How long can Hong Kong pharmaceutical stocks stay strong?

《Why Can XBI Rise Despite Interest Rate Hike Expectations?》A few days ago, we noted that the U.S. stock biopharmaceutical sector has been rising steadily this year, but Hong Kong-listed innovative drug stocks have suffered significant declines. This is due to differences in underlying fundamentals and the fact that Hong Kong stocks are more susceptible to the impact of interest rate hikes.

However, China's innovative drugs will also benefit from the major trends mentioned in our previous article, such as the empowerment of AI in R&D. Moreover, more Chinese innovative drug companies are increasingly attracting attention from large international MNCs, with more pipelines being acquired by overseas pharmaceutical giants.

Overall, the quality of Hong Kong-listed innovative drug assets is uneven, making the advantage of active stock selection crucial. Therefore, it's important to rely on the professional judgment of fund managers to select individual stocks. On the other hand, if you want to invest via ETFs, the differences among Hong Kong-listed innovative drug-related ETFs are quite significant. For example, the Stock Connect Innovative Drug ETF (Huitianfu), which tracks the Guozheng Stock Connect Innovative Drug Index, does not include CXO stocks (CXO was removed from the index level last year). It is a relatively pure index investing in pure drug companies.

However, within the entire innovative drug industry, upstream clinical research organizations (CROs) and CXO-related companies remain an important part. They not only handle a large number of domestic innovative drug-related orders but also have extensive collaborations with large international MNC pharmaceutical companies. If you want to focus on this aspect, the Hong Kong Stock Healthcare ETF (Yongying), which tracks the CSI Stock Connect Healthcare Theme Index, currently has the highest CXO concentration among all market indices.

It's hard to say in the short term whether pure innovative drug companies or CXO-related companies will see higher gains. Therefore, at this time, it is more suitable to allocate through these two ETFs, each having its own purity advantage.

(Not for investment advice)

$Yinhua CNI HK Connect Innovative Drugs ETF(159567.SZ)  $Harvest S&P Biotechnology Selected Industry ETF(QDII)(159502.SZ) $SPDR S&P Biotech(XBI.US)  $China Universal CNI HK Connect Innovative Drugs Industry ETF(159570.SZ)  $MaxWealth CSI Hong Kong Connect Medical Treatment Thematic ETF(159366.SZ)