Hong Kong's pharmaceutical sector has returned to a volatile pattern, continuing its weak performance today (March 13th) with both innovative drugs and medical sectors under pressure. The Hong Kong Stock Connect Innovative Drug ETF (520880), which focuses 100% on innovative drug R&D companies, and the Hong Kong Stock Connect Medical ETF Huabao (159137), a popular tool for T+0 trading, both fell for a third consecutive day, declining by approximately 1%. Despite the decline, trading continued at a premium, indicating sustained active buying interest.

Looking at the performance of individual innovative drug stocks, United Laboratories and Baiji Medicine-B led the declines, falling 14.13% and 11.25% respectively. Companies like Insilico Medicine and Changfeng Pharmaceutical also saw significant drops. In contrast, Lepu Biopharma-B and RemeGen managed to rise against the trend, gaining 4.46% and 3.02%.

For the week, the Hong Kong Stock Connect Innovative Drug ETF (520880) accumulated a loss of 2.87%, marking its third consecutive week of decline. Over a longer horizon, the innovative drug sector has been undergoing a correction since last September, a period now approaching six months. The underlying index for the Hong Kong Stock Connect Innovative Drug ETF (520880) has retreated more than 27% from its peak last year.

A recent report from Founder Securities suggests that now is an opportune time to increase focus and allocation to the innovative drug sector. The sector may have found a阶段性 bottom, supported by a confluence of four factors: policy support, accelerating overseas expansion, profit realization, and clinical catalysts, presenting a high value-for-money investment opportunity.

1. Policy Support: The biopharmaceutical industry has been included as one of the nation's "Six Emerging Pillar Industries," significantly elevating its strategic importance. 2. Accelerated Overseas Expansion: So far in Q1 2026, the value of License-out deals has approached nearly half of the total for the entire year of 2025. 3. Profit Realization: Leading companies like BeiGene have officially entered a profit cycle, suggesting a potential valuation shift from Price-to-Sales (PS) to Price-to-Earnings (PE) ratios, which could significantly lift overall valuation levels. 4. Clinical Catalysts: The first half of the year features a dense schedule of major academic conferences such as ELCC, AACR, and ASCO, where the clinical value of drug pipelines will be further demonstrated.

Strategically, Founder Securities believes that after six months of significant correction, the innovative drug sector has shed its excesses. The market's reaction to Business Development (BD) news is showing positive changes. Market sentiment is shifting from being driven by overextended expectations to being driven by fundamentals. The recommendation is to prioritize leading companies with strong commercial capabilities, while also considering those with new technology platforms and differentiated pipelines.

To capture the potential rebound opportunity in leading innovative drug companies, investors can consider the Hong Kong Stock Connect Innovative Drug ETF (520880) and its corresponding feeder fund (025221). This ETF provides 100% exposure to innovative drug R&D companies, with its top ten holdings accounting for over 70% of the portfolio, highlighting its focus on sector leaders.

[Special Note on Rebalancing for Hong Kong Stock Connect Innovative Drug ETF (520880)] Last Monday (March 9th), the rebalancing of the ETF's underlying index (Hang Seng Hong Kong Stock Connect Innovative Drug Selection Index) took effect. The rebalance involved the addition of 13 new constituents with zero removals, increasing the total number of constituents to 50. Post-rebalancing, the index's relative advantages have been further strengthened: - More Updated! Newly eligible innovative drug stocks are included promptly, ahead of most peer indices. - More Comprehensive! With full coverage of 50 innovative drug R&D companies, it is the most comprehensive Hong Kong Stock Connect index for this sector.

For investors看好 the opportunities across the entire innovative drug industry chain, the Hong Kong Stock Connect Medical ETF Huabao (159137) is also worth attention. It has nearly 40% exposure to CXO (Contract Research, Development, and Manufacturing Organizations) and also covers hot themes like AI healthcare, brain-computer interfaces, and high-end medical devices. Among its 50 constituents, 41 are unique listings available only in Hong Kong and not on the A-share market.

MACD golden cross signals have formed, indicating potential upward momentum for certain stocks.