The surge after consolidation—Analysis of the significant rise in innovative drug-related ETFs

Today, driven by leadership in innovative drugs, medical and pharma-related indices saw broad volume expansion and surged higher across the board. Among them, the STAR Market Innovative Drugs ETF (589720) rose more than 7.5% intraday, the Innovative Drugs ETF (517110) rose more than 6% intraday, and the Hang Seng Biotech ETF (520930) rose more than 5.5% intraday.

【Analysis of the Reasons Behind the Big Rally】

On the geopolitical front, overnight, both Iran and Israel simultaneously released signals of a ceasefire, easing investors’ panic sentiment and with liquidity showing signs of a rebound. This may drive a rebound in the high-volatility STAR Market innovative-drugs ETF (589720) with 20cm upside potential, the Hang Seng Biotech ETF (520930) that focuses on innovative drug core leaders plus high volatility & high Sharpe ratio, and the Innovative Drugs ETF (517110) that provides a one-click allocation across innovative drug companies across the three regions of the mainland, Hong Kong, and Shenzhen-Shanghai.

On the fundamentals side, according to data released by the National Medical Products Administration on March 28, the total value of cross-border authorization transactions for innovative drugs in China in the first quarter this year has already exceeded $60 billion, approaching half of the $135.7 billion total for all of 2025. As of March 27, 10 innovative drugs have been approved for上市 in 2026, including 8 domestically developed innovative drugs, setting a historical record for the same period. On performance, the A+H leading innovative-drug companies’ annual reports are nearing the end of the reporting season, showing performance highlights such as a group of innovative drug companies crossing the profitability inflection point to achieve their first turnaround to net profit, multiple companies’ net profits doubling, core pipeline commercialization seeing successful scale-up, and sustained optimization of cash flow.

【Outlook for the Next Phase】

Due to liquidity shocks caused by global geopolitical conflicts and the fermentation of earlier interest-rate hike expectations, the A/H valuation for the sector is still positioned at a historical trough level below the midpoint seen at the start of April 2025, before the market breakout. Profit inflection points for leading companies and improvements in cash flow may provide left-side support for the sector. Going forward, by late May, the ASCO conference will intensively release clinical data progress on key technical routes such as bispecific antibodies (double antibodies), ADC, and related PFS/OS/ORR/HR metrics. If the data readouts come in above expectations, a certain valuation-repair rally may be expected. Combined with follow-on BD and commercialization expectations for early-stage FIC/BIC platform-type assets such as the TCE segment, the sector’s industry prosperity may be expected to be lifted on the right side. Previously, the allocation ratio of public mutual funds across the entire market to medical and biological products—especially innovative drugs—fell to an extremely low historical percentile, leaving the sector’s chips clean. Since last Friday, money has started to flow back into innovative drugs, and during this week’s high market volatility it has shown strong downside resilience. This indicates that the prior adjustment has already produced a favorable price-to-value setup, and investors are willing to participate in this round of repair driven by solid fundamentals plus low valuations.

For specific positioning, the external environment still has uncertainty. In the short term, the innovative-drugs sector may continue to trade in a volatile upward pattern. Investors who are interested may want to pay attention to changes in liquidity and risk preferences and build positions in batches on dips.

Related products: Hang Seng Biotech ETF Guotai (520930), STAR Market Innovative Drugs ETF Guotai (589720), Innovative Drugs ETF Guotai (517110)

Risk Warning: Mentioning individual stocks is only for industry event analysis and does not constitute any recommendation or investment advice regarding any individual stock. Short-term index gains and losses are for reference only and do not represent its future performance, nor do they constitute any commitment or guarantee regarding fund performance. Views may change with market conditions and do not constitute investment advice or commitments. The risk-return characteristics of the funds mentioned are all different. Investors are kindly requested to read the fund’s legal documents carefully, fully understand product details, risk grades, and the principles of profit distribution, choose products that match their own risk tolerance, and invest prudently.

Economic Daily News

(Editor-in-charge: Guo Jiandong)

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