On Monday, July 20th, AH pharmaceutical assets were among the first to recover following the previous week's market downturn. Hong Kong Stock Connect pharmaceutical stocks showed notable resilience, with the HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880) and the Huabao Hong Kong Stock Connect Healthcare ETF (159137) surging 4.17% and 3.27%, respectively. In the A-share market, the pharmaceutical sector remained active against the broader trend, with the Huabao Pharmaceutical ETF (562050) and the Huabao Healthcare ETF (512170) both rebounding by 2.5%.
Hong Kong Stock Connect innovative drug stocks demonstrated strength throughout the trading session. The ETF tracking 100% innovative drug R&D companies, the 520880, saw its intraday price climb as much as 4.63%, with substantial turnover reaching 8.1 billion yuan. Among its constituents, IMMUNOTECH-B (06978) announced that its candidate DB-1311/BNT324 is expected to be designated as a breakthrough therapy, leading its stock to surge 15% in the afternoon session. Remegen Co.,Ltd. (688331) announced plans for a share buyback of up to 50 million yuan, propelling its shares to a robust gain of 9.84%.
The A-share pharmaceutical manufacturing sector rebounded in tandem. The market's sole ETF tracking the pharmaceutical index, the Huabao Pharmaceutical ETF (562050), opened lower but quickly reversed course to trade in positive territory, climbing as much as 3% intraday and closing up 2.58%, marking its seventh gain in the past eight trading days. Shanghai Allist Pharmaceuticals Co.,Ltd. (688578) reported a 46% year-over-year increase in half-year profit, driving its stock price up 11.09%. Leading heavyweight Jiangsu Hengrui Pharmaceuticals Co., Ltd. announced it has cumulatively repurchased 853 million yuan worth of shares, contributing to its 4.47% rise.
Since the beginning of July, AH innovative drug stocks have embarked on a significant recovery path, with market sentiment improving rapidly. Representative ETFs in this space, the Huabao Pharmaceutical ETF (562050) and the 520880, have seen exceptionally active trading, with their weekly turnover last week hitting record and near-record highs, respectively.
Institutional Activity on the Rise
Institutional investors are taking action. Over the past month or so, several public funds have collectively increased their holdings in leading innovative drug companies listed in Hong Kong. According to equity change disclosures on the Hong Kong Exchange, as their holdings successively reached or exceeded the 5% disclosure threshold, these funds have effectively "cornered" stakes in companies including Biocytogen Pharmaceuticals (Beijing) Co., Ltd., 3SBio Inc., CSPC Pharmaceutical Group Limited, and Kelun-Biotech Biopharmaceutical Co., Ltd..
Concurrently, research activity focused on the biomedical sector is heating up rapidly. Data from a fund research platform indicates that in June, 152 public fund institutions participated in A-share research activities, with the biomedical sector receiving at least one hundred fund research visits.
The pharmaceutical team at a major securities firm has reiterated its view that innovative drug stocks currently represent high-value, low-position growth assets, aside from the AI thematic line. The upward trend in the innovative drug industry's prosperity has not changed, with significant characteristics including the commercial scaling of core products, a high level of business development activity, and the accelerated globalization of key drugs. This may lead to a re-rating based on the realization of fundamentals and industry momentum.
Key Instruments to Track the Rebound
For investors looking to follow the innovative drug rebound, two key ETFs are highlighted:
The 520880: This ETF provides 100% exposure to companies engaged in innovative drug research and development. Its top ten holdings account for over 70% of the portfolio, highlighting its focus on industry leaders. Its underlying assets are Hong Kong-listed stocks, offering high volatility and T+0 trading.
The Huabao Pharmaceutical ETF (562050): This is the only ETF in the market tracking the pharmaceutical index. It features a unique allocation of "72% innovative drugs + 22% traditional Chinese medicine," combining the high growth potential of innovative drugs with the high dividend appeal of traditional Chinese medicine stocks.
*Source for institutional perspective: A research report dated July 15, 2024.
Note: The mentioned ETFs do not charge sales service fees. When investors subscribe for or redeem fund units, the subscription/redemption agency may charge a commission of up to 0.5%, which includes related fees charged by stock exchanges and registration institutions. Please refer to the respective fund legal documents for detailed fee structures.
Risk Disclosure: The index constituents mentioned are for illustrative purposes only. Descriptions of individual stocks are not intended as any form of investment advice and do not represent the holdings or trading动向 of any fund managed by the asset manager. Past performance of the indices is not indicative of future results. Investors are advised to make their own investment decisions based on independent judgment. Fund investments carry risks.
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