Innovent Biologics' impressive $10 billion business development (BD) deal has ignited a surge in interest in innovative pharmaceuticals. On October 22, the company recorded a total trading volume of HK$6.288 billion, marking a historic high.

Despite an unexpected decline in the secondary market, bottom-fishing investors are taking action. Data shows the innovative drug ETF under Hong Kong Stock Connect (520880) attracted over HK$75.86 million in a single day, continuing a streak of net inflows for four consecutive days, totaling over HK$123 million.

Analysts have noted that the innovative drug sector has been impacted by market risk aversion, preventing significant gains. However, the current configuration value has become especially prominent. Historically, the fourth quarter has been when BD deals are commonly finalized.

Brokerage firms have indicated that the resurgence of BD transactions in the innovative drug sector alleviates market concerns. The long-term industrial logic for Chinese innovative drug BDs expanding overseas remains unchanged, and with the year-end approaching, BD activity is expected to remain robust. Chinese innovative drugs currently under research have shown global competitiveness, suggesting further commercialization potential for the sector.

Looking ahead, Feng Chen, the fund manager of the innovative drug ETF (520880), believes that the market for innovative drugs is transitioning from a boom phase where all companies saw gains to a stage focused on "quality factors." Only truly viable companies with excellent clinical data and commercialization capability will achieve financial success and leverage overseas business opportunities for a "Davis Double."

【Emerging Forces in Innovative Drugs — Hong Kong Stock Connect Innovative Drug ETF (520880): Purely Innovative Drug Focused on True Leaders, with High Elasticity in HK Stock Market】 The Hong Kong Stock Connect Innovative Drug ETF (520880) passively tracks the Hang Seng Hong Kong Stock Connect Innovative Drug Select Index, which is entirely composed of innovative drug R&D companies and excludes CXO firms. Over 70% of its allocation is focused on major innovative drug leaders, making it a precise representation of the core strength in innovative drugs. External investors can consider its connected fund: 025221.

So far this year, the Hang Seng Hong Kong Stock Connect Innovative Drug Select Index has shown greater elasticity and stronger momentum compared to similar indices, recording a year-to-date increase of 108.14% by the end of September, leading various innovative drug indices.

The Hong Kong Stock Connect Innovative Drug ETF (520880) is the first ETF to track this index in the market. By the end of September, the fund had a size of HK$1.806 billion and an average daily trading volume of HK$493 million, making it the largest in size and most liquid ETF in its peer group.

Risk Warning: The Hong Kong Stock Connect Innovative Drug ETF passively tracks the Hang Seng Hong Kong Stock Connect Innovative Drug Select Index, which had a base date of December 31, 2020, with a publication date of July 17, 2023. Since the index's inception, its annual performance has been as follows: 2021: -22.72%; 2022: -16.48%; 2023: -19.76%; 2024: -14.16%. The composition of index constituents is adjusted according to the index compilation rules, and past performance is not indicative of future performance. The stocks mentioned are for demonstration purposes only and do not constitute any form of investment advice or represent any fund's holdings or trading direction managed by the fund manager. The risk level of the Hong Kong Stock Connect Innovative Drug ETF, as assessed by the fund manager, is classified as R4 - medium to high risk, suitable for aggressive (C4) investors and above. All information in this article (including but not limited to individual stocks, comments, forecasts, charts, indicators, theories, or any form of statement) is for reference only, and investors must take responsibility for any investment decisions they make independently. Additionally, any opinions or analyses expressed in this article do not constitute investment advice and the fund manager bears no responsibility for any direct or indirect losses arising from the use of this content. The performance of other funds managed by the fund manager is not a guarantee of the fund's performance, and past performance does not predict future results. Investing in funds involves risks and requires caution.

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