More potential remains to be tapped for the healthcare sector moving forward, with the government and private sector recognising it as one of the economy's key growth sectors, said OSK Research.

'The healthcare sector grew steadily in 2010 after emerging unscathed from the economic downturn in 2009.

'For 2011, we expect the healthcare sector in general to continue to chalk up sturdy earnings growth owing to increasing demand for healthcare products and services,' said OSK Research in a statement today.

It highlighted that momentum for merging and acquisitions may continue in 2011 as more investors capitalise on the growing demand for healthcare products and services, not only in Malaysia but also regionally.

'Moving forward, we expect the sector's growth to be led by the private sector with support from the government as it encourages bigger private sector participation in the sector,' it said.

It added, under the Economic Tranformation Programme (ETP), the healthcare sector was set to be transformed from being a social service and consumer of wealth to a private sector-driven engine of economic growth.

'The industry will require RM23.3 billion from 2011 to 2020 to fund this targeted growth, of which only 1.0 per cent will be via public money, while the Health Industry Development Corp will be established to ensure the remaining funds are achieved from the private sector,' it said.

OSK maintained its overweight rating on the sector due to its ample growth potential and its defensive nature.

'Due to intense competition among the generic pharmaceuticals producers, we prefer private healthcare and healthcare related services players over pharmaceutical players.

'As the largest and leading private healthcare sector provider, we believe KPJ Healthcare is set to reap the most benefits arising from the more vibrant private healthcare segment,' it said. -- BERNAMA