On May 15, the Hong Kong stock market experienced a broad-based pullback, with the Hang Seng Index falling over 1%. The Hong Kong Stock Connect innovative drug sector continued its adjustment, with leading heavyweight Innovent Bio plunging more than 7%. Companies including Akeso, BeiGene, and CSPC Pharmaceutical Group all fell over 3%. The Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection ETF, which focuses 100% on innovative drug R&D targets, declined 2%, marking its fourth consecutive day of losses, with its on-market price approaching previous lows.
Notably, the Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection ETF maintained an on-market premium, indicating active buying interest. It attracted over 100 million yuan in inflows during the recent decline. Over the past 10 days, the ETF has accumulated net inflows exceeding 535 million yuan, with its latest share count rising to 5.342 billion shares, setting a new record high since its listing. The Hong Kong Stock Connect innovative drug sector entered a phase of adjustment in September last year, which has now lasted for eight months. The underlying index of the Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection ETF has accumulated a decline of over 23% during this period, suggesting a relatively full adjustment. The current position may offer a favorable investment value proposition, continuously attracting capital inflows.
Note: The annual historical returns for the Hang Seng Hong Kong Stock Connect Innovative Drug Selection Index from 2021 to 2025 were: -22.72%, -16.48%, -19.76%, -14.16%, and 66.32%. Past performance does not indicate future results. A latest research report from Industrial Securities highlights that the innovative drug sector is about to enter a period of intensive data catalysts. The 2026 ASCO Annual Meeting is scheduled for May 29 to June 3, which is expected to catalyze sector performance. Multiple Chinese innovative drug companies, including Akeso, Kelun-Biotech, BeiGene, Duality Biologics, Hengrui Pharmaceuticals, CSPC Pharmaceutical Group/Shinovo, Innovent Bio, Baili Pharmaceutical, RemeGen, Dizal Pharmaceutical, Zenshine Pharmaceuticals, 3SBio, Hutchmed, GenFleet Therapeutics, InnoCare Pharma, Junshi Biosciences, Ascentage Pharma, and Sino Biopharmaceutical, are expected to release important clinical data, which is highly anticipated. The investment logic for innovative drugs remains solid, and the sector has undergone a significant adjustment. Positioning at low levels in anticipation of a future rebound can be achieved through two key investment tools: For pure exposure to innovative drugs, consider the Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection ETF. It allocates 100% to companies engaged in innovative drug R&D, with its top ten holdings accounting for over 70% of the portfolio, highlighting its focus on leading companies. The underlying assets are Hong Kong-listed stocks, offering high volatility and T+0 trading. For investors seeking to reduce volatility, the Huabao Pharmaceutical ETF, the only such on-market product, offers a unique allocation of "70% innovative drugs + 30% traditional Chinese medicine." It is a scarce product in the market, combining the high growth potential of innovative drugs with the high dividend yield of traditional Chinese medicine.
Note: According to data from the Shanghai and Shenzhen Stock Exchanges, as of the current date, the Huabao Pharmaceutical ETF is the only ETF tracking the CSI Pharmaceutical Index in the entire market. Note: ETF funds do not charge sales service fees. When investors subscribe for or redeem fund shares, the subscription/redemption agent broker may charge a commission not exceeding 0.5%, which includes related fees charged by stock exchanges and registration institutions. Please refer to the respective fund's legal documents for detailed fee structures. Risk Disclosure: The index constituents mentioned herein are for illustrative purposes only. Descriptions of individual stocks do not constitute any form of investment advice and do not represent the holdings or trading trends of any fund managed by the fund manager. The fund manager assesses the risk rating of the Huabao Pharmaceutical ETF and its feeder fund as R3 - Medium Risk, suitable for Balanced (C3) and above investors. The risk rating of the Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection ETF and its feeder fund is assessed as R4 - Medium to High Risk, suitable for Aggressive (C4) and above investors. Any information appearing in this article is for reference only. Investors are responsible for any independent investment decisions. Furthermore, any views, analysis, or forecasts herein do not constitute investment advice of any kind to readers, 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 fund manager does not guarantee the performance of these funds. Past performance of a fund is not indicative of its future results. Fund investment carries risks.
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