On the afternoon of November 18, Hong Kong's innovative drug stocks accelerated their decline, with the HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880), which focuses solely on innovative drug R&D, falling over 2% and breaking below its 10-day moving average. Intraday premiums reappeared, suggesting bargain-hunting funds may be entering the market amid the dip.

Key heavyweight stocks led the downturn, with Immunotech-B plunging 4.5%, followed by declines in Sansheng Pharmaceuticals, Sino Biopharmaceutical, and CSPC Pharmaceutical Group. BeiGene, another core constituent, initially surged 5.5% in early trading, briefly lifting the HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880) by 1.5%, but later retreated alongside the broader market.

On the news front, BeiGene announced positive results from its Phase III HERIZON-GEA-01 study on November 17. The trial evaluated the efficacy and safety of its HER2-targeted bispecific antibody, zenocutuzumab, either as monotherapy or in combination with the PD-1 inhibitor tislelizumab, as a first-line treatment for HER2-positive locally advanced or metastatic gastroesophageal adenocarcinoma.

How should investors view the current state of Hong Kong's innovative drug sector?

Some institutional analysts note that the innovative drug index has corrected approximately 20% from its peak, with certain companies experiencing declines of 30%-50%. Market sentiment has shifted from excessive optimism in August and September to a more pessimistic outlook. However, valuations for many innovative drug firms have returned to reasonable or even undervalued levels. At this juncture, there is reason for renewed optimism—Chinese innovative drug companies are reshaping the global R&D ecosystem. Despite short-term volatility, the sector is poised for long-term growth.

For investors looking to capitalize on this deep correction, the HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880) and its linked fund (025221) stand out as top choices. The underlying index, the Hang Seng Hong Kong Stock Connect Innovative Drug Selection Index, offers three key advantages: 1. **Pure Exposure**: Excludes CXO firms, providing focused exposure to innovative drug R&D companies. 2. **Dominance of Leaders**: The top 10 constituents account for over 71% of the index, reflecting the sector's core strength. 3. **Risk Control**: Imposes caps on illiquid stocks to mitigate tail risks.

Data from the Shanghai Stock Exchange shows that as of November 12, the HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880) had assets under management of RMB 2.128 billion, with average daily turnover of RMB 466 million since listing, making it the largest and most liquid ETF tracking this index.

**Risk Disclosure**: The HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES passively tracks the Hang Seng Hong Kong Stock Connect Innovative Drug Selection Index (base date: December 31, 2020; launch date: July 17, 2023). The index's annual returns since inception are: -22.72% in 2021, -16.48% in 2022, -19.76% in 2023, and -14.16% in 2024. Constituents are adjusted per index methodology, and past performance does not guarantee future results. Stock mentions are for illustrative purposes only and do not constitute investment advice or reflect fund holdings. The fund is rated R4 (medium-high risk) and suitable for aggressive (C4) or higher-risk investors. Investors must bear responsibility for independent decisions. Views expressed do not constitute recommendations, and no liability is assumed for losses arising from reliance on this content. Past fund performance does not guarantee future results; investing involves risks.