The Hang Seng Index company announced that there are signs of improvement in the recent situation of biotech stocks, along with policy support and three consecutive months of inflows. In terms of product structure, 10-30 billion yuan products have operating income of 401/1288/60 million yuan respectively.
According to the Futu News App, on August 7th, the Hang Seng Index company announced that there are signs of improvement in the recent situation of biotech stocks, along with policy support and three consecutive months of inflows. With more policies being implemented, the Hang Seng Hong Kong-listed Biotech Index has outperformed the market since July.
Policy support has led to an investment atmosphere for biotech stocks.
Since the government work report this year mentioned "innovative drugs" for the first time, a series of new policies have continuously supported the development of the medical care industry. For example, the State Council executive meeting held in early July passed the "Implementation Plan for Supporting the Whole Chain Development of Innovative Drugs", proposing to strengthen policy guarantees throughout the chain, optimize the evaluation and approval mechanism, and strengthen the basic research of new drug development.
Then on July 31, 2024, the National Medical Products Administration issued the "Optimization Plan for Clinical Trial Approval of Innovative Drugs Pilot Work", proposing to explore the establishment of a work system and mechanism that comprehensively improves the quality and efficiency of drug clinical trials and complete the innovative drug application evaluation and approval process within 30 working days. Relative to the usual 60 working days for relevant evaluations and approvals in the past, the time for initiating clinical trials of new drugs is expected to be shortened. The National Medical Products Administration later approved the pilot program for optimizing the clinical trial evaluation and approval of innovative drugs in Beijing and Shanghai on August 2, 2024.
Biotech stocks have performed better than the market in recent months.
The recent favorable policies related to innovative drugs have boosted pharmaceutical companies. Biotech stocks, represented by the Hang Seng Hong Kong-listed Biotech Index, have outperformed the market (represented by the Hang Seng Composite Index, or "HSCI") in July and August, even during periods of decline in global stock markets (Figure 1), whereas they previously underperformed the market for four consecutive months.
The Hang Seng Hong Kong-listed Biotech Index was launched in December 2019 to reflect the overall performance of the top 50 biotech companies listed in Hong Kong, including those listed under Chapter 18A of the Listing Rules of the Hong Kong Stock Exchange. The index adopts a fast inclusion mechanism. If the market capitalization of a newly listed stock ranks among the top five on its first trading day and among the existing index constituents, the new stock will be included in the index.
ETFs tracking the Hang Seng Hong Kong-listed Biotech Index have recorded inflows in the past three months.
The Hang Seng Hong Kong-listed Biotech Index selects constituents from four business sub-categories, including pharmaceuticals, biotechnology, pharmaceutical distribution, and medical equipment and supplies. As of the end of July, pharmaceuticals and biotechnology accounted for over 88% of the weight of this index (Figure 2).
Although biotech stocks have experienced consecutive adjustments earlier this year due to geopolitical factors, they have recorded inflows in the past three months. Represented by the total asset under management (AUM) of ETFs tracking the Hang Seng Hong Kong-listed Biotech Index that increased or decreased less than the fluctuation of the index from May to July this year, the investor has added holdings during the weak period of stock prices in biotech stocks (Figure 3).
ETFs tracking the Hang Seng Hong Kong-listed Biotech Index qualified for the Hong Kong Stock Connect.
On the other hand, since the expansion of the ETF mutual recognition scheme on June 22, 2024, additional six ETFs have been included in the Hong Kong Stock Connect scheme on July 22, 2024, one of which tracks the Hang Seng Hong Kong-listed Biotech Index. As of August 6, 2024, there were 12 ETFs tracking the Hang Seng Index series in the Hong Kong Stock Connect scheme, tracking six indices (Figure 4).