On Wednesday, July 22nd, the three major A-share indices showed divergent movements. The Shanghai Composite Index consolidated, while the ChiNext Index, which surged yesterday, performed relatively weaker today. The combined turnover for the Shanghai, Shenzhen, and Beijing markets was 2.67 trillion yuan, a decrease of over 300 billion yuan from the previous session.
In terms of sector performance, pro-cyclical sectors and low-priced rebound plays rose together, marking a second consecutive day of gains. The in-market price of Huabao CSI Nonferrous Metals ETF (159876), the largest and most liquid ETF tracking its benchmark index, gapped up with a significant rise of 3.29%. Meanwhile, Huabao CSI Segmented Chemicals Industry Theme ETF (516020), whose constituent stocks cover popular themes like AI computing power, anti-involution, robotics, and new energy, saw its in-market price climb as much as 1.97%.
Significant news emerged regarding innovative drugs making a comeback! A novel drug targeting a new mechanism, developed through global synchronized R&D, has received approval in China first. The in-market price of Huabao HK Connect Innovative Drug ETF (520880), which invests 100% in innovative drug R&D companies, surged up to 3% intraday before closing 1.11% higher. Since the beginning of July, its daily chart may have formed a volatile upward trend.
Notably, besides broad-based ETFs, Hong Kong stock ETFs have recently become a popular destination for capital inflows. Huabao HK Connect Information Technology ETF (159131), which aggregates Hong Kong stocks with a composition of roughly "85% hardware + 15% software", saw net subscriptions exceeding 300 million shares for the day, following net inflows of 196 million yuan just yesterday. Huabao HK Internet ETF (513770), heavily weighted in internet giants, has attracted a continuous influx of 253 million yuan over the past three days.
Looking Ahead to Market Trends
Looking ahead, GF Securities believes the foundation for A-share market resilience remains solid, with AI still being the most important thematic trend. As the second half of the year enters the interim report verification window, the earnings delivery of overseas computing power chains becomes a key pricing factor. Structural opportunities in technology and growth assets still exist, but the market trend may shift from a one-sided rally to a phase of higher volatility and greater reliance on earnings confirmation. This precisely illustrates the fundamental difference between this cycle and the 2015 leverage-driven bull market or the late 1990s tech bubble—this cycle follows a healthy "two steps forward, one step back" rhythm, rather than being a "one-off deal" that exhausts future potential. After short-term sentiment fluctuations, returning to tracking and verifying fundamentals is key, with the second major inflection point of 2026 not far off.
Analysis of Key Sector ETFs
Nonferrous Metals ETF Surges for Second Day
The nonferrous metals sector rose sharply for a second consecutive day. The in-market price of Huabao CSI Nonferrous Metals ETF (159876), the largest and most liquid ETF tracking its benchmark index, climbed 3.29% following a 4.75% gain yesterday, decisively reclaiming its 10-day moving average.
Among its constituents, Shandong Gold International Mining hit the daily limit-up, while Shengmu Mining, Western Mining, Chifeng Gold, and Xingye Yintin touched the limit intraday, closing with strong gains of 9.18%, 7.76%, 7.72%, and 7.12% respectively. Major weighted stocks also advanced, with Zijin Mining Group rising over 6%, China Molybdenum gaining more than 4%, and Aluminum Corporation of China (Chalco) up nearly 3%.
What triggered this sudden surge in the nonferrous metals sector? Firstly, on a macro level, after U.S. June inflation data (CPI and PPI) both fell short of expectations, expectations for Federal Reserve rate hikes cooled dramatically. CME's "FedWatch Tool" indicates that maintaining the current rate is now the market's baseline expectation for the upcoming FOMC meeting. Secondly, on the earnings front, as of July 21st, among the 60 constituent stocks of the ETF's benchmark index, all 39 companies that have announced 2026 interim earnings forecasts project both profitability and growth. Zijin Mining Group leads with a projected highest net profit attributable to shareholders of 39.1 billion yuan, followed by China Molybdenum and Chalco with projections of 16.5 billion yuan and 12.2 billion yuan respectively.
Notably, spot gold has returned to the $4,100 level. The strength in international gold prices is linked to continued active gold purchases by global central banks and renewed safe-haven demand due to escalating Middle East geopolitical tensions. CITIC Securities notes that gold prices were severely oversold following the U.S.-Iran conflict, and gold stocks currently offer strong safety margins in terms of both P/E ratios and resource valuation. If expectations for rate hike trades are fully revised, gold prices could return to the $4,500–$5,000 per ounce range, with the gold sector benefiting from a combined recovery in profit expectations and valuation levels.
Huabao Fund's Index R&D and Investment Department stated that industrial and precious metals had been oversold, previously suppressed by high oil prices triggered by the U.S.-Iran conflict and a correction in the tech sector. Overall, the factors that led to the sector's correction since March may have largely dissipated. Current stable commodity prices support corporate earnings, leading companies still contribute volume growth, and sector profit certainty is high. With low valuations coupled with high growth certainty, the current period presents a quality window for allocating to the nonferrous metals sector.
For investors bullish on nonferrous metals, a straightforward approach to capture the sector's beta is through broad exposure. Huabao CSI Nonferrous Metals ETF (159876) and its feeder funds comprehensively cover industries like copper, aluminum, rare earths, gold, lithium, tungsten, molybdenum, and tin, allowing for better capture of the sector's overall beta. The ETF is also eligible for margin trading, serving as an efficient tool for a one-click allocation to the nonferrous metals sector.
