30 innovative drug ETFs collectively surged over 5%. How far can this rally go?

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Source: International Finance News

Recently, the style in China’s A-share market has once again shifted to the innovation drug concept.

Wind data shows that as of the market close on March 27, the Shanghai Composite rose 0.63%. The pharmaceutical, chemical, and non-ferrous metals sectors led the gains. Among them, the innovation drug sector surged strongly in the afternoon, driving more than 30 innovation-drug-related ETFs (exchange-traded open-ended index funds) to jump more than 5% on the day.

Interviewees believe that the surge in the innovation-drug sector is the result of multiple positive catalysts converging for the biopharmaceutical industry. From a liquidity perspective, A-share liquidity is clearly better than Hong Kong’s. When industry sub-sectors generally rebounded, the Science and Technology Innovation innovation-drug ETF rose more strongly than the Hong Kong innovation-drug ETF.

“King of the leaderboard” for innovation-drug ETFs

The public ETF gainers list once again shows a “king of the leaderboard” scenario for innovation-drug-related ETFs. Both China A-share innovation-drug ETFs and cross-border innovation-drug ETFs ranked near the top of the daily gainers list.

Figure source: Wind

Wind data shows that as of the market close on March 27, the pharmaceutical sector rebounded sharply. For the CITIC first-level industry indices, the pharmaceutical industry index rose 3.69%, leading all industry indices. Looking at sub-sectors, innovation-drug concept stocks kept strengthening after the market opened, with several individual stocks rising more than 10%. In terms of ETFs, more than 30 innovation-drug or pharmaceutical-related ETFs rose more than 5%.

Specifically, the China-KeChuang Innovation Drug ETF by E Fund led the whole market ETFs with a 6.7% gain; the China-KeChuang Innovation Drug ETF by Guotai rose 6.55%. In addition, three Hong Kong innovation-drug ETFs and one Hong Kong Stock Connect medical ETF each rose more than 6%. Regarding trading value, Guangfa’s Hong Kong innovation-drug ETF led cross-border ETFs on the day with a trading value of RMB 8.046 billion.

Since September last year, innovation-drug ETFs have seen a bumpy decline all the way. In January this year there was a small rebound, but it quickly fell back again. As of March 27, among the 28 ETFs with “innovation drugs” in their names across the whole market, the average return for the year to date was -0.24%, with the largest gain at 2.07% and the largest drawdown at -2.56%. Since the beginning of the year, the performance of ETFs tracking Hong Kong innovation-drug-related indices has been slightly better than that of ETFs tracking China A-share innovation-drug indices. However, during this rebound, the ETFs tracking the STAR Market innovation-drug index outperformed more strongly.

Although the innovation-drug sector continues to fluctuate, fund companies are still laying out this track. The CSRC website shows that since September last year, there have been seven public fund management companies that submitted innovation-drug-related ETFs, including the Hong Kong Stock Connect innovation-drug ETF, the SSE STAR Market innovation-drug ETF, the CSI Innovation Drug ETF, and the CSI Innovation Drug Industry ETF, among others.

Can the rally continue

The innovation-drug sector belongs to the biopharmaceutical field. Regarding this sudden surge, 曾方芳 from the public fund products operation department at Pai Pai Wang Wealth told reporters from International Finance News that this is the result of multiple positive catalysts converging for the biopharmaceutical industry.

曾方芳 analyzed that, on the policy front, biopharmaceuticals have been clearly defined as an “emerging pillar industry,” and their strategic positioning has been elevated. On the performance front, leading companies’ innovation-drug revenue share has increased and they have achieved turnaround from losses to profits, and the industry has entered a profitability inflection point. On going global, the amount of BD (business development) authorizations this year has already exceeded the full-year level of last year, demonstrating global competitiveness. Also, nearby events such as the ASCO conference have formed short-term catalysts. With sufficient adjustments in the sector beforehand and valuations at historically low percentiles, under the drive of overlapping positive news, the sector’s strong performance is expected to continue.

E Fund Asset Management (Hong Kong) said that biopharmaceuticals are a high-visibility track that combines rigid consumer demand and innovative growth attributes, and the global population aging trend provides the industry with a long-term demand foundation lasting 10 to 20 years.

Right now is the 2025 annual report disclosure season, and some pharmaceutical companies’ performance has been impressive. Even though the innovation-drug sector had previously experienced several months of pullback, 何理, general manager of Zhizhi Investment, told reporters that the fundamental trends of the innovation-drug industry have not changed. You can see continued improvement in fundamentals from annual reports in which some companies turned losses into profits.

“We have long been optimistic about the rise of domestic innovation-drug companies globally,” 何理 said. In the 2026 government work report, for the first time, biopharmaceuticals are explicitly defined as an emerging pillar industry, which carries more weight than the previous “cultivate and grow,” meaning that at the top-level design, innovation drugs are regarded as a new engine for national economic growth.

From an investment perspective, 何理 believes that since the pullback began in September last year, valuations for some innovation-drug names have returned from being somewhat expensive to being reasonable, or even somewhat low levels—especially, the pullback has been more pronounced for innovation drugs in earlier pipeline stages.

Looking at that day’s performance, some China-KeChuang innovation-drug ETFs were stronger than Hong Kong innovation-drug ETFs. 曾方芳 believes this is mainly because their constituent stocks are almost all pure-source innovative biotechnology companies, with no dilution from traditional business lines, enabling them to reflect breakthroughs at the industry frontier more directly. Meanwhile, they more heavily and more concentratedly cover cutting-edge technology areas such as ADC (antibody-drug conjugates) and small nucleic acids. Major R&D progress from relevant companies often transmits quickly to share prices, so they have a more distinct growth upside and faster reaction speed.

From a liquidity perspective, 何理 believes that A-share liquidity is clearly better than Hong Kong’s. When industry sub-sectors generally rebound, the China-KeChuang innovation-drug ETF tends to rise more strongly than the Hong Kong innovation-drug ETF.

Reporter 夏悦超

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