China's anticorruption drive hurts drug firms

The aggressive anticorruption campaign by the State Food and Drug Administration, combined with uncertainties in China's fragmented pharmaceutical sector, are dampening enthusiasm for drugmaker stocks. The cautious mood comes at a time when growing numbers of local firms are applying for listings on the Hong Kong and New York stock exchanges.

Although health care market analysts believe that China's pharmaceutical sector will boom in the long term, "in the short term, the SFDA shake-up and price controls by the government will all have an effect on the industry," according to Vicky Chen, of UBS' Shanghai, China unit, speaking to the Wall Street Journal.

With 5,000 drug firms to choose from, and with corruption probes increasing, investors may have little data as to which firms are good opportunities. Cai Renhua, Dean of the Shanghai Jiaotong University Medical School, claims that there is no official data on the number of the country's drugmakers that conduct innovative research which, in itself, raises questions about safety standards.