On June 25th, A-share and H-share innovative drug stocks once again entered a period of adjustment. The Huabao Pharma ETF (562050), heavily invested in A-share innovative drugs, and the fully-invested Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) both saw intraday declines exceeding 2%.

The pharmaceutical sector in the A-share market experienced widespread declines. Core heavyweight stock Jiangsu Hengrui Pharmaceuticals Co., Ltd. fell 1.5%, while Zhejiang NHU Co., Ltd. and Shanghai Fosun Pharmaceutical (Group) Co., Ltd. dropped 3%. The sole on-market ETF tracking the pharmaceutical sector, the Huabao Pharma ETF (562050), ended its four-day winning streak. Notably, 562050 has recently seen frequent capital inflows, attracting over ten million yuan in the past ten days.

Hong Kong Stock Connect innovative drug stocks opened lower and continued to decline. The Huabao Hong Kong Stock Connect Innovative Drug ETF (520880), which is 100% invested in innovative drug R&D targets, erased yesterday's gains. All major weighted constituents fell, with Innovent Biologics, Inc. down over 2%, and CSPC Pharmaceutical Group Limited, Akeso, Inc., and Sino Biopharmaceutical Limited all declining more than 3%.

Market Analysis and Outlook

Analysis indicates the current market remains fragmented. Technology companies, represented by AI, have absorbed significant liquidity, while stock prices of some fundamentally solid innovative drug companies with promising growth prospects continue to face pressure, leading to a divergence between stock prices and fundamentals. Against the backdrop of a sustained positive industry trend, this extreme divergence may present better opportunities to invest in high-quality innovative drug companies.

Investment Considerations and Strategies

It is important to note that although both A-share and H-share innovative drug sectors have corrected to near their recent lows, short-term volatility remains high. Investors optimistic about the medium-to-long-term investment value of innovative drugs should be mindful of risks and avoid blindly going "all-in" to catch the bottom. Instead, they might consider strategies like buying on dips in batches or employing grid trading tactics.

Key Investment Tools for Core Innovative Drug Assets

For investing in pure innovative drug plays, consider the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880). It is 100% invested in innovative drug R&D companies, with its top ten holdings accounting for over 70%, highlighting its focus on industry leaders. Its underlying assets are Hong Kong-listed stocks, offering high volatility and T+0 settlement.

For those seeking to reduce volatility, the sole on-market Huabao Pharma ETF (562050) offers a unique "75% innovative drugs + 25% traditional Chinese medicine" allocation, a rare combination in the market that blends the high growth potential of innovative drugs with the high dividend characteristics of traditional Chinese medicine stocks.

Data is sourced from the Shanghai, Shenzhen, and Hong Kong stock exchanges, China Securities Index Co., Ltd., and Hang Seng Indexes Company.

Note: ETF funds do not charge sales service fees. When subscribing for or redeeming fund units, subscription/redemption agents may charge a commission of up to 0.5%, which includes relevant fees charged by stock exchanges and registration institutions. Please refer to the legal documents of each fund for specific fund fee rates.

Risk Disclosure: Constituent stocks of the indices mentioned are for illustrative purposes only. Descriptions of individual stocks do not constitute investment advice in any form and do not represent the holdings information or trading动向 of any fund managed by the fund manager. The fund manager assesses the risk rating of the Huabao Pharma ETF and its feeder fund as R3-Medium Risk, suitable for Balanced (C3) and above investors. The risk rating of the Huabao Hong Kong Stock Connect Innovative Drug ETF and its feeder fund is assessed as R4-Medium to High Risk, suitable for Aggressive (C4) and above investors. Any information appearing in this article (including but not limited to individual stocks, commentary, forecasts, charts, indicators, theories, and expressions of any form) is for reference only. Investors are responsible for any independent investment decisions. Furthermore, any views, analysis, or forecasts herein do not constitute investment advice of any kind to the reader, and no liability is accepted for any direct or indirect losses arising from the use of this content. The performance of other funds managed by the fund manager does not guarantee the performance of these funds. Past fund performance is not indicative of future results. Fund investment carries risks.