On September 23, Hong Kong's pharmaceutical sector resumed its upward momentum after a day of consolidation. Innovative drug development companies saw broad gains, with Immunotech-B leading the charge with a surge of over 7%, while heavyweight leader Akeso rebounded 3.6%. InnoCare Pharma and Kangnuoya-B both advanced more than 2.5%. The Huabao Hong Kong Stock Connect Innovative Drug ETF (520880), which exclusively tracks innovative drug R&D companies, traded higher against a softer market backdrop.

The Hong Kong Stock Connect healthcare theme sector also stayed active, supported by the AIDD narrative. CXO stocks rallied broadly, with Joinn Laboratories climbing over 6%, while Biocytogen-B, Pharmaron, and GenScript Biotech each gained more than 3%. The Huabao Hong Kong Stock Connect Healthcare ETF (159137), which carries high exposure to both AI-driven drug development and CXO names, likewise strengthened despite the overall market weakness.

Recent catalysts for the innovative drug supply chain have been dense, giving the sector powerful momentum. On the policy front, the industry has received another national-level strategic endorsement. The "15th Five-Year Plan" for the Development of the Pharmaceutical Industry clearly sets targets: by 2030, the innovative drug industry is expected to grow at an average annual rate of over 20%, with first-in-class drugs projected to account for more than 25% of the global share. The plan also calls for accelerating the paradigm shift toward AI-driven pharmaceutical R&D, diagnostics, and production management.

On the industrial side, clinical data and outbound business development deals provide dual validation. At the 2026 World Conference on Lung Cancer, Chinese innovative drugs delivered a record performance: 19 oral presentations and 45 mini oral presentations were selected, with two Chinese studies chosen for the Presidential Symposium. According to statistics from TF Securities, from January to August 2026, the total value of Chinese innovative drug BD out-licensing deals reached $111.5 billion, up 25.4% year-over-year and already reaching 79.6% of the full-year 2025 total. Upfront payments hit $6.79 billion, a 35.2% increase from the prior year.

Furthermore, the AIDD (AI-assisted drug discovery) supply chain is opening up new structural opportunities. Zhang Fang, fund manager of the Huabao Hong Kong Stock Connect Healthcare ETF (159137), noted that global computing power and large model companies are accelerating their entry into AIDD. Once AI candidate molecules reach an inflection point, demand for wet-lab services—including gene synthesis, protein expression and purification, in vitro affinity validation, model animals, and sequencing—is systematically amplified, meaning domestic companies in these fields stand to benefit.

On the earnings front, profitability improvements at innovative drug makers are providing a more solid foundation for the rally. Among the 50 innovative drug R&D companies covered by the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880), 34 reported profits in the first half of the year, and 36 posted year-over-year growth in net profit attributable to parent shareholders—more than 70% of the total. The earnings recovery for innovative drug companies is gradually shifting from expectations to concrete results.

Externally, according to foreign media reports, the U.S. Treasury Department is drafting rules related to Chinese pharmaceutical investment. Most ordinary drug licensing deals may still be permitted to proceed. CMB International noted that the risk of widespread bans or substantial restrictions on Chinese innovative drug companies licensing general therapeutic drugs to U.S. pharmaceutical firms has marginally declined.

At the current juncture, Huatai Securities suggested that during this round of the healthcare rally from late September into early October, innovative drugs—particularly oncology assets—are likely to emerge as the leading segment. For full-chain exposure to innovative drugs, two T+0 trading instruments are worth watching: the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880), whose underlying index is 100% allocated to innovative drug R&D companies with roughly 70% of positions in R&D leaders; its off-exchange feeder fund is 025221. The Huabao Hong Kong Stock Connect Healthcare ETF (159137), whose underlying index has an AI drug development concentration of nearly 70% and CXO exposure above 50%, counts representative constituents such as XtalPi Holdings, GenScript Biotech, and the three WuXi entities. Its off-exchange feeder fund is 026922.

Data is sourced from public information released by the Shanghai, Shenzhen, and Hong Kong exchanges, as well as CSI and Hang Seng Index companies. Weightings are as of August 31, 2026. Institutional views cited include CMB International's September 21, 2026 report on the pharmaceutical industry and Huatai Securities' September 22, 2026 recommendation to increase allocation to innovative drugs.

Regarding the "AI drug development content" note: the Hong Kong Stock Connect Healthcare Theme Index tracked by the Huabao Hong Kong Stock Connect Healthcare ETF covers 17 AI drug development-related constituents, including pure AI drug development platforms, AI plus CRO, and innovative drug companies with AI drug development initiatives, with a combined weight of 69.52%.

As for constituent weightings in the Hong Kong Stock Connect Healthcare Theme Index: the WuXi entities (WuXi Biologics at 18.77%, WuXi AppTec at 14.70%, and WuXi XDC at 5.54%) together account for 39.01%, GenScript Biotech holds 8.15%, and XtalPi Holdings holds 4.02%.

On fund fees: ETF funds do not charge sales service fees. When investors subscribe for or redeem fund shares, the subscribing or redeeming broker may charge a commission of no more than 0.5%, which includes fees levied by the stock exchange and registration institutions. Detailed fee structures are available in each fund's legal documents.

A special note: fund managers have assessed the risk level of the Huabao Hong Kong Stock Connect Healthcare ETF and its feeder fund, as well as the Huabao Hong Kong Stock Connect Innovative Drug ETF and its feeder fund, as R4 (medium-to-high risk), suitable for aggressive investors (C4) and above.

Risk disclosure: the index constituents mentioned here are for illustrative purposes only, and descriptions of individual stocks do not constitute investment advice in any form, nor do they represent the holdings or trading activities of any fund under the manager's umbrella. Any information appearing in this article—including but not limited to individual stocks, commentary, forecasts, charts, indicators, theories, or any other form of expression—is provided for reference only. Investors bear full responsibility for their own investment decisions. Moreover, any views, analyses, or forecasts in this article do not constitute investment advice to readers of any kind, and no liability is assumed for direct or indirect losses arising from the use of this content. The performance of other funds managed by the fund manager does not constitute a guarantee of fund performance. Past performance of a fund does not represent its future returns, and fund investing carries risks. A MACD golden cross signal has formed—these stocks are trending well!