It's the right time to "tug-of-war" rebalancing at 3800 points! Is the medical devices sector about to "relay" the rally?

This week, China’s A-shares’ “A Index” at around 3800 points started doing “sit-ups”—the pace of sector rotation has clearly accelerated. A very obvious example is that semiconductor equipment surged one after another, directly pushing down the previously hot “CPO.” Many sectors that are still at relatively low levels have already seen changes in their fundamentals, and it’s very worth rebalancing to optimize positions—for example, medical devices, where capital has already begun to “move.”

The 11th batch of centralized procurement was just officially announced to be underway. The rules have been comprehensively optimized, with a clear signal of “anti-overinvestment.” The fundamentals in the medical device sector are accelerating toward repair, and the market has a good chance to continue rallying. At present, the Medical Device Index ETF (159898) has “inflowed capital” for 3 straight days, totaling 27 million, and in the past 20 days it has pulled in more than 100 million. Today, during intraday trading, it’s up slightly by 0.34%.

This momentum has something to it.

Many friends may be curious why funds choose to buy medical devices at the bottom. To put it simply, with the triple resonance of a policy floor + earnings floor + overseas expansion dividend, the upward channel for medical devices is opening up—and right now is a good time to position in advance.

1、 Policy efforts: from “price competition” to “competition in innovation”

First, the biggest news in the pharma space these past few days has been nothing more than the new wording in the documents for the 11th batch of national centralized procurement—“ensure clinical effectiveness, ensure quality, prevent bid-rigging, and counter overinvestment.” In this procurement, bids will be opened on October 21. It explicitly optimizes the way price differentials are controlled, avoiding “the survival of the worse by driving out the better,” which will inevitably serve as a major catalyst for the sector.

Let’s give an example:

Before centralized procurement, a certain cardiac stent’s price was 13,000 yuan; after centralized procurement, it fell to 700 yuan. While patients benefit, corporate profits were crushed, leaving insufficient incentive to innovate. Now the policy has shifted to “ensure quality + encourage innovation,” meaning medical device companies can free up profit space to do R&D. High-end imaging equipment, surgical robots, and AI-assisted diagnosis—these “hard-tech” areas will directly benefit.

2、 Earnings rebound: from the “darkest moment” to an “upward turning point”

According to Wind data, in 2025 the CICC medical device index is expected to generate attributable net profit of 41.983 billion yuan, with a year-on-year growth rate jumping directly to +23.71%! You know, in 2023 industry profits were still negative growth—now it’s clearly past the “darkest moment.”

More importantly, in the second half of the year and into next year, policy will continue to provide “downside support”: centralized procurement will no longer be driven solely by the lowest price; the speed of getting innovative drugs and devices into medical insurance will increase; and interest subsidies supporting equipment upgrades will be provided. In simple terms, medical device companies now have “money to earn” and “directions to compete on,” so an earnings rebound is very likely.

3、 Overseas expansion: from “Made in China” to “global brands”

If policy and earnings are the “internal strength,” then overseas expansion is the medical device sector’s “external booster.” Now, the innovation of China’s medical devices is no longer just “copycats.” For example, United Imaging’s MRI machines are sold in the United States; Mindray’s patient monitors take up 70% of the European market; and NanoString Medical’s endoscopy consumables have become standard in German hospitals… In 2025, the overseas business growth rates of multiple device companies have already exceeded those of the domestic business, and the share of international business has even surpassed the domestic share!

Overseas business growth rates of leading companies across medical device sub-sectors in 2025H1 were higher than in China

Source: Company announcements, Wind, Guojin Securities Research Institute

It can be said that China’s device companies have very broad growth space globally. Valuations are also moving toward those of U.S.-listed innovative medical device companies step by step—there’s a lot of room!

The Medical Device Index ETF (159898), which has been continuously attracting capital lately, is a high-quality option for positioning in medical devices. This is because the underlying index covers medical device segment leaders in the ChiNext and STAR Market quite comprehensively, with the combined allocation of the two boards exceeding 80%. It’s well-suited to hold when the index is currently experiencing narrow-range consolidation, positioning for the next leg up.

Author: ETF Golden Shovel

(Editor: Liu Jing HZ010）

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