Chemicals Sector Stages Strong Rebound
The chemicals sector continued its counteroffensive. Reflecting the overall movement of the sector, Huabao CSI Segmented Chemicals Industry Theme ETF (516020) quickly surged after opening, with its in-market price reaching an intraday high of 1.97% before closing up 1.48%.
Constituent stocks in sectors like phosphate chemicals, petrochemicals, and chlor-alkali led the gains. By the close, Dongfang Tieta hit the daily limit-up, while Hongda, Tongkun, and Rongsheng Petrochemical rose over 6%. Zangge Mining, Boyuan Chemical, and Huafon Chemical gained more than 5%.
Regarding sector-specific news, the agrochemical segment has shown weak market performance recently. Orient Securities attributes this to fundamental reasons: after expectations for the sustainability of the recent price increase cycle were dashed, market concerns arose about the industry returning to a long-term slump of oversupply, with few investment highlights absent further price increase catalysts. However, with strategic adjustments by multinational corporations in recent years, Chinese companies are expected to expand overseas, seizing a new period of structural growth opportunities and writing a new investment narrative for the industry.
From a valuation perspective, the chemicals sector remains at relatively low levels. Data shows that as of yesterday's close, the price-to-earnings ratio of the ETF's benchmark index was 21.74 times, situated at the 32.03% percentile over the past three years, highlighting the cost-effectiveness of medium-to-long-term allocation.
Looking forward, Orient Securities notes that the resurgence of Middle East conflicts and the blockade of the Strait of Hormuz have significantly impacted the actual operations of petrochemical and most mid-to-downstream chemical industry chains. However, leading chemical stocks have shown significant relative outperformance. Based on conditions in June, when supply chain issues were most severe, bottom scenarios for various chemical sub-sectors have already appeared. Sectors with clearer expectations for marginal improvement in the third quarter include the chemical fiber chain, titanium dioxide, and phosphate chemicals.
Guohai Securities points out that the chemicals sector has entered a favorable zone for investment. It is optimistic about the global anti-involution supply cycle and the global AI demand supercycle. As the peak season for chemicals approaches, upward demand will become a key marginal variable, enhancing the profitability of chemical enterprises. At this time, investment opportunities focusing simultaneously on demand, value, and supply should be prioritized.
To capture the rebound opportunities in the chemicals sector, utilizing Huabao CSI Segmented Chemicals Industry Theme ETF (516020) may offer higher efficiency. The ETF tracks the CSI Segmented Chemicals Industry Theme Index, with constituents covering hot themes like AI computing power, anti-involution, robotics, and new energy.
Innovative Drug Sector Sees Historic Breakthrough
Technology and innovative drug stocks have recently shown a recurring "seesaw" pattern, with tech stocks correcting after a surge and innovative drugs regaining momentum.
Huabao HK Connect Innovative Drug ETF (520880), which invests 100% in innovative drug R&D companies, opened lower but then surged straight up, testing a 3% gain intraday before paring gains to close 1.11% higher, significantly outperforming the broader market (the Hang Seng Index fell 0.95%), on elevated turnover of 629 million yuan.
Several major weighted leaders strengthened. Akeso Biopharma jumped over 8% at the open, closing up 4.55%. Sino Biopharmaceutical gained 4.7%, while BeiGene and 3SBio rose 1.81% and 2.19% respectively.
The A-share pharmaceutical sector showed mixed performance. Bright Gene Pharmaceutical led gains, up 13.14%, with Kelun Pharmaceutical rising 3.93%. However, Conba Group fell 4.2%, and traditional Chinese medicine stocks generally declined, with Pien Tze Huang down 3.48%. Huabao CSI Pharmaceutical Index ETF (562050), the only ETF in the market tracking the pharmaceutical index, tested a 2% gain intraday before retreating, ultimately closing slightly higher, successfully achieving "9 gains in 10 days".
Significant news broke on the innovative drug front. On the 21st, a novel drug targeting a new mechanism, a "selective orexin type 2 receptor agonist" developed through global synchronized R&D, received approval in China first, marking a historic breakthrough as the first global multi-center R&D original target innovative drug to be first reported and launched in China.
On the same day, former U.S. President Trump announced a plan to impose 100% tariffs on generic drugs in two years. Current policies regarding patented drugs, branded drugs, and innovative drugs will remain unchanged due to their effective implementation.
In the secondary market, the A+H innovative drug sector has been trending upward with volatility since mid-June. Guotai Haitong believes there may still be room for further gains from current levels, and sustainability can still be expected. From a relative valuation perspective, A-share ETFs heavily weighted in innovative drugs have not yet broken through their early-year highs, while the HK Connect Innovative Drug ETF remains at a relatively lower and more lagging level.
Looking forward, strong fundamental expectations exist: nine Chinese innovative drugs are expected to complete U.S. Phase III clinical trials in 2026, and if successful, will begin sales and realization in the U.S. market in 2027.
To follow the innovative drug rebound, investors can focus on two key investment tools: Huabao HK Connect Innovative Drug ETF (520880) for 100% exposure to innovative drug R&D companies with concentrated top holdings, and Huabao CSI Pharmaceutical Index ETF (562050), the market's sole ETF tracking the pharmaceutical index, offering a unique blend of "72% innovative drugs + 22% traditional Chinese medicine".
Investors are reminded that recent market volatility may be significant, and short-term price movements do not predict future performance. Investment decisions should be made rationally based on individual financial circumstances and risk tolerance, with high attention paid to position sizing and risk management.
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