On May 28th, the Hong Kong stock market experienced a deep correction, with the Hang Seng Index falling by over 2% at one point. The Hong Kong Stock Connect innovative drug sector declined significantly, with major leading constituents collectively in the red.
The Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection ETF (520880), a pure-play innovative drug R&D fund, fell by 3.68% in the afternoon session and is currently down 2.99%. It has declined for four consecutive days, with its on-market price hitting a new record low since listing.
Taking a longer-term view, the Hong Kong Stock Connect innovative drug sector entered a phase of adjustment in September last year, a period that has now lasted over eight months. The underlying index of the Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection ETF (520880) has fallen more than 30% during this interval. The current position may be near the bottom of this adjustment cycle, highlighting its attractive valuation for allocation.
Note: The annual historical returns for the Hang Seng Hong Kong Stock Connect Innovative Drug Selection Index from 2021 to 2025 were: -22.72%, -16.48%, -19.76%, -14.16%, and 66.32%. Past performance does not indicate future results.
Returning to the fundamental investment thesis, the innovative drug sector has solid fundamentals. Business development and overseas licensing deals exceeded $60 billion in Q1 2026, with Hengrui's landmark $15.2 billion platform transaction signaling an industry upgrade. Policy support is evident through optimized initial pricing mechanisms and better linkage between the national reimbursement and commercial insurance catalogs. Overall, the Hong Kong Stock Connect innovative drug sector has entered a profitability phase.
On the event front, the 2026 American Society of Clinical Oncology (ASCO) Annual Meeting begins tomorrow in Chicago. It is reported that Chinese researchers will lead 95 studies selected for important sessions, including oral presentations, rapid oral sessions, clinical science symposia, and continuing education sessions. This marks a new high, increasing from 48 in 2024 and 72 in 2025.
To accumulate core innovative drug assets at low levels, consider these two key investment tools:
For pure exposure to innovative drugs, consider the Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection ETF (520880). It invests 100% in innovative drug R&D companies, with its top ten holdings accounting for over 70% of the portfolio, highlighting its focus on sector leaders. The underlying assets are Hong Kong-listed stocks, offering high volatility and T+0 trading.
For investors seeking to reduce volatility, the Huabao Pharmaceutical ETF (562050) is the only on-market fund with a unique "70% Innovative Drugs + 30% Traditional Chinese Medicine" allocation. It is a scarce offering in the market, combining the high growth potential of innovative drugs with the high dividend characteristics of traditional Chinese medicine.
Note on "the only on-market Pharmaceutical ETF Huabao (562050)": According to data from the Shanghai and Shenzhen Stock Exchanges, as of the current date, the Huabao Pharmaceutical ETF is the only ETF tracking the CSI Pharmaceutical Index in the entire market.
Note: ETF funds do not charge sales service fees. When investors subscribe for or redeem fund shares, the subscription/redemption agent broker may charge a commission of up to 0.5%, which includes related fees charged by the stock exchange and registration institutions. Please refer to the legal documents of each fund for specific fund fee rates.
Risk Disclosure: The constituent stocks of the indices mentioned are for display purposes only. Descriptions of individual stocks are not investment advice in any form and do not represent the holdings or trading动向 of any fund managed by the manager. The fund manager assesses the risk rating of the Huabao Pharmaceutical ETF and its feeder fund as R3-Medium Risk, suitable for Balanced (C3) and above investors. The risk rating for the Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection ETF and its feeder fund is assessed as 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, 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 the reader, and no responsibility is accepted for any direct or indirect losses arising from the use of this content. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. Past performance of a fund is not indicative of its future results. Fund investment carries risks.
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