better than most of the market, analysts have told Proactive.

The ASX200 healthcare index, AXHJ, fell to a low of 33,730 points in mid-March 2020 as Australia went into lockdown to tackle the first wave of the virus.

But despite some ebbs and flows, by mid-November the index was sitting at nearly 46,000 points, its highest point since mid-February, when most Australians were wondering just how serious the whole COVID-19 thing really was.

The healthcare index’s recovery is in line with most of the Australian market – as previously reported by Proactive, the ASX200 and the All Ordinaries had recovered almost all of their losses by the end of the year.

And while the healthcare index has dropped slightly as 2021 began very similarly to how 2020 ended, Morgans associate analyst Iain Wilkie, who covers healthcare, biotechnology and medical devices, said the sector had held up well.

“COVID-19 was obviously the story of 2020 and when it really hit in March healthcare went down, like everything else,” he said.

“But after that initial drop, it held up better than the broader market. COVID-19 was a health issue and the healthcare sector is seen as a safe haven.”

COVID-19 causes haywire

Wilkie said when the pandemic first hit, it caused chaos in the healthcare sector as companies scrambled to figure out how to remain relevant.

“There were many ‘me too’ announcements, everyone came out with some sort of angle on the pandemic, about how its drugs or its devices could be used to fight against it,” he said.

That caused a number of companies’ share prices to go on opportunistic, short-lived runs.

“It seemed for a while that we had companies moving hundreds or thousands of per cent in a day, every couple of days,” Wilkie said.

“Some people made money, but more were torched by it.”

Wilkie said, however, that the healthcare sector was able to “fan the flames”.

“It was a healthcare issue, and it led to increased utilisation of hospitals, increased telehealth appointments, and healthcare was the talking point for everyone,” he said.

2021 outlook

Wilkie said the outlook for the healthcare sector for this year was positive, particularly as COVID-19 vaccines begin to roll out across the world.

“It is looking really nice, particularly as more people get the vaccine, however, it will have a lot to do with infection rates and lockdowns as that can kill business sentiment,” he said.

He said telehealth had been a major trend of 2020, and that would continue to shape the healthcare environment as more doctors, hospitals and healthcare and medical technology companies realised what could be done remotely.

Wilkie also said the stability offered by US president Joe Biden’s swearing-in would play a role in Australian markets, as well as the make-up of the US Senate and the strength of the Australian dollar.

Healthcare’s long-term strength

Wilkie also pointed to the healthcare sector’s long-term strength – the AXHJ index has gained about 110 per cent in the past five years, compared with gains of 38 per cent and 43 per cent for the ASX200 and All Ords respectively.

- Daniel Paproth

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