Today saw a broad-based rally across the three major Hong Kong stock indices, with the biotech and innovative drug sector leading gains. A confluence of supportive policies and strong earnings performance fueled a collective surge in biotech ETFs, while the STAR 50 ETF faced renewed downward pressure due to negative external sentiment.
By the market close, the Hang Seng Index had risen 1.4% to 24,681.1 points, with a total turnover of HK$304.297 billion. The Hang Seng Tech Index climbed 1.3% to 4,740.49 points.
Among major Hong Kong-listed ETFs by size, the Tracker Fund of Hong Kong (02800) closed up 1.05% at HK$25.10. The CSOP 2x Long S. Korean Semiconductor Futures Daily Roll (07709) surged 10.09% to HK$71.78. The Hang Seng China Enterprises Index ETF (02828) gained 0.79%, closing at HK$84.14.
Sector Performance Highlights
Biotech and Innovative Drug Sector
The innovative drug sector experienced a full-scale breakout, with related ETFs posting significant gains, driven by positive policy developments and a robust earnings outlook.
At the close, the Huatai-PineBridge CSI Hong Kong Innovative Drug Index ETF (520500.SH) was up 4.71% at 1.468 yuan. The Fullgoal SSE-HK Stock Connect Innovative Drug & Medical ETF (159506.SZ) rose 4.55% to 1.264 yuan. The E Fund SSE-HK Stock Connect Innovative Drug Index ETF (159316.SZ) increased by 4.33% to 1.181 yuan.
The inclusion of innovative drug varieties in the National Essential Medicines List for the first time marks their entry into the primary healthcare system, significantly expanding their market potential. Bocom International noted that the new list focuses on innovative drugs, chronic disease medications, and pediatric drugs, with all 116 newly added items being drugs currently covered by the national reimbursement list. Estimates suggest drugs in the new list account for 71% of total drug usage in public medical institutions nationwide, with coverage rates of 78%, 74%, and 65% in primary, secondary, and tertiary institutions respectively.
Furthermore, the shift from prioritizing generic/off-patent drugs to also including innovative drugs, and from ensuring basic drug supply to focusing on clinical value, represents a major historical transition for China's essential medicines system. This also paves a feasible path for more innovative drugs to enter the list in the future.
The mid-year earnings season is also underway, with performance forecasts from leading CXO companies validating the logic of "BD repayments and commercial scaling" in their financial reports. Sinolink Securities stated that the innovative drug out-licensing market is booming, with Chinese firms leading in global advanced fields like ADC and bispecific antibodies. Coupled with advantages in regulatory efficiency and cost, Chinese pharmaceutical companies are deeply integrated into the global supply chain.
The top 15 multinational corporations invest approximately $200 billion annually in external collaborations, with deals already reaching $200.3 billion this year, confirming high M&A activity. With a growing domestic pipeline and support from both national reimbursement negotiations and the expanded essential drugs list, the industry is entering a golden period for earnings realization. Hong Kong stock valuations are near lows, foreign selling is bottoming out, southbound capital is increasing allocations, and global sentiment towards pharmaceuticals is improving, creating a window for configuring quality assets.
Technology Sector and STAR 50 ETF
The STAR 50 ETF declined again, weighed down by external market sentiment.
At the close, the Bosera CSI STAR 50 Index ETF (02832) fell 3.53% to HK$13.95. The PP CSI STAR 50 Index ETF (03151) dropped 3.21% to HK$13.57. The CSOP CSI STAR 50 Index ETF (03109) decreased by 2.7% to HK$18.74.
Recent technical bear market conditions in the South Korean stock market have triggered risk-off sentiment among investors. Persistent weakness in memory chip heavyweight stocks, combined with pressure from valuation shifts ahead of the mid-year reporting season, has led to short-term capital outflow from high-volatility tech sectors.
Huachuang Securities also commented that the recent adjustment is more a rotation of funds from high-valuation areas to lower ones, rather than a fundamental change in the sector's logic. As the mid-year reporting season approaches, the AI technology sector is expected to resume its upward trend after a short-term consolidation. More certain AI hardware segments, such as optical modules, PCBs, memory, and semiconductor equipment, remain key focus areas.
Shenwan Hongyuan Group believes that the adjustment phase, which started in non-tech sectors in May-June and moved to tech sectors in June-July, is nearing completion. With momentum and profit-taking effects sufficiently contracted, the adjustment wave is poised to end. In this final stage, attention should be paid to potential capital diversion effects from the upcoming listing of a major domestic memory chip maker. The tech sector rally has slowed, entering a phase awaiting new significant industry catalysts. The next wave will likely mark a new market phase rather than a simple continuation of the previous one, with the AI industry trend remaining the main battlefield for major market movements.
Institutional Perspectives
Zhang Sida, an analyst at Guoyuan International, suggests that market funds are rotating from high-valuation, crowded AI hardware plays into relatively undervalued sectors. Therefore, the recent rebound in Hong Kong stocks should be viewed more as a recovery in oversold sectors and internal style rotation, rather than the continuation of a semiconductor-led rally. The overall valuation of the Hang Seng Index remains relatively low, and southbound capital maintains strong allocation interest, limiting significant downside potential. However, given the lack of consistent positive signals regarding overseas interest rates, geopolitics, and corporate earnings expectations, Hong Kong stocks may continue to experience range-bound fluctuations and structural differentiation in the short term.
CITIC Securities indicated that the global monetary environment is undergoing marginal adjustments. A potential pivot in the interest rate hike narrative, combined with improved liquidity, could catalyze a valuation recovery in Hong Kong's tech sector. From an industry trend perspective, the global expansion in AI capital expenditure is far from its peak. As a crucial part of the full AI industry chain (platforms, applications, and certain semiconductor manufacturing), Hong Kong's tech sector will continue to benefit. In the near term, attention should be paid to fluctuations in US Treasury yields and the pace of foreign capital inflows.
Comments