Pharmaceutical stocks are showing a significant rebound from oversold conditions.
On June 29th, the pharmaceutical sectors in both the A-share and Hong Kong stock markets witnessed a long-awaited and substantial rally.
As of 2:20 PM, nine A-share pharmaceutical stocks, including Xin Gan Jiang (920367.BJ), BGI Genomics (688796.SH), Bairun Medical (688198.SH), and Wanbang Pharmaceutical (301520.SZ), hit the 20% daily limit-up. Additionally, the new listing N Kelai (920072.BJ) surged by 217.73%.
The indices for sectors such as recombinant protein, biopharmaceuticals, monoclonal antibody concepts, weight-loss drugs, and innovative drugs in the A-share market all rose by more than 7%.
In the Hong Kong market, individual stocks including Jiangsu Aosaikang Pharmaceutical (02617.HK), PegBio Co., Ltd. (02565.HK), InnoCare Pharma (09606.HK), and RemeGen Co., Ltd. (09995.HK) saw gains exceeding 10%.
Analyzing the Surge in Pharma Shares
Several market observers have indicated that this surge is likely related to a technical rebound from oversold levels in the pharmaceutical sector.
One market participant noted that the U.S. SPDR S&P Biotech ETF (XBI) has reached a new recent high, while domestic Chinese pharmaceutical stocks have fallen back to their early-year lows or even lower, creating a significant disparity. This observer believes capital is bound to rotate back from the AI sector eventually.
Another pharmaceutical investor suggested that today's sharp rise in pharma stocks is likely a result of sector rotation.
Specifically, the U.S. S&P XBI ETF, after surging 35.89% in 2025, has accumulated a further gain of 27.56% year-to-date.
In contrast, among the more than 500 pharmaceutical stocks in the A-share market, over 80% have declined cumulatively since the start of the year as of June 26th, with 187 stocks falling more than 20%.
Similarly, in the Hong Kong pharmaceutical market, nearly 90% of stocks have declined year-to-date as of June 26th, with 17 stocks seeing their prices halved.
Underlying Fundamentals Remain Solid
From a fundamental perspective, multinational pharmaceutical companies continue to actively acquire Chinese innovative drug pipelines, and the boom in out-licensing (BD) deals for domestic innovative drugs persists.
Data released by the National Medical Products Administration shows that in the first quarter of 2026 alone, the total value of China's innovative drug out-licensing transactions has already exceeded $60 billion, approaching half of the total for the entire year of 2025.
The wave of pharmaceutical innovation in China continues. The NMPA's 2025 "Annual Report on the Progress of New Drug Clinical Trial Registrations in China" indicates that the total number of clinical trials in China exceeded 5,000 for the first time, setting a historical record.
At the 2026 American Society of Clinical Oncology (ASCO) Annual Meeting held in late May and early June, 94 Chinese studies were selected for oral presentations, and 13 studies from 12 Chinese companies were selected for the latest breakthrough abstracts, both figures reaching record highs.
At the 2026 ASCO Breakthrough conference held in Singapore from June 25th to 27th, China was one of the most actively represented countries in offline attendance, providing a crucial platform for Chinese oncology research to reach a global audience.
A recent research report suggests that the continued strength of the U.S. S&P Biotech Select Industry Index (XBI) is primarily catalyzed by two factors: first, leading multinational corporations (MNCs) are accelerating their merger and acquisition pace amid patent cliffs, completing several innovative drug pipeline deals recently; second, flexible signals from the U.S. regarding accelerated drug review processes are favorable for the clinical development of new drugs for rare diseases, among others. In comparison, the fundamentals of China's innovative drug sector continue to improve while valuations remain at a bottom range.
The report further argues that the allocation value of Chinese innovative drugs is continuously strengthening, specifically due to: first, the sustained trend of out-licensing, with the global value of core assets being consistently validated; second, the approaching mid-year financial report window, where earnings catalysts are worth watching.
Another perspective maintains that looking ahead, innovative drugs will remain the core growth driver for the industry, supported not only by continued preferential allocation and guarantees in domestic medical insurance expenditures but also by a series of supportive policies being implemented. The increasing proportion of profits and market capitalization from innovative drugs also provides significant valuation support for the pharmaceutical sector. Reviewing the overall performance of the pharmaceutical industry over the past eleven years, the pharmaceutical industry index has largely returned to its early 2015 levels, but the innovative drug index still shows considerable gains compared to early 2019. Since 2026, the innovative drug index has adjusted somewhat from the start of the year, influenced more by overall market sector preferences. Since June, companies like WuXi AppTec have begun announcing share buyback or increased holding plans, gradually helping to restore market confidence in the pharmaceutical industry.
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