In early trading on July 20th, the Hong Kong Stock Connect innovative drug sector experienced a swift recovery. Remegen Co., Ltd. (HKEX: 09995) led the gains, rising 7%, while IMMUNOTECH-B (HKEX: 06978) advanced 6%. The Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection Trading Open Ended Index Securities Inves (SSE: 520880), an ETF exclusively targeting innovative drug R&D companies, saw an intraday surge exceeding 4%. Notably, during the sector's significant decline in the previous trading session, the fund attracted net inflows of RMB 19.39 million against the market trend.
On the news front, Remegen announced on July 19th its plan to repurchase company shares worth between RMB 25 million and RMB 50 million. These shares are intended for employee stock ownership plans or equity incentives, with a repurchase price not exceeding RMB 149 per share.
Regarding performance, several companies have issued positive profit alerts. One AI-driven biotech firm has forecasted a year-on-year net profit increase of 274.48% to 305.73% for the first half of the year. Another company has projected a net profit growth exceeding 16 times compared to the same period last year.
Analyst Perspective on Sector Value
A major securities firm's healthcare team has reiterated its view that the innovative drug sector currently represents a high-value, low-priced growth asset outside of the AI thematic. The underlying trend of improving industry fundamentals remains intact, characterized by accelerating commercialization of core products, robust business development activity, and faster global rollout of key drugs. This is expected to potentially drive a market re-rating based on fundamental and cyclical improvements.
Key Investment Vehicles for Sector Exposure
For investors looking to gain core exposure to this sector, two primary ETF options are highlighted. The first is the Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection Trading Open Ended Index Securities Inves (SSE: 520880), which provides 100% exposure to innovative drug R&D companies. Its top ten holdings account for over 70% of the portfolio, emphasizing a concentrated, high-conviction approach with a focus on Hong Kong-listed underlying assets, offering high potential volatility and T+0 settlement.
The second option is a pharmaceutical sector ETF, noted as the only ETF tracking a specific pharmaceutical index in the market. It features a unique allocation of approximately 72% to innovative drugs and 22% to traditional Chinese medicine, aiming to combine the high-growth potential of biotech with the stable dividend income from the traditional medicine segment.
Market data is sourced from relevant stock exchanges and index providers. The institutional viewpoint cited originates from a research report dated July 15, 2026. It is important to note that the mentioned ETFs do not charge sales service fees. Brokerages may charge a commission of up to 0.5% for share creation/redemption, which includes fees levied by exchanges and clearing institutions. Specific fund fee structures are detailed in their respective legal documents.
Important Risk Disclosures
Constituent stocks are listed for illustrative purposes only; individual stock mentions are not investment recommendations and do not represent the holdings or trading intentions of the fund manager. Historical annual returns and volatility for the referenced pharmaceutical index from 2021 to 2025 were: -9.10%/23.43%, -21.09%/25.92%, -3.70%/18.25%, -6.53%/29.46%, and 9.38%/16.12%. For the Hong Kong Stock Connect innovative drug index, the figures for the same period were: -22.72%/35.30%, -16.48%/44.08%, -19.76%/34.79%, -14.16%/38.47%, and 66.32%/39.20%. Index composition is subject to change per its methodology. Past performance is not indicative of future results. The fund manager assesses the risk level of certain healthcare/pharma ETFs and their feeder funds as R3-Medium, suitable for Balanced (C3) and higher risk-tolerance investors. The Hong Kong Stock Connect innovative drug ETF and its feeder funds, along with another Hong Kong healthcare ETF, are assessed as R4-Medium-High risk, suitable for Aggressive (C4) and higher risk-tolerance investors. All information provided is for reference only. Investors are solely responsible for their own investment decisions. The views, analysis, and forecasts herein do not constitute investment advice, and no liability is accepted for any direct or indirect losses arising from the use of this content. The performance of other funds managed by the same manager does not guarantee the performance of these funds. Investment involves risks.
Comments