KUALA LUMPUR: The growth prospects for the healthcare sector globally are positive over the long term underpinned by an ageing population, rising affluence and increasing life expectancy, said AmInvestment Research.

The research firm maintained its "neutral" call on the sector in 2018 but may upgrade it to "overweight" if there is a surge in patients to due to pandemic diseases, lower start-up losses at new hospitals, value-accretive M&As, and the implementation of a new health insurance system in Malaysia.

According to AmInvestment Research, the local private heathcare sector has the added advantage of medical tourism back by highly competitive medical charges and hospitalisation costs, a generally English-speaking population and incentives by the government.

"Over the short term, private healthcare operators in Malaysia will also benefit from the strengthening ringgit vs. USD, as costs of key inputs such as drugs, medical supplies and medical equipment are denominated in USD," said the research firm.

However, private healthcare operators in the country will continue to face wage inflation in 2018 and short-term pain such as start-up losses from new hospitals.

AmInvestment Research added that private healthcare operators in Malaysia could benefit from a government-backed national healthcare insurance system. 

Under the new system, citizens can choose between treatments in public or private hospitals, easing the overcrowding in public hospitals.

The national healthcare insurance will narrow the price differential between the private and public hospitals, even though the former will still incur a higher cost from higher insurance contribution or extra services.

"However, the biggest hurdles for a national health insurance system remain who will be contributing, by how much and the legitimacy of free riders in the system," said the research firm.