On Friday (May 15th), the market experienced a volatile consolidation. The Shanghai and Shenzhen Composite Indices both fell over 1%, with more than 3,500 stocks declining across the board. The combined trading volume for the Shanghai, Shenzhen, and Beijing markets exceeded 3.3 trillion yuan, marking the eighth consecutive session above the 3 trillion yuan threshold.
In terms of sector performance, the chemical sector demonstrated resilience against the broader market decline. The Huabao Chemical ETF (516020) saw its intraday gain peak at 1.78%, managing to close in positive territory despite being dragged down by the overall market. Factors such as rising hydrofluoric acid prices and a surge in leading fluorochemical company Do-Fluoride, coupled with persistent energy supply disruptions, suggest the chemical industry may be entering a new upward cycle, potentially leading to a value re-rating.
Globally, Nvidia's stock price achieved a seven-day winning streak, hitting a new all-time high. As a leading indicator for the AI sector on the ChiNext board, Nvidia's sustained strength has reinforced optimistic expectations for the computing power supply chain, including optical modules. This positive sentiment has translated to the A-share market, where companies like TFC Optical Communication and Zhongji Innolight saw their intraday stock prices reach new highs. However, the Huabao ChiNext Artificial Intelligence ETF (159363), which has over 50% exposure to CPO (Co-Packaged Optics) optical modules, closed down 1.14%, retesting its five-day moving average. It recorded a daily turnover of 1.7 billion yuan, leading all AI-themed ETFs in trading volume. Capital flowed in significantly on the dip, with a net subscription of 66 million units for the day.
As the broader market experienced a deep correction, the Hong Kong Stock Connect innovative pharmaceutical sector continued its downward trend. The Huabao Hong Kong Stock Connect Innovative Drug ETF (520880), which invests 100% in innovative drug R&D companies, saw its intraday price drop nearly 3%, declining for four consecutive days and approaching its historical low. Despite the price action diverging from fundamentals, bullish investors accelerated their entry. This ETF attracted a substantial 535 million yuan in net inflows over the past 10 days, with its latest share count rising to 5.342 billion units, setting a new record high since its listing. Institutions note that the underlying logic for innovative drugs remains solid, with their investment appeal becoming more prominent after the deep correction. Coupled with potential catalysts from industry conferences at the end of the month, this could present an opportunity to position for a potential rebound.
UBS Securities pointed out that the Shanghai Composite Index's breakthrough of a key integer level this week provided strong positive momentum for the market. Subsequent profit recovery and the inflow of incremental funds are expected to be the most significant drivers for the market's upward movement this year. A-share profit growth is anticipated to accelerate further this year based on last year's performance. Notably, the recovery in corporate profits is one of the most important factors for which foreign institutions have maintained a bullish outlook on the Chinese stock market this year.
Morgan Stanley forecasts a moderate improvement in the profit outlook for Chinese companies ahead. Key supporting factors include potentially stronger export growth against the backdrop of accelerating AI and energy capital expenditure cycles, the appreciation of the Renminbi against the US dollar, and price competition among major internet platform companies having peaked. The firm expects a moderate uptrend in the Chinese market by the second quarter of 2027.
【ETF Insights: Hot Topic Review】This section focuses on the trading and fundamental aspects of industry-themed ETFs such as Chemicals, ChiNext Artificial Intelligence, and Hong Kong Stock Connect Innovative Pharmaceuticals. 1. 【Resilience Against the Trend! Fluorochemicals and Lithium Battery Sectors Surge, Huabao Fund Chemical ETF (516020) Intraday Gain Peaks at 1.78%! Nearly 10 Billion in Main Capital Inflow】 The chemical sector showed resilience against the market downturn. The Huabao Chemical ETF (516020), reflecting the overall performance of the chemical sector, traded in positive territory for most of the day, with its intraday price gain reaching 1.78% at one point. It pared gains towards the close but still managed to close up 0.1% against the market trend.
In terms of constituent stocks, sectors like fluorochemicals and lithium batteries saw broad strength. At the close, Do-Fluoride hit the daily limit-up, while Juhua Group, Satellite Chemical, Guangzhou Tinci Materials Technology, and others surged over 3%. Sanmei Chemical, Kingfa Sci. & Tech., and Huafon Chemical also ranked among the top gainers.
Notably, despite a recent pause in the rally, the chemical sector's performance since the beginning of the year has remained significantly better than the broader market. Data shows that as of today's close, the CSI Sub-Industries Chemicals Index, which the Huabao Chemical ETF tracks, has achieved a cumulative gain of 8.88% year-to-date, significantly outperforming major A-share indices like the Shanghai Composite Index (4.2%) and the CSI 300 Index (4.96%) over the same period.
