Hong Kong and Mainland Pharma Funds Surge as Sector Gains Momentum
Innovative drug stocks—particularly those listed in Hong Kong—have been a major driver of fund performance this year, with some top-performing funds delivering staggering returns. The E Fund Hong Kong Advantage Select A fund leads the pack, soaring 78.8% year-to-date, while other healthcare-focused funds like Great Wall Pharmaceutical Industry Select A, Yongying Pharmaceutical Innovation A, and HuaAn Medicine & Biology A have also surged over 60%.
As the rally continues, debates emerge: What’s fueling this boom? Are valuations justified? And where does China’s biotech sector stand in the global pharmaceutical landscape? The Securities Times and Broker China spoke with several fund managers to dissect the investment thesis behind this red-hot sector.
A “Double Whammy” of Value and Price Discovery
Fund managers attribute this year’s explosive growth to a “Davis Double Play”—where value discovery (identifying undervalued assets) and price discovery (market repricing) converge.
Li Bokang, portfolio manager of HSBC Jintrust Healthcare Pioneer Fund, highlights two key catalysts:
Improved risk appetite—Investors are more willing to price in long-term potential, partly due to excitement around AI and robotics.
Validation of China’s biotech capabilities—Strong clinical trial data, commercialization milestones, and a surge in overseas licensing deals have boosted confidence in domestic drugmakers.
Sang Xiangyu, manager of HuaAn Medicine & Biology Fund, breaks down the sector’s transformation:
Policy tailwinds: New regulations, including preferential pricing for breakthrough drugs, have lifted revenue potential.
China’s “DeepSeek moment”: The country has leapfrogged Western rivals in antibody-drug conjugates (ADCs), bispecific antibodies, and T-cell engagers (TCEs). China’s share in global licensing deals (BD) surged from 5% in 2020 to 40% in Q1 2024.
Multinational pharma’s patent cliff: With blockbuster drugs losing exclusivity post-2025, Big Pharma is scrambling to acquire Chinese assets for cost-efficient R&D.
Strong ASCO presence: Data readouts at the American Society of Clinical Oncology (ASCO) have reinforced China’s role as a biotech innovator.
Zhou Sicong, PM of Ping An Healthcare Fund, calls 2025 the “triple元年 (first year)” for China’s biotech sector—marking the start of revenue acceleration, profitability, and valuation expansion.
Three Key Tech Trends Shaping the Future
Navigating biotech investments is notoriously complex, but fund managers point to three breakthrough areas
1. ADCs: The Next Evolution of Chemotherapy
- Current challenge: Drug resistance and toxicity limit ADC efficacy.
- Future trends: Combining ADCs with immuno-oncology (IO) therapies or developing dual-toxin ADCs to overcome resistance.
2. Bispecific Antibodies: Beyond PD-1 Inhibitors
- PD-1/VEGF bispecifics (like a leading HK-listed drug) show synergistic effects, attracting massive licensing deals.
- PD-1/IL combos could be the next blockbuster, targeting PD-1-resistant cancers.
3. TCEs: A Cheaper Alternative to CAR-T?
- Already successful in blood cancers, TCEs are now being tested in solid tumors and autoimmune diseases.
- China is on par with global players in this space.
How to Invest? Funds May Be the Best Bet
- Given the sector’s complexity, non-specialist investors may benefit from healthcare-focused funds.
- Li Bokang explains the challenges of stock-picking:
- Assessing target efficacy, clinical trial risks, and market potential requires deep expertise.
- Platform companies with strong R&D and execution are preferred.
- Events like ASCO can be key inflection points for stock performance.
- Bottom line: China’s biotech sector is no longer a niche play—it’s a global contender with structural growth drivers. But with volatility expected, selective exposure remains critical.
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