On September 3rd, as market volatility intensified and Hong Kong's three major indices collectively declined, the innovative drug sector bucked the trend with strong gains throughout the trading session, establishing itself as one of the strongest themes amid market turbulence. The high-purity, high-beta Hong Kong Stock Connect Innovative Drug ETF (520880) saw intraday gains exceeding 2%, closing up 1.22% for its fourth consecutive daily gain, with trading volume surpassing 700 million yuan.
Leading sector constituents posted broad-based strength, with Corden Pharma-B surging over 6% intraday to reach new historical highs. CSPC Pharmaceutical Group rose over 4%, while 3SBio gained more than 2%. China Biologic Products Holdings, Innovent Biologics, and others followed with gains exceeding 1%.
Reviewing recent performance, the innovative drug sector entered a sideways consolidation phase during August due to limited BD licensing catalysts and the "siphoning effect" from technology themes. Entering September, multiple catalysts are expected to support the sector's return to market leadership.
From an industry opportunity perspective, September maintains elevated expectations for Federal Reserve rate cuts. Once overseas markets begin a new rate-cutting cycle, significantly improved investment and financing environments should drive new industry breakthroughs and "blockbuster drugs" globally. This would create a synchronized boom cycle for both Chinese and US innovative drug industries, with China's deep participation in the global supply chain positioning it to fully benefit from the global innovation cycle.
Data shows that since the beginning of the year, domestic innovative drug outbound licensing deals have reached 83 transactions, approaching last year's full-year total with a 57% year-over-year increase. The total transaction value reached $84.531 billion, far exceeding last year's full-year scale of $48.813 billion, representing a 185% surge that fully demonstrates the global R&D competitiveness and market recognition of domestic innovative drugs.
In terms of event catalysts, the 2025 World Conference on Lung Cancer (WCLC) will be held from September 6-9. Chinese scholars will present 35 oral presentations at this conference, with clinical data disclosures from domestic new drugs worth anticipating.
The second half of the year will also feature a series of major conferences including the European Society for Medical Oncology Congress and the American Society of Hematology Annual Meeting, all featuring key clinical data readouts from Chinese innovative drugs. Combined with the arrival of peak MNC licensing season for overseas Big Pharma companies at year-end (multiple Chinese potential best-in-class candidates are in late-stage negotiations), analysts believe the innovative drug sector could experience a feast of opportunities similar to the "stellar performance of Chinese innovative drug data" witnessed at the American Society of Clinical Oncology meeting in May.
For participating in innovative drug opportunities, tracking target purity is crucial. Notably, the Hang Seng Hong Kong Stock Connect Select Innovative Drug Index tracked by the Hong Kong Stock Connect Innovative Drug ETF (520880) is set to revise its compilation methodology, explicitly excluding companies whose main business involves CXO services, focusing instead on innovative drug R&D enterprises to become a truly 100% pure innovative drug index. This revision will officially take effect on September 8th.
Note: The above individual stocks are all among the top 15 weighted constituents of the Hang Seng Hong Kong Stock Connect Select Innovative Drug Index and are presented for display purposes only. Individual stock descriptions do not constitute any form of investment advice and do not represent holding information or trading activities of any funds managed by the manager.
Year-to-date, the Hang Seng Hong Kong Stock Connect Select Innovative Drug Index tracked by the Hong Kong Stock Connect Innovative Drug ETF (520880) has demonstrated outstanding elasticity among similar indices. As of today, its cumulative year-to-date gain reached 118.95%, leading various innovative drug indices.
The Hang Seng Hong Kong Stock Connect Select Innovative Drug Index has a base date of December 31, 2020, and publication date of July 17, 2023. Since publication, the index's complete annual returns were: 2021: -22.72%; 2022: -16.48%; 2023: -19.76%; 2024: -14.16%. Index constituent composition is adjusted timely according to compilation rules, and historical backtesting performance does not predict future index performance.
Alongside the recent market rally, capital flows into the Hong Kong Stock Connect Innovative Drug ETF (520880) have heated up again. Shanghai Stock Exchange data shows the ETF recorded net inflows of 68.79 million yuan in the latest trading day, with current fund assets under management at 1.18 billion yuan and average daily trading volume of nearly 500 million yuan since listing, making it the largest and most liquid ETF tracking the Hang Seng Hong Kong Stock Connect Select Innovative Drug Index.
Reminder: Recent market volatility may be substantial, and short-term price movements do not predict future performance. Investors must make rational investment decisions based on their financial situation and risk tolerance, paying close attention to position sizing and risk management.
Risk Warning: The Hong Kong Stock Connect Innovative Drug ETF passively tracks the Hang Seng Hong Kong Stock Connect Select Innovative Drug Index, which has a base date of December 31, 2020, and publication date of July 17, 2023. Index constituent composition is adjusted timely according to compilation rules. Index constituents mentioned in this article are for display purposes only. Individual stock descriptions do not constitute any form of investment advice and do not represent holding information or trading activities of any funds managed by the manager. The fund manager assesses this fund's risk level as R4-Medium-High Risk, suitable for Aggressive (C4) and above investors. Any information appearing in this article (including but not limited to individual stocks, commentary, predictions, charts, indicators, theories, any form of expression, etc.) is for reference only. Investors must take responsibility for any autonomous investment decisions. Furthermore, any views, analyses, and predictions in this article do not constitute investment advice in any form for readers and bear no responsibility for any direct or indirect losses arising from the use of this content. Performance of other funds managed by the fund manager does not guarantee this fund's performance. Past performance does not represent future results. Fund investment involves risks and requires caution.