Data source: Wind, covering the period from Jan 1, 2026, to May 15, 2026. The Sub-Industries Chemicals Index's annual returns for the past five full years are: 2021: 15.72%; 2022: -26.89%; 2023: -23.17%; 2024: -3.83%; 2025: 41.09%. The index's constituent composition is adjusted according to its compilation rules, and its past performance does not predict future results. On the capital flow front, the basic chemicals sector saw substantial inflows from main capital today. Data indicates that by the close, the basic chemicals sector recorded a net main capital inflow of 9.663 billion yuan for the day, ranking second among the 30 CITIC primary industries in terms of net inflow.
Looking ahead, BOC Securities stated that considering the current industry expansion cycle is nearing its end, measures like "dual carbon" goals and "anti-involution" policies are expected to catalyze a recovery in industry profitability from the bottom. Simultaneously, new materials are poised to benefit from the rapid development of downstream demand, potentially initiating a new phase of high growth. In the long term, the global market share and competitiveness of the chemical industry chain are expected to continue improving. CSC Financial noted that it might be prudent to set expectations based on a rising oil price trend, guard against potential liquidity risks, and first focus on assets with certainty. From a medium-term perspective, China's chemical industry's relative competitive advantage globally is strengthening, and a market environment with rising inflation is more favorable for HALO assets with a solid profit base. After the oil price shock subsides, opportunities may be sought in core chemical assets with smooth transmission and strengthened relative competitive advantages. How to capture the recovery opportunities in the chemical sector? Investing through the Huabao Chemical ETF (516020) might offer higher efficiency. Public information shows that the Huabao Chemical ETF (516020) tracks the CSI Sub-Industries Chemicals Index. Its constituent stocks cover popular themes like AI computing power, anti-involution, robotics, and new energy. Off-exchange investors can also access the chemical sector through the ETF's feeder fund (Class A: 012537, Class C: 012538).
2. 【Optical Module Sector Experiences Divergence and Adjustment, ChiNext Artificial Intelligence ETF (159363) Retests Five-Day Line, Capital Rushes to Buy 66 Million Units】 The ChiNext artificial intelligence sector experienced a volatile decline, with CPO optical modules leading the losses. Stocks like T&S Communications, Changxinborui, and Lante Optical-Electronics fell over 5%. Performance among leading players diverged: TFC Optical Communication closed up 2%, continuing its new high streak, while Zhongji Innolight fell over 2% and Eoptolink Technology dropped more than 1%. Conversely, AI applications and computing power leasing sectors were active against the trend, with Easymob leading gains at 9% and Runze Technology rising nearly 3%.
Regarding popular ETFs, the Huabao ChiNext Artificial Intelligence ETF (159363), with a 50% exposure to CPO optical modules, saw intense intraday battles between bulls and bears, trending lower in the afternoon session. It closed down 1.14% in the secondary market, retesting its five-day moving average, with a daily turnover of 1.7 billion yuan, ranking first among all AI-themed ETFs in trading volume. Capital made significant net purchases on the dip, adding 66 million units for the day.
Market analysis suggests three potential logics behind the substantial capital inflow into the ChiNext AI sector on the dip, positioning for future opportunities in computing power hardware like optical modules: 1. Nvidia's stock price achieved a seven-day winning streak, hitting a new all-time high. As a leading indicator for the AI sector on the ChiNext board, Nvidia's sustained strength has reinforced optimistic expectations for the computing power supply chain, including optical modules. 2. Cloud service providers' capital expenditure continues to increase. Overseas cloud providers are accelerating AI monetization and have comprehensively raised their capital expenditure guidance. The construction of AI data centers is expected to accelerate in the second half of the year, potentially benefiting optical modules through both volume and price increases. 3. CPO commercialization is progressing faster than expected. Foxconn's CPO switch supply is tight, having entered the mass production stage. 2026 could be the inaugural year for CPO development, with domestic optical module manufacturers potentially entering the supply chain.
