Group 1 - The Chinese medicine sector is experiencing a positive trend, with the Zhongzheng Traditional Chinese Medicine Index (930641) rising by 0.48% and several constituent stocks, such as Zhongsheng Pharmaceutical (002317) and Yabao Pharmaceutical (600351), showing significant gains of 6.44% and 3.74% respectively [1] - Despite a market adjustment from August 5 to 7, the Chinese medicine sector attracted capital inflows, with the Chinese Medicine ETF (159647) seeing a total net inflow of 20.21 million yuan over three days, averaging 6.74 million yuan per day [1] - The implementation of new labeling regulations for Chinese medicine pieces is expected to increase costs for small and medium-sized enterprises, while larger companies with robust R&D capabilities will adapt more easily, potentially leading to market consolidation [2] Group 2 - The top ten weighted stocks in the Zhongzheng Traditional Chinese Medicine Index account for 54.58% of the index, with notable companies including Yunnan Baiyao (000538) and Tongrentang (600085) [3] - The new regulations on labeling are aimed at improving product quality and market standards, which may lead to the elimination of non-compliant small enterprises, thereby enhancing the overall market environment [2] - The Chinese Medicine ETF closely tracks the Zhongzheng Traditional Chinese Medicine Index, which reflects the performance of listed companies involved in the production and sale of Chinese medicine [2]

Core Viewpoint - The Chinese traditional medicine industry is entering a new phase characterized by a significant transformation due to the implementation of centralized procurement, which is expected to impact the entire industry chain from cultivation to distribution and production [1][2]. Group 1: Market Performance - As of June 3, 2025, the Zhongzheng Traditional Chinese Medicine Index (930641) increased by 0.84%, with notable gains from companies such as Huawen Pharmaceutical (002907) up 8.87% and Zuo Li Pharmaceutical (300181) up 8.67% [1]. - The Traditional Chinese Medicine ETF (159647) rose by 0.61%, marking its third consecutive increase, with a latest price of 1 yuan [1]. - Over the week leading up to May 30, 2025, the Traditional Chinese Medicine ETF saw a cumulative increase of 2.17%, ranking first among comparable funds [1]. Group 2: Industry Developments - In May, the implementation of centralized procurement for traditional Chinese medicine pieces accelerated, with approximately 10 provinces beginning to implement the results of the first national centralized procurement [1]. - Some winning companies reported overwhelming orders and have raised their operational targets for the year, reflecting a generally optimistic outlook for their performance [1]. - Industry insiders noted that the changes brought by centralized procurement are causing significant disruptions across the entire traditional Chinese medicine supply chain, akin to a "butterfly effect" [1]. Group 3: Investment Insights - Guosen Securities suggests that the traditional Chinese medicine industry is entering a favorable investment phase due to supply-side structural reforms and demand policy stimulation, emphasizing the importance of matching valuation with sustainable performance [2]. - The Zhongzheng Traditional Chinese Medicine Index includes companies involved in the production and sales of traditional Chinese medicine, reflecting the overall performance of the sector [2]. - As of May 30, 2025, the top ten weighted stocks in the Zhongzheng Traditional Chinese Medicine Index accounted for 54.6% of the index, including major players like Yunnan Baiyao (000538) and Pianzaihuang (600436) [2].