Summary of Key Points
After nearly three quarters of continuous adjustment, reaching a one-year low, the innovative pharmaceutical sector witnessed a sudden surge on June 29th. Related A-share and Hong Kong stock indices and individual stocks saw significant increases, with trading volumes for pharmaceutical ETFs doubling. At the same time, there was a clear divergence in institutional attitudes towards the sector: some fund managers reduced their holdings, while others increased their positions against the trend. This shift reflects a change in industry focus from emphasizing future prospects to focusing on the actual realization of results. Fund managers believe that the current valuation of the sector is reasonable and the fundamentals are improving, making it an opportune time for medium- to long-term investment, although it is essential to select companies with genuine competitiveness.
I. The Innovative Pharmaceutical Sector's "Dramatic Turnaround in One Day": A-share and Hong Kong Stock ETFs Experience a Boom
On June 29th, the innovative pharmaceutical sector seemed to hit the "accelerator button":
- A-share Market: The Shenwan Medical Biology Index soared by 5.91%, with 55 stocks rising by more than 10% (29 of them hitting daily limit up levels), including Shu Tai Shen and Bai Ren Medical, which both increased by over 20%.
- Hong Kong Stock Market: The Hang Seng Innovative Drugs Index rose by 7.74%, with Yao Jie An Kang-B surging nearly 40%, and 8 stocks rising by more than 10%.
- ETF Performance: The Huitianfu Science and Technology Innovation Pharmaceuticals ETF increased by 11.67% in a single day, while the average performance of 55 pharmaceutical ETFs was 6.5%. Daily trading volume reached 8.9 billion yuan (doubling from the previous day), with the Yinhua Innovative Drugs ETF trading at 1.78 billion yuan (a 1.4-fold increase).
In the past month, an additional 4.2 billion yuan has been invested in pharmaceutical ETFs against the trend, with the Yinhua Innovative Drugs ETF attracting 711 million yuan in a single month and a total of 4.23 billion yuan this year—this investment indicates that market confidence in the sector is on the rise.
II. Three Quarters of Decline, and Now Institutional Divergence: Some Sell, Some Buy at Low Prices
The innovative pharmaceutical sector has been declining since the third quarter of last year, with the Hang Seng Innovative Drugs Index falling by more than 33% and hitting a one-year low on June 22nd. During this period:
- Companies' Self-Help Measures: Over 20 pharmaceutical companies have repurchased or increased their holdings since June (for example, WuXi AppTec used 1 billion yuan to repurchase nearly 10 million shares) in an attempt to stabilize stock prices.
- Divergent Institutional Positions:
- Some Reduced Holdings: Ge Lan's China Europe Healthcare Fund reduced its stake in Xin Li Tai, and Xu Yan's Dacheng Rui Xiang Fund reduced its holdings in Pu Luo Pharmaceutical.
- Some Bought at Low Prices: Bai Li Tian Heng fell by 34% this year, but China Europe Healthcare Fund and Huitianfu Innovation Pharmaceuticals increased their holdings, resulting in a nearly 40% increase in the stock's price since June.
- Contradictory Positions on the Same Stock: Tiger Medicine was increased by Xing Quan Fund but reduced by China Europe Healthcare Fund—this does not mean institutions are pessimistic about the sector; rather, they are being selective in their investments.
III. A Change in Industry Logic: From "Promising Dreams" to "Verifying Reality"
Previously, the innovative pharmaceutical sector's rise relied on promising forecasts (e.g., claiming that a drug could generate 10 billion yuan in sales). However, the market now demands proof of these claims, such as whether the drug has been approved and can actually generate profits:
- Fundamentals Have Improved: For the first time, both A-share and Hong Kong stock innovative pharmaceutical sectors reported overall profitability last year, marking a historic breakthrough. Yet, stock prices fell, creating a divergence between improving fundamentals and declining prices.
- Reasons for the Decline: Funds have shifted to sectors with faster results, such as AI and semiconductors, which see rapid quarterly order growth. Innovative pharmaceuticals, on the other hand, face longer cycles involving clinical trials, approvals, and commercialization. Additionally, high interest rates have affected the performance of these sectors, with innovative pharmaceuticals being particularly impacted.
- Opportunities Now: After the adjustment, valuations have returned to levels from early 2025 or even lower, making them more attractive. As a result, funds are beginning to return to this sector.
IV. How to Invest in the Future? Fund Managers: Choose Companies with Real Potential
Fund managers emphasize that not all innovative pharmaceutical companies will perform well. The key is to select those with solid foundations:
- What to Look For:
1. Global Competitiveness: The ability to sell drugs internationally (e.g., companies that have successfully entered foreign markets).
2. Strong Clinical Evidence: Proof that the drugs are effective, not just claims.
3. Strong Commercialization Capabilities: The ability to effectively market and profit from the drugs.
- Focus Areas: Specific segments of the innovative pharmaceutical industry chain (e.g., CXO companies that assist in research and development) and AI-driven healthcare solutions.
In summary, the current innovative pharmaceutical sector does not experience a generalized rise; only the best companies are performing well. Those looking to invest need to be cautious and select those with genuine potential.
Conclusion
The sudden surge in the innovative pharmaceutical sector reflects a shift in market logic from focusing on promises to verifying actual results. Although short-term performance may still be influenced by investment trends, the current valuation and improving fundamentals create an opportunity for medium- to long-term investment. However, it is crucial to invest wisely and only in companies that can deliver tangible results.