On August 18, the CXO sector continued its strong momentum, leading gains in the healthcare segment with major players breaking through key levels. WuXi AppTec hit a fresh historical high on the A-share market while its H-shares closed at an all-time high, WuXi Biologics climbed 5.24% to a one-year peak, WuXi XDC advanced 7.54% to a six-month high, and both GenScript Biotech and Pharmaron reached three-year highs across their A and H shares.

Exchange-traded funds with high CXO exposure continued their upward trajectory. The Hong Kong Stock Connect Healthcare ETF (159137) saw its underlying index, which holds the highest CXO weight in the market at 52.5%, push the fund's trading price up 1.25% to a five-month closing high. Meanwhile, the Healthcare ETF (512170), the largest of its kind by assets, with over 30% CXO concentration, has now logged seven gains in eight sessions.

Since late June, both the Hong Kong Stock Connect Healthcare ETF (159137) and Healthcare ETF (512170) have traced a V-shaped pattern on daily charts. Fund manager Zhang Fang noted that at this juncture, the A-share and Hong Kong healthcare sectors have transitioned from a phase of correction from absolute undervaluation into a stage of interim earnings delivery and policy catalyst validation, with valuation appeal and industry momentum still supporting allocation.

On the earnings front, catalysts are building. WuXi AppTec surpassed the 10 billion yuan mark in net profit for the first time in a half-year period and significantly raised its full-year guidance. Pharmaron posted second-quarter revenue growth of 19.38% year-over-year and adjusted profit growth of 22.3%. Joinn Laboratories projected a surge in first-half net profit attributable to shareholders of between 884.9% and 1377.4% year-over-year.

Policy support is reinforcing the innovative drug theme. Expert reviews for the 2026 medical insurance drug catalog and commercial insurance innovative drug catalog have been completed, with a batch of products recognized for clinical value and innovation advancing to stages such as tentative negotiations and renewals. Mechanisms including the dual-track of medical insurance and commercial insurance, along with price protection for innovative drugs, continue to improve industry expectations.

The AI for Science (AI4S) trend in healthcare is adding further momentum. A research note from Zhongtai Securities indicates that the pathway for AI4S to translate into order growth across the full CXO chain is logical and could drive a broad valuation uplift for the sector.

From an allocation perspective, the A-share and Hong Kong healthcare sectors have been recovering recently, driven by CXO strength, but after years of prior corrections, current levels still offer compelling valuation appeal for investors.

For those looking to ride the primary uptrend, two key tools stand out. The Hong Kong Stock Connect Healthcare ETF (159137) offers an underlying index with over 50% CXO exposure, the highest in the market, including more than 38% weight in WuXi-affiliated companies, while also covering rare leaders in innovative drugs, medical devices, internet healthcare, and AI-driven pharma. It tracks Hong Kong-listed assets, providing high elasticity and T+0 trading, with an off-exchange feeder fund available under code 026922.

The Healthcare ETF (512170), the largest medical and healthcare ETF by asset size, holds over 30% CXO concentration and focuses on medical devices and healthcare services, while also including brain-computer interface and AI healthcare themes. Its off-exchange feeder fund is available under code 012323.

Data sources include the Shanghai and Shenzhen stock exchanges and China Securities Index. Institutional views are drawn from Zhongtai Securities' August 17 report on CXO sector earnings recovery and AI catalysts. Notably, neither ETF charges a sales service fee, and fee details are outlined in each fund's legal documents.

Risk disclosures: The CSI Healthcare Index posted annual returns and annualized volatilities of -14.71%/34.42% in 2021, -25.10%/29.45% in 2022, -24.25%/18.63% in 2023, -17.16%/36.02% in 2024, and 3.08%/19.73% in 2025. The CSI Hong Kong Stock Connect Healthcare Theme Index recorded -28.26%/38.74%, -15.99%/46.88%, -32.92%/32.96%, -25.08%/44.18%, and 48.20%/32.72% over the same period. Index constituent compositions adjust according to index methodology, and backtested performance does not indicate future index results. Index constituents are shown for illustrative purposes only, and any stock descriptions do not constitute investment advice or reflect the holdings or trading activity of any fund under management. The fund manager rates the Hong Kong Stock Connect Healthcare ETF and its feeder fund as R4 (medium-high risk), suitable for aggressive (C4) investors and above, while the Healthcare ETF is rated R3 (medium risk), suitable for balanced (C3) investors and above. Any information in this article, including stocks, comments, forecasts, charts, indicators, theories, or other expressions, is for reference only. Investors bear full responsibility for their own investment decisions. Any views, analyses, or predictions herein do not constitute investment advice and do not incur liability for direct or indirect losses arising from the use of this content. Fund investing carries risks, and past performance does not guarantee future returns. Performance of other funds under the same manager does not ensure this fund's performance. Invest in funds with caution.