China Healthcare [Correction] Middle East Conflict – Defensive tilt: Sentiment over fundamentals

Research evidence excerpt

24 March 2026

Equity Research Report

China Healthcare

[Correction] Middle East Conflict – Defensive tilt:

Sentiment over fundamentals

◆ China healthcare: Overall defensive; sentiment risk outweighs

fundamental deterioration

◆ Cost inflation drives dispersion; limited direct MENA exposure

◆ We favour defensives and pharmas amid a volatile backdrop

Limited direct MENA exposure in the short term. Wind A/H Healthcare corrected

4%/6% since Middle East geopolitical tensions (CSI300/ HSI Index down 3%/5%).

We see the short-term impact concentrated in energy- and commodity-sensitive

subsectors such as APIs and medical consumables. Rising oil and logistics costs

create margin dispersion: higher-end exporters with pricing power can pass through

cost increases and see short-term margin upside, while smaller, undifferentiated

players and those with heavy MENA export exposure face a margin squeeze. That

said, China’s API export and logistics exposure to MENA remains controllable,

limiting direct sector demand risk.

Equities

Health Care

China

Linda Shu*, PhD (Reg. No. S1700522120001)

Head of China Healthcare Research

HSBC Qianhai Securities Limited

Cindy Chai* (Reg. No. S1700523040001)

Analyst, China Healthcare Research

HSBC Qianhai Securities Limited

Oliver Wang* (Reg. No. S1700523100003)

Analyst, China Healthcare Research

HSBC Qianhai Securities Limited

Evie Liu* (Reg. No. S1700119110001)

Associate

Shenzhen

* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is

not registered/ qualified pursuant to FINRA regulations

Macro tightening weighs on biotech sentiment, not fundamentals. Over the

medium to long term, we see the transmission is largely indirect, with minimal impact

on core fundamentals. According to HSBC Senior Global Life Sciences & Healthcare

analyst Rajesh Kumar, companies under coverage derive less than 2–5% of revenue

from the region, and their supply-chain exposure there (data centres, staff, etc.) is

also limited. Instead, potentially higher Fed rates (not HSBC’s base case, but traders

now expect a 35% chance of a 25bps rate increase per CME), inflationary pressure,

…