On November 14, the broader market experienced a deep correction, with the Shanghai Composite Index dropping 0.97% to close at 3,990.39 points, while the ChiNext Index plunged 2.82%, erasing the previous day’s gains. Amid the volatility, the pharmaceutical sector demonstrated resilience. The Pharma ETF (562050), the only ETF tracking the pharmaceutical index, briefly rose 1% intraday before closing with a modest 0.18% decline, significantly outperforming the market.

The Pharma ETF (562050) covers 50 leading pharmaceutical companies, with a focus on innovative drugs while also including traditional Chinese medicine (TCM). Today, TCM leader Yiling Pharmaceutical led gains with a 3.14% rise, while Tongrentang also closed higher. Some innovative drug stocks showed strength, with Gan & Lee Pharmaceuticals and Chengdu Kanghong Pharmaceutical gaining around 2%. Declines in heavyweights like Hengrui Pharmaceuticals, BeiGene, and Pien Tze Huang weighed on the sector.

This week, the A-share pharmaceutical sector largely rebounded, with the Pharma ETF (562050) gaining 3.33% cumulatively, significantly outperforming the broader market (Shanghai Composite: -0.18%; ChiNext: -3.01%).

Zooming out, the pharmaceutical sector underwent a two-month correction starting in September, retreating over 10% from its peak. However, this week’s recovery coincided with increased inflows into healthcare ETFs, totaling nearly ¥2.5 billion. Is this a sign of renewed opportunities in the sector?

Pharma ETF (562050) manager Zhang Fang provided timely insights: - Year-end typically marks the peak season for biopharma M&A in the U.S., with the JPM Conference serving as an additional catalyst early next year. - China’s recent医保谈判 (medical insurance negotiations) continued to favor innovative drugs. Against the backdrop of potential Fed rate cuts, upside potential for innovative drugs may now outweigh downside risks. - Fundamental improvements are emerging. Q3 earnings reports show a broad recovery in the innovative drug segment, with several companies turning profitable. BeiGene’s standout performance reflects the industry’s accelerated transition from R&D investment to commercial harvest. - The sector’s long-term thesis remains intact: Pharmaceuticals represent an essential market with vast growth potential. China’s aging population drives sustained demand, particularly for chronic disease treatments. Rising healthcare awareness further supports industry growth.

For exposure, investors may consider the Pharma ETF (562050) and its feeder fund (024986). The underlying index comprises 50 leading A-share pharma companies, with ~25% weight in TCM stocks—which offer relatively high dividends and stability—helping offset innovative drugs’ volatility and reducing overall index fluctuations.

Data sources: SSE, SZSE, and CSI Index Co. (market data as of 2025.11.14; other data as of 2025.11.13).

Risk disclosure: The Pharma ETF tracks the CSI Pharmaceutical Index (base date: 2011.12.30; launch date: 2013.7.15). Historical annual returns (2020-2024): 41.61%, -9.10%, -21.09%, -3.70%, -6.53%. Index constituents may change, and past performance doesn’t guarantee future results. Stock mentions are illustrative and not investment advice or indicative of fund holdings. The fund carries an R3 (moderate risk) rating, suitable for balanced (C3) or higher risk-profile investors. Investment decisions based on this information are at investors’ own risk. No liability is assumed for direct/indirect losses from using this content.