On the afternoon of May 27, the A-share market experienced a sudden downturn, with the Shanghai Composite Index falling below 4100 points. The pharmaceutical sector showed localized activity, with leading heavyweight stock Hengrui Pharma quickly reversing to gains, surging over 4% at one point. Traditional Chinese medicine (TCM) stocks performed against the market trend, with Yunnan Baiyao, Yiling Pharmaceutical, Dong-E-E-Jiao, and Pien Tze Huang all trading in positive territory.
The only on-market ETF tracking the overall performance of the pharmaceutical sector, the Huabao Pharma ETF (562050), saw a sharp rebound from deep losses in the afternoon. As of the latest update, it was down 0.22%, while the Shanghai Composite Index had fallen 1.41%.
Regarding the leading gainer, Hengrui Pharma announced yesterday that its subsidiary, Chengdu Shengdi Pharmaceutical, received a "Drug Clinical Trial Approval Notice" from the National Medical Products Administration, approving the clinical study of HRS-1635 tablets in patients with B-cell malignancies. This drug is an innovative anti-tumor medication independently developed by the company, and currently, no similar drugs have been approved for marketing domestically or internationally.
In terms of the sector, the A-share pharmaceutical sector has currently adjusted to historically low levels, offering outstanding value for allocation. As of May 26, the price-to-earnings ratio (TTM) of the CSI Pharmaceutical Index, which the Huabao Pharma ETF (562050) tracks, was 31.31 times, standing at the 8.24th percentile over the past five years. This means the current valuation level is lower than over 90% of the time in the past five years.
For positioning in "innovative drugs + traditional Chinese medicine" at low levels, consider the only on-market Huabao Pharma ETF (562050) and its off-market feeder fund (024986). It aggregates 50 leading pharmaceutical companies in the A-share market, with a focus on innovative drugs while allocating approximately 25% of its weight to TCM stocks. The TCM sector offers relatively high dividend yields and demonstrates relatively stable performance, which can partially hedge against the high volatility of innovative drugs, thereby reducing the overall volatility and drawdown of the index.
Note on "the only on-market Huabao Pharma ETF (562050)": According to data from the Shanghai and Shenzhen stock exchanges, as of now, the Huabao Pharma ETF is the only ETF in the market tracking the CSI Pharmaceutical Index.
Note: The ETF does not charge a sales service fee. When investors subscribe for or redeem fund units, the subscription and redemption agent broker may charge a commission of up to 0.5%, which includes relevant fees collected by the stock exchange and registration institutions. For detailed fund fee rates, please refer to the respective fund's legal documents.
Risk Disclosure: The index constituent stocks mentioned herein are for illustrative purposes only. Descriptions of individual stocks do not constitute any form of investment advice, nor do they represent the holdings information or trading trends of any funds managed by the fund manager. The fund manager assesses the risk rating of the Huabao Pharma ETF and its feeder fund as R3-medium risk, suitable for balanced (C3) and above investors. The risk rating of the Huabao Hong Kong Connect Innovative Pharma ETF and its feeder fund is R4-medium to high risk, suitable for aggressive (C4) and above investors. Any information appearing in this article (including but not limited to individual stocks, comments, forecasts, charts, indicators, theories, and any form of expression) is for reference only. Investors are responsible for any independent investment decisions. Furthermore, any views, analyses, or predictions in this article do not constitute investment advice of any kind to readers, and no liability is assumed for any direct or indirect losses arising from the use of the content herein. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. Past performance of the fund does not indicate its future results. Fund investment involves risks.
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