Looking at future opportunities, Industrial Securities stated that the high growth in capital expenditure from overseas CSP (Cloud Service Provider) vendors, combined with the accelerated implementation of AI commercial closed loops and the rapid expansion of leading AI companies' businesses, has comprehensively solidified investment confidence in the computing power sector. Optical interconnect technology paths continue to evolve, with multiple routes like XPO, CPO, and OCS developing simultaneously. CPO is transitioning from the "technology verification" phase to the inflection point of "small-batch commercial use." In the new era of communication driven by AI agents, it is recommended to continue focusing on leading optical module manufacturers. Regarding valuations, Cao Xuchen, the fund manager of the Huabao ChiNext Artificial Intelligence ETF (159363), recently commented that the optical module sector as a whole does not show signs of excessive frothiness. He suggested holding leading companies in the sub-sector at the current stage, which is beneficial for capturing potential accelerated gains while also preparing for potential consolidation. Taking ChiNext AI as an example, although the stock prices of leading optical module companies are high, their valuations remain manageable as they are not driven solely by price increases.
To capture opportunities in leading CPO optical module companies, it is recommended to focus on the Huabao ChiNext Artificial Intelligence ETF (159363), which leads its category in both size and liquidity, along with its off-exchange feeder fund (Class A: 023407, Class C: 023408). Its underlying index currently has a 50% exposure to optical modules, providing comprehensive coverage of leading players. Approximately 30% of its portfolio is allocated to AI applications, making it not only a core holding for computing power but also representative of AI applications. Notably, as of May 14, 2026, the Huabao ChiNext Artificial Intelligence ETF (159363) reached a size of 7.382 billion yuan, ranking first in size among all AI-themed ETFs in the dual-innovation (ChiNext and STAR Market) space. Its average daily turnover over the past six months was approximately 800 million yuan, also ranking first in trading volume among all AI-themed ETFs.
3. 【Hong Kong Stock Connect Innovative Pharmaceutical Sector Searches for Bottom, 520880 Nears Historical Low! Price Action Diverges from Fundamentals, Bullish Investors Accelerate Entry】 Amid a deep correction in the broader market, the Hong Kong Stock Connect innovative pharmaceutical sector continued to decline, with leading weighted stocks like Akeso, Innovent Biologics, BeiGene, CSPC Pharmaceutical Group, and Sino Biopharmaceutical experiencing widespread losses. The Huabao Hong Kong Stock Connect Innovative Drug ETF (520880), which invests 100% in innovative drug R&D companies, closed down 2.14% on high volume, marking its fourth consecutive negative day, with its price nearing its historical low.
This week, the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) accumulated a loss of 6.91%, marking its fourth consecutive weekly decline. However, trading in the secondary market was particularly active, with a cumulative weekly turnover of 2.004 billion yuan, a nearly 60% increase from the previous week. Analysis points out that the recent accelerated decline in the Hong Kong Stock Connect innovative pharmaceutical sector is more attributable to capital flow and sentiment factors. On one hand, the strong "siphon effect" of the AI technology theme has led to a significant diversion of liquidity. On the other hand, recent clinical data from some individual innovative pharmaceutical companies falling short of expectations has heightened market sensitivity to R&D uncertainties.
Notably, bargain-hunting capital has begun accelerating its accumulation. As of May 14th, the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) attracted over 535 million yuan in net subscriptions over the past 10 days. Consequently, its fund share count has also risen to a new high of 5.342 billion units.
This steadfast capital inflow against the trend may stem from three solid fundamental supports for the innovative pharmaceutical sector. First, outbound licensing (BD) deals continue to grow rapidly: the total value of Chinese innovative drug out-licensing transactions in Q1 2026 has already exceeded 60 billion USD. Second, policy support is clear: following the accelerated inclusion of innovative drugs in the national reimbursement drug list (NRDL), the "Implementation Measures for Drug Trial Data Protection" have been issued and implemented, granting a 6-year protection period for trial data of innovative drugs and original drugs. Third, the industry is entering a phase of self-sustainability: a batch of leading innovative drug companies are reaching profitability inflection points.
Looking ahead, the latest research report from Industrial Securities highlights that the innovative pharmaceutical sector is about to enter a period of intensive data catalysts. The 2026 ASCO (American Society of Clinical Oncology) Annual Meeting is scheduled from May 29th to June 3rd. Several Chinese innovative drug companies are expected to release important clinical data, which could potentially catalyze the sector's performance.
The current correction in the innovative pharmaceutical sector has lasted for 8 months, making the current valuation level particularly attractive for investment. To accumulate core innovative pharmaceutical assets at low levels, consider these two primary investment tools: For pure exposure to innovative drugs, consider the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880). It allocates 100% to innovative drug R&D companies, with its top ten holdings accounting for over 70%, highlighting its focus on leading players. Its underlying assets are listed in Hong Kong, offering high elasticity and T+0 settlement. For those seeking lower volatility, consider the Huabao Pharmaceutical ETF (562050), the only such ETF in the secondary market. It features a unique allocation of "70% innovative drugs + 30% traditional Chinese medicine," a scarce combination in the market, offering both the high growth potential of innovative drugs and the high dividend appeal of traditional Chinese medicine.
