Core Viewpoint - The Chinese traditional medicine sector is experiencing a positive trend, with the Zhongzheng Traditional Chinese Medicine Index showing an increase, driven by rising flu cases and the performance of key stocks in the industry [1][2]. Group 1: Market Performance - As of November 24, 2025, the Zhongzheng Traditional Chinese Medicine Index (930641) rose by 0.68%, with a one-year dividend yield of 3.18% [1]. - Key component stocks such as Jiaying Pharmaceutical (002198) increased by 4.48%, Zhongsheng Pharmaceutical (002317) by 2.86%, and others also showed positive growth [1]. - The Zhongzheng Traditional Chinese Medicine ETF (159647) increased by 0.40%, with the latest price at 1 yuan [1]. Group 2: Flu Trends and Impact - The National Influenza Center reported that the ILI% in southern hospitals was 5.5%, up from 4.6% the previous week, and higher than the same period in 2022 and 2024 [1]. - Northern hospitals reported an ILI% of 6.1%, also higher than the previous week and exceeding levels from the last three years [1][2]. - The rising flu positivity rates in both southern and northern regions are attributed to lower immunity against the H3N2 strain and an earlier onset of the flu season this year [2]. Group 3: Industry Outlook - The flu season for 2025-2026 is expected to peak higher than the previous year, leading to increased demand for respiratory infection-related products [2]. - The traditional Chinese medicine sector is anticipated to face short-term performance pressure but is expