Catalysts continue to emerge, propelling the healthcare sector to surge again! On July 10th, A-share and H-share healthcare assets gained strength across the board. In early trading, CXO (Contract Research Organization) stocks led the charge, with Huabao Medical ETF (512170) and Huabao Hong Kong Stock Connect Healthcare ETF (159137) jointly climbing up to 4.56%! Innovative drugs followed closely behind, with Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) and Huabao Pharmaceutical ETF (562050) reaching highs of 4.38% and 3.59%, respectively.
Focusing on A-share and H-share innovative drugs, the A-share pharmaceutical sector, after an initial surge and subsequent pullback, still significantly outperformed the broader market. Leaders in innovative drugs and traditional Chinese medicine showed notable performance, with Tonghua Jinma and Pien Tze Huang leading gains of over 6%. The market's sole ETF tracking the pharmaceutical index, Huabao Pharmaceutical ETF (562050), closed up 2.01% with an intraday amplitude nearing 5%, achieving a record turnover of 46.63 million yuan.
Hong Kong Stock Connect innovative drug stocks demonstrated higher elasticity. The T+0 tradable Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) showed an intraday amplitude close to 6%, closing up 3.46% and reclaiming its 60-day moving average, with significantly increased turnover of 949 million yuan. Heavyweight constituents Innovent Biologics, CSPC Pharmaceutical Group, and Sino Biopharmaceutical collectively rose over 3%.
This week, following a short-term adjustment, the Hong Kong Stock Connect innovative drug sector resumed its upward trend. After a historic 16.4% surge last week, ETF (520880) gained another 2.05%, successfully achieving consecutive weekly gains. Trading volume expanded significantly, with weekly turnover reaching 4.283 billion yuan, marking the second-highest level in its history.
Key Market Catalyst
On the news front, after an eight-year interval, the "National Essential Drug List (2026 Edition)" was officially released on July 9th and will take effect from September 1, 2026. The new edition expands the total number of drug varieties to 794, with 16 innovative drugs included on a large scale for the first time, accounting for over 5% of the list.
Analysts point out that this revision marks the first time innovative drugs have been a key focus for selection into the essential drug list, reflecting a further strengthening of policy support for innovative products with high clinical value. Supportive policies for innovative drugs are extending from review and approval processes and medical insurance inclusion to the essential drug list, primary-level allocation, standardized usage, and medication coordination between different levels of medical institutions, which is expected to enhance the clinical accessibility of domestically developed innovative drugs.
Alongside continuous policy reinforcement, the innovative drug sector has recently received multi-dimensional support from sustained progress in business development deals and strength in the U.S. stock market. This week saw several transactions finalized, including Sino Biopharmaceutical with AstraZeneca, CSPC Pharmaceutical Group with AZ, and Insilico Medicine with Takeda, with potential maximum total deal values reaching $1.9 billion, $1.74 billion, and $600 million, respectively. Regarding overseas market influence, the U.S. biotech innovation index XBI has recently shown strong performance.
Future Outlook
Looking ahead, some market observers believe that against the backdrop of strengthening global sentiment towards innovative drug assets, the current Chinese innovative drug sector faces a divergence between improving fundamentals and downward pressure on valuations, potentially presenting highly elastic bottom-fishing investment value.
Investment Tools to Track the Rebound
To follow the innovative drug sector's rebound, investors may consider two key instruments:
Huabao Hong Kong Stock Connect Innovative Drug ETF (520880): This fund is 100% invested in companies focused on innovative drug research and development. Its top ten holdings account for over 70% of the portfolio, highlighting its concentration on sector leaders. The underlying assets are Hong Kong-listed stocks, offering high elasticity and T+0 trading.
Huabao Pharmaceutical ETF (562050): This is the only ETF in the market tracking the pharmaceutical index. It features a unique allocation of "75% innovative drugs + 25% traditional Chinese medicine", combining the high growth potential of innovative drugs with the high dividend characteristics of traditional Chinese medicine stocks.
Data is sourced from the Shanghai, Shenzhen, and Hong Kong stock exchanges, China Securities Index Co., Ltd., Hang Seng Indexes Company, and pharmaceutical databases.
Note: The ETFs mentioned do not charge sales service fees. When investors subscribe for or redeem fund units, the subscription/redemption agent may charge a commission of up to 0.5%, which includes relevant fees charged by stock exchanges and registration institutions. Detailed fund fee structures are available in the respective fund legal documents.
Risk Disclosure: The index constituents mentioned 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动向 of any fund managed by the asset manager. The composition of the underlying index is subject to adjustment according to its compilation rules. The fund manager assesses the risk rating of the Medical ETF Link Fund, Huabao Hong Kong Stock Connect Healthcare ETF and its Link Fund, and Huabao Hong Kong Stock Connect Innovative Drug ETF and its Link Fund as R4 (Medium-High Risk), suitable for aggressive (C4) and above investors. The risk rating for the Medical ETF, Pharmaceutical ETF, and their Link Funds is assessed as R3 (Medium Risk), suitable for balanced (C3) and above investors. Any information appearing in this article (including but not limited to individual stocks, commentary, forecasts, charts, indicators, theories, and any form of expression) is for reference only. Investors must be 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, and no liability is accepted for any direct or indirect losses arising from the use of this content. Fund investment carries risks. The past performance of a fund does not indicate its future results. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. Caution is advised in fund investment.
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