Healthcare stocks are charging ahead once more, driven by a fresh wave of catalysts. On July 10, healthcare assets across the A-share and Hong Kong markets showed broad strength. The morning session saw CXO (Contract Research Organization) stocks leading the charge, with the Huabao Medical ETF (512170) and the Huabao Hong Kong Stock Connect Medical ETF (159137) both advancing up to 4.56%. Innovative drug stocks followed closely, with the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) and the Huabao Pharmaceutical ETF (562050) climbing as high as 4.38% and 3.59% respectively.
Focusing on innovative drugs across both markets, the A-share pharmaceutical sector, despite some pullback from intraday highs, still significantly outperformed the broader market. Leaders in innovative drugs and traditional Chinese medicine showed notable gains, with Tonghua Jinma and Pien Tze Huang rising over 6%. The sole ETF tracking the pharmaceutical index, the Huabao Pharmaceutical ETF (562050), closed up 2.01% with an intraday swing of nearly 5%, setting a new record with turnover hitting 46.63 million yuan.
Hong Kong Connect innovative drug stocks exhibited even greater elasticity. The Huabao Hong Kong Stock Connect Innovative Drug ETF (520880), which allows for same-day trading (T+0), saw an intraday swing of nearly 6%, closing up 3.46% and reclaiming its 60-day moving average. Its turnover surged to 949 million yuan. Major constituent stocks like Innovent Biologics, CSPC Pharmaceutical Group, and Sino Biopharmaceutical all rose over 3%.
This week, following a brief consolidation, the Hong Kong Connect innovative drug sector resumed its upward trajectory. After a historic 16.4% surge last week, ETF 520880 gained another 2.05%, marking a consecutive weekly gain. Trading volume was notably high, with weekly turnover reaching 4.283 billion yuan, the second-highest level on record.
Key Policy Catalyst Emerges
The primary catalyst came from the policy front. After an eight-year interval, the "National Essential Medicines List (2026 Edition)" was officially released on July 9, set to take effect from September 1, 2026. The new list expands the total number of drug varieties to 794, with 16 innovative drugs being included on a large scale for the first time, accounting for over 5% of the list.
Analysis points out that this revision marks the first time innovative drugs have been prioritized as a key direction for selection into the essential medicines list, reflecting a significant strengthening of policy support for innovative products with high clinical value. Supportive policies for innovative drugs are now extending beyond review and approval and medical insurance reimbursement to include the essential medicines list, grassroots-level availability, standardized usage, and medication coordination between different levels of medical institutions. This is expected to enhance the clinical accessibility of domestically developed innovative drugs.
Multiple Supportive Factors Converge
Alongside these policy tailwinds, the innovative drug sector has recently benefited from multiple supportive factors, including continued business development (BD) deals and strength in related overseas indices. This week saw several significant transactions materialize, such as those involving Sino Biopharmaceutical and AstraZeneca, CSPC Pharmaceutical Group and AZ, as well as Insilico Medicine and Takeda, with potential total deal values reaching up to $1.9 billion, $1.74 billion, and $600 million respectively. From an overseas perspective, the U.S.-listed SPDR S&P Biotech ETF (XBI) has also shown strong performance recently.
Looking ahead, market observers believe that against the backdrop of strengthening global interest in innovative drug assets, the current Chinese innovative drug sector presents a divergence between improving fundamentals and depressed valuations, potentially offering highly elastic investment value at a cyclical bottom.
Investment Vehicles for the Rally
For investors seeking to track this innovative drug rebound, two key exchange-traded funds are highlighted. The Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) offers 100% exposure to companies engaged in innovative drug R&D, with its top ten holdings constituting over 70% of the portfolio, highlighting its focus on sector leaders. Its underlying assets are Hong Kong-listed stocks, offering high elasticity and T+0 trading flexibility.
The Huabao Pharmaceutical ETF (562050) is noted as the only ETF tracking the pharmaceutical index in the market, featuring a unique allocation of "75% innovative drugs + 25% traditional Chinese medicine." This blend aims to capture the high-growth potential of innovative drugs alongside the high-dividend characteristics of the traditional Chinese medicine segment.
Data is sourced from the Shanghai, Shenzhen, and Hong Kong stock exchanges, China Securities Index Co., Ltd., Hang Seng Indexes Company, and PharmCube. Analyst views are referenced from relevant institutional research reports dated late June and early July 2026. It is noted that the mentioned ETFs do not charge sales service fees. Investors should be aware that brokerage firms may charge a commission not exceeding 0.5% for share subscriptions or redemptions. Detailed fund fee structures are available in respective legal documents.
Risk Considerations for Investors
All index constituent stocks mentioned are for illustrative purposes only. Descriptions of individual stocks are not intended as investment advice of any kind and do not represent the holdings or trading intentions of the fund manager. The composition of the underlying index is subject to adjustment per its compilation rules. The fund manager assesses the risk rating of the Medical ETF Link Fund, the Huabao Hong Kong Stock Connect Medical ETF and its Link Fund, and the Huabao Hong Kong Stock Connect Innovative Drug ETF and its Link Fund as R4 (Medium-High Risk), suitable for aggressive (C4) or higher risk-tolerance investors. The Medical ETF, Pharmaceutical ETF, and their Link Funds are rated R3 (Medium Risk), suitable for balanced (C3) or higher risk-tolerance investors. All information presented is for reference only. Investors are solely responsible for their independent investment decisions. The views, analysis, and forecasts contained herein do not constitute investment advice to readers, and no liability is accepted for any direct or indirect losses arising from the use of this content. Fund investment carries risks. Past performance of a fund is not indicative of its future results. The performance of other funds managed by the same manager does not guarantee the performance of this fund. Investors should exercise caution.
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