Brian Roberts, Head of Securities Product Development at Hong Kong Exchanges and Clearing Limited (HKEX), stated that biotechnology remains one of the most closely watched themes in the global investment market. The growth momentum of Hong Kong's biotech industry this year remains solid, reflected in the performance of related stocks and the overall sector. The Hang Seng Biotech Index is one of the widely monitored benchmarks. The index recorded a gain of 64.5% in 2025 and has risen a further 10.7% year-to-date as of February 24, 2026. Launched in 2019, the Hang Seng Biotech Index tracks the 30 largest biotechnology companies listed in Hong Kong that are eligible for the Stock Connect program. Beyond focusing solely on biotechnology, the index also covers a broader range of the healthcare industry chain. According to Hang Seng Indexes Company Limited, biotech firms account for approximately half of the index's weighting, while pharmaceutical companies comprise about 40%. To enhance diversification, the index also includes companies engaged in drug distribution (around 6%) and medical equipment and supplies (around 4%).
Roberts indicated that as the biotech market continues to expand, the tools available in Hong Kong for investment and risk management are becoming increasingly diverse. Currently, HKEX's biotech product portfolio encompasses stocks, exchange-traded funds (ETFs), structured products, and derivatives. As of the end of February 2026, there were a total of 10 ETFs tracking the Hang Seng Biotech Index (8 listed in mainland China and 2 listed in Hong Kong), with total assets under management reaching HKD 15.6 billion. Concurrently, the number of structured products linked to biotech stocks has increased significantly, rising from 132 in January 2025 to 500 in January 2026. These products form a comprehensive biotech product ecosystem, allowing market participants to engage with related opportunities in various ways according to their investment objectives and experience.
Roberts noted that within this entire ecosystem, biotech stocks represent the most fundamental investment tool, enabling direct investment in individual companies. Since HKEX implemented listing reforms in 2018, biotechnology and healthcare have become one of the most active sectors in the Hong Kong market. Presently, there are over 270 listed biotechnology and healthcare companies in Hong Kong, with a combined market capitalization exceeding HKD 4.2 trillion, representing substantial growth compared to the end of 2018. These companies span multiple sub-sectors, including innovative drugs, CXO (medical outsourcing services), and biotechnology.
With the launch of Hang Seng Biotech Index futures at the end of 2025, Hong Kong's biotech product ecosystem gained an additional index-based derivative, providing the market with more diverse deployment and risk management options. Hang Seng Biotech Index futures were launched on HKEX in November 2025, aiming to broaden investor access to the biotech sector while providing an effective hedging tool. Each futures contract has a multiplier of HKD 50 per index point, meaning the contract value changes by HKD 50 for every 1-point move in the index. For example, a 100-point move in the index results in a corresponding HKD 5,000 change in contract value. Unlike trading physical stocks, futures trading involves margin. Investors must pay an initial margin to open a position, and daily profits or losses are settled via variation margin based on market price movements. The relevant margin levels are set by the clearing house to support the overall risk management of the futures market. It is important to note that futures are leveraged products that can amplify both returns and losses, making them unsuitable for all investors and generally more appropriate for market participants familiar with margin mechanisms.
One primary reason for the widespread use of futures is their risk management function. Biotechnology is a highly volatile sector, with performance susceptible to factors such as clinical trial results and policy changes. Over the 12 months ending January 2026, the annualized volatility of the Hang Seng Biotech Index was approximately 41.2%, significantly higher than the Hang Seng Index's volatility of around 24.2% and the Hang Seng China Enterprises Index's volatility of about 25.9%, reflecting the generally larger price fluctuations associated with biotech investments.
Roberts stated that investors can use Hang Seng Biotech Index futures in conjunction with biotech ETFs or stock portfolios to manage overall sector risk. For instance, investors holding a basket of biotech stocks might use index futures to hedge against some sector-specific risks while maintaining long-term positions. As the biotech industry continues to develop, HKEX's related products provide investors with transparent avenues for participation. Understanding how different instruments operate and their role within an overall investment strategy can help investors more effectively seize opportunities in Hong Kong's biotech market.
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