Note on the "Huabao Pharmaceutical ETF (562050)": According to data from the Shanghai and Shenzhen Stock Exchanges, as of the current date, the Huabao Pharmaceutical ETF is the only ETF in the market tracking the CSI Pharmaceutical Index. Note: For fee details, please refer to the respective fund's legal documents. Source: Shanghai and Shenzhen Stock Exchanges, etc., as of May 15, 2026. Reminder: Recent market volatility may be high. Short-term gains or losses do not predict future performance. Investors must make rational investment decisions based on their own financial situation and risk tolerance, paying close attention to position sizing and risk management.
*Institutional views reference sources: ① UBS Securities view on May 11, detailed in "A-Share 2026 Q1 Performance Review: Profit Growth Accelerates Significantly, Profit Margins Improve"; ② Morgan Stanley's "China Stock Market Outlook for the Second Half of 2026" released on May 13; ③ BOC Securities' "Basic Chemicals Sector Recovery, Oil & Petrochemicals Profits Improve" released on May 13; ④ CSC Financial's "A New Round of Chemical Sector Allocation is Approaching" released on May 5; ⑤ Industrial Securities' "Communication Industry Mid-2026 Strategy: The New Era of Communication Driven by Agents" released on May 10; ⑥ Industrial Securities' "Weekly Report on Pharmaceutical and Biological Industry: Maintain Optimism on Innovative Drugs + Innovative Drug Industry Chain, Tracking Hot Directions in the Sector" released on May 13.
Risk Disclosure: The Huabao Chemical ETF passively tracks the CSI Sub-Industries Chemicals Index. The base date for this index is December 31, 2004, and it was launched on April 11, 2012. The Huabao ChiNext Artificial Intelligence ETF passively tracks the ChiNext Artificial Intelligence Index. The base date for this index is December 28, 2018, and it was launched on July 11, 2024. The Huabao Hong Kong Stock Connect Innovative Drug ETF passively tracks the Hang Seng Hong Kong Stock Connect Innovative Drug Selection Index. The base date for this index is December 31, 2020, and it was launched on July 17, 2023. The Huabao Pharmaceutical ETF passively tracks the CSI Pharmaceutical Index. The base date for this index is December 30, 2011, and it was launched on July 15, 2013. The index constituent composition is adjusted according to its compilation rules, and its historical performance does not predict future results. Individual stocks mentioned in this article are for illustrative purposes only as index constituents and do not constitute any stock recommendation, nor do they represent the investment direction of the fund manager or the fund. Any information appearing in this article (including but not limited to individual stocks, commentary, forecasts, charts, indicators, theories, any form of expression, etc.) is for reference only. Investors are responsible for any independent investment decisions. Furthermore, any views, analysis, or forecasts in this article do not constitute investment advice of any kind to readers. Huabao Fund also bears no responsibility for any direct or indirect losses arising from the use of this content. Investors should carefully read the "Fund Contract," "Prospectus," "Fund Product Key Facts Statement," and other fund legal documents to understand the fund's risk-return characteristics and choose products suitable for their own risk tolerance. The past performance of a fund does not predict its future performance, and the performance of other funds managed by the fund manager does not guarantee the performance of this fund. According to the fund manager's assessment, the Huabao Chemical ETF and Huabao Pharmaceutical ETF carry a risk rating of R3 (Medium Risk), suitable for investors with a Balanced (C3) or higher risk profile. The Huabao Hong Kong Stock Connect Innovative Drug ETF and Huabao ChiNext Artificial Intelligence ETF carry a risk rating of R4 (Medium-High Risk), suitable for investors with an Aggressive (C4) or higher risk profile. The appropriateness matching opinion is subject to the sales institution. Sales institutions (including the fund manager's direct sales channels and other sales institutions) conduct risk assessments of the above funds according to relevant laws and regulations. Investors should pay timely attention to the appropriateness opinions issued by the fund manager. The appropriateness opinions of various sales institutions may not be consistent, and the risk rating results of fund products issued by fund sales institutions shall not be lower than the risk rating results made by the fund manager. The description of fund risk-return characteristics and fund risk ratings in the fund contract may differ due to different considerations. Investors should understand the fund's risk-return situation, combine it with their own investment objectives, term, experience, and risk tolerance to prudently select fund products and bear the risks themselves. The China Securities Regulatory Commission's registration of the above funds does not indicate a substantive judgment or guarantee of their investment value, market prospects, or returns. Fund investment involves risks.
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