On December 22, the Hong Kong Stock Connect innovative drug sector experienced its first pullback after three consecutive days of gains. The high-profile HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES (520880) fell nearly 1% in the afternoon session, with frequent intraday premiums indicating active buying interest.
Among the constituent stocks, leading innovative drug companies mostly declined. Immunotech-B and Sino Biopharmaceutical both dropped over 2%, while Everest Medicines, InnoCare Pharma, and Ascentage Pharma Group fell more than 3%.
On the policy front, Xi'an recently released the "Implementation Plan for Enhancing Biopharmaceutical Industry Capabilities (2025–2027)," which highlights breakthroughs in key drug R&D technologies, including stem cell drugs, peptide drugs, liver-targeted innovative drugs, and anesthetics. The plan also supports enterprises in developing Class I innovative drugs and clinically scarce drugs while encouraging R&D projects for Class II innovative drugs. Similar policies have been introduced this year in Beijing, Shanghai, Chongqing, and Sichuan to promote high-quality development in the innovative drug sector.
Changjiang Securities noted that the pharmaceutical industry exhibits cyclical policy trends. In recent years, comprehensive support policies for the innovative drug supply chain have been implemented, such as introducing incremental insurance funds, expanding the Class C medical insurance catalog, and streamlining clinical trial approvals within 30 days. The pharmaceutical industry, particularly innovative drugs, has entered a new cycle of policy-backed growth. Investors should focus on high-quality innovative drug assets, particularly those with "hard innovation" capabilities and strong potential for overseas expansion.
For those looking to capitalize on the dip in innovative drug stocks, the largest Hong Kong Stock Connect Innovative Drug ETF (520880) and its feeder fund (025221) are top choices. The underlying index, the Hang Seng Hong Kong Stock Connect Innovative Drug Selection Index, offers three key advantages: 1. **Pure and Comprehensive**: Excludes CXO companies, focusing solely on innovative drug R&D firms. 2. **Dominance of Leading Stocks**: The top 10 innovative drug companies account for over 72% of the index, reflecting core industry strength. 3. **Controlled Risk**: Imposes mandatory weight reductions on less liquid constituents to mitigate tail risks.
For investors seeking exposure to innovative drugs with lower volatility, the Pharmaceutical ETF (562050) and its feeder fund (024986) provide a balanced approach. This ETF tracks the top 50 A-share pharmaceutical companies, with 60% allocated to innovative drugs and 25% to traditional Chinese medicine (TCM). The TCM sector, known for stable dividends and steady performance, helps offset the volatility of innovative drugs, reducing overall portfolio fluctuations.
Data sourced from the Shanghai Stock Exchange shows that as of November 30, the Hong Kong Stock Connect Innovative Drug ETF (520880) had assets under management (AUM) of RMB 2.142 billion, with an average daily turnover of RMB 458 million since listing, making it the largest and most liquid ETF tracking its benchmark index.
**Risk Disclosure**: The Medical ETF and its feeder fund passively track the CSI Medical Index (base date: December 31, 2004; launch date: October 31, 2014). The Pharmaceutical ETF and its feeder fund track the CSI Pharmaceutical Index (base date: December 30, 2011; launch date: July 15, 2013). The Hong Kong Stock Connect Innovative Drug ETF and its feeder fund track the Hang Seng Hong Kong Stock Connect Innovative Drug Selection Index (base date: December 31, 2020; launch date: July 17, 2023). The CSI Hong Kong Stock Connect Medical Theme Index has a base date of December 31, 2018, and was launched on July 21, 2022. Constituent stocks are for illustrative purposes only and do not constitute investment advice or reflect fund holdings. The HUABAO HANG SENG HONG KONG STOCK CONNECT INNOVATIVE DRUG SELECTION TRADING OPEN ENDED INDEX SECURITIES INVES and related funds carry an R4 (medium-high risk) rating, suitable for aggressive (C4) or higher-risk investors. The Medical ETF and Pharmaceutical ETF are rated R3 (medium risk), suitable for balanced (C3) or higher-risk investors. All information provided is for reference only, and investors assume full responsibility for their decisions. Past performance does not guarantee future results. Investment involves risks.