On July 3rd, Hong Kong-listed healthcare stocks continued their strong advance. The pure-play innovative drug tracker—HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880), and the HUABAO HK Connect Healthcare ETF (159137), which has over 50% exposure to CXO companies, both surged more than 4%, securing their third consecutive day of gains.
The Hong Kong Connect innovative drug sector opened higher and extended gains, with IMMUNOTECH-B (06978) leading the charge, up 9.68%. Heavyweights like CSPC Pharmaceutical Group Limited, CanSino Biologics Inc., and 3SBio Inc. also posted significant collective gains. The HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880) rose 4.76%, closing at the day's high. For the week, it accumulated a gain of 16.4%, substantially outperforming the Hang Seng Index's 2.99% rise.
The Hong Kong Connect healthcare theme strengthened in tandem, with broad-based gains across CXO, innovative drugs, medical devices, and internet healthcare. Stocks like MicroPort MedBot (B) and Asymchem Laboratories surged 16.05% and 11.46% respectively, while WuXi Biologics (Cayman) Inc. and JD Health International Inc. rose 4.74% and 5.68%. The HUABAO HK Connect Healthcare ETF (159137) climbed as much as 5% in the afternoon session before closing up 4.45%. It accumulated an 11.77% gain for the week, successfully marking a weekly winning streak.
Key Catalysts and Market Developments
On the news front, the 12th batch of the national drug procurement program clarified that it will only include mature generic drugs, excluding patented innovative drugs from the list. This signals a shift in industry policy focus from cost control and price reductions to supporting high-quality development and strengthening the sector. Furthermore, the two-tiered payment system, characterized by "basic medical insurance for basic coverage and commercial insurance supplementing high-end needs," has recently entered a substantive implementation phase, accompanied by new mechanisms like a pre-application system and an 8-year price protection period.
Positive developments also emerged in innovative drug business development (BD). CSPC Pharmaceutical Group Limited entered a strategic collaboration with AstraZeneca for a novel small interfering RNA drug, with the potential to receive up to $1.74 billion in milestone payments. According to statistics, the total value of Chinese pharmaceutical BD deals reached $95.6 billion as of June 10, 2026, accounting for 62.4% of the global total.
Assessing the Market Turnaround
Taking a longer-term view, Hong Kong healthcare stocks have experienced sustained volatility and a downtrend throughout the year. As recently as June 22nd, the intraday prices of both the HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880) and the HUABAO HK Connect Healthcare ETF (159137) hit historic lows. This week's dramatic reversal prompts the question: has the inflection point arrived?
Analysis suggests that the innovative drug sector's fundamentals and stock prices had diverged over the past period, with valuations remaining at low levels. Since June, numerous listed companies have initiated intensive share buybacks or increased holdings, highlighting strong bottoming signals for the sector. It is posited that with multiple fundamental factors aligning, the innovative drug sector may be stabilizing at a bottom and embarking on a recovery trajectory. The window for a revaluation of core Hong Kong Connect innovative drug leaders may have arrived, offering ample room for valuation expansion.
Further analysis indicates that after the short-term negative impact of anti-corruption policies and pessimistic expectations have been fully priced in, the healthcare sector is poised to become a key focus for capital seeking undervalued, policy-supported, oversold, and defensive growth opportunities. Strategically, a sustained focus on the two high-conviction themes of innovative drugs and their industrial chain is recommended, while also monitoring thematic rotations and better-than-expected Q2 earnings.
Instruments for Capturing the Rebound
To capture the rebound opportunity in Hong Kong Connect healthcare, attention is drawn to two T+0 trading instruments. For a pure play on innovative drugs, the HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880) is highlighted, which excludes CXO and allocates 100% to innovative drug R&D companies, with over 70% of its holdings concentrated in innovative drug leaders.
For exposure to both "Innovative Drugs + CXO," the HUABAO HK Connect Healthcare ETF (159137) is noted, with allocations of approximately 50% to CXO, 20% to innovative drugs, and the remaining 30% to leading medical device and AI healthcare stocks.
Risk Disclosures: Index constituents are shown for illustrative purposes only. Descriptions of individual stocks do not constitute investment advice of any form and are not indicative of the holdings or trading activities of any fund managed by the asset manager. The fund manager assesses the risk rating of the aforementioned ETFs and their feeder funds as R4 (Medium-High Risk), suitable for aggressive (C4) and above investors. Any information appearing herein is for reference only. Investors must be responsible for any independent investment decisions. The views, analyses, and forecasts herein do not constitute investment advice to readers. Past performance of funds is not a guarantee of future results. Fund investment carries risks.