The recovery in Hong Kong Stock Connect innovative drug stocks came to an abrupt halt on October 22, with the sector taking a sharp turn for the worse. The underlying index of the HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880) fell more than 4.6%, breaking below all moving averages.
All 50 innovative drug companies covered by the index traded in the red. Lepu Biopharma and Zai Lab Ltd (ZAI LAB) dropped over 8%, while IMMUNOTECH-B and Akeso (AKESO) were among several stocks declining more than 7%.
After three consecutive sessions of gains against the broader market trend, the sudden morning plunge raises the question: what happened? Broad market sentiment disruption appears to be the direct trigger. As of press time, the Hang Seng Index had fallen more than 2.7% to a three-month low, while the Hang Seng Tech Index dropped over 4% to a near one-year low. Risk-aversion sentiment triggered short-term profit-taking in the innovative drug sector.
On the news front, the ESMO conference is set to begin tomorrow, and the market may be in a wait-and-see phase transitioning from "buying the expectation" to "selling the fact."
Returning to the investment logic, the industry fundamentals remain strong — outbound business development deals have already hit a record high this year, and high growth in third-quarter earnings is anticipated. At the secondary market level, Western Securities noted that this year's pharmaceutical sector gains were mainly driven by CXO and upstream companies, leaving innovative drugs relatively undervalued with a value opportunity present.
The latest data shows that as of the most recent update, the price-to-earnings ratio (TTM) of the underlying index of the HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880) stands at 33.93 times, having fallen back to the 39th percentile over the past three years, highlighting its attractive allocation value.
For those looking to accumulate core innovative drug assets on the Hong Kong Stock Connect at lower levels, attention is drawn to the T+0 trading tool — the HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880): its underlying index is 100% allocated to innovative drug R&D companies, with nearly 70% of its position betting on innovative drug R&D leaders. The off-exchange feeder fund is: 025221.
[Data Source] Public information from the Shanghai-Hong Kong-Shenzhen Stock Exchanges, China Securities Index Company, Hang Seng Index Company, etc. Weight data as of September 30, 2026. [Institutional View] Western Pharmaceutical Li Mengyuan Team, October 19, 2026, "Innovative Drugs Have Reached a Good Opportunity to Buy the Dip, Bullish on Overseas Commercialization Realization Logic." [Fund Fee Rates] ETF funds do not charge sales service fees. When investors subscribe or redeem fund shares, the subscription and redemption agent broker may charge a commission of no more than 0.5%, which includes related fees charged by the stock exchange, registration institution, etc. Fund fee rates are detailed in each fund's legal documents. [Special Notice] The risk rating assessed by the fund manager for the HUABAO Hang Seng Hong Kong Stock Connect Innovative Drug ETF and its feeder fund is R4-Medium-High Risk, suitable for aggressive (C4) and above investors. [Risk Disclosure] The index constituent stocks mentioned in this article are for display purposes only. Individual stock descriptions do not constitute any form of investment advice, nor do they represent the holdings or trading activities of any fund under the manager. Any information appearing in this article (including but not limited to individual stocks, comments, forecasts, charts, indicators, theories, and any form of expression) is for reference only. Investors are responsible for any investment decisions they make independently. Additionally, any views, analyses, and forecasts in this article do not constitute any form of investment advice to readers, nor shall they bear any responsibility for direct or indirect losses arising from the use of the content herein. The performance of other funds managed by the fund manager does not guarantee the performance of the fund. Past performance of a fund does not represent its future performance. Fund investment involves risks. MACD golden cross signals have formed; these stocks are performing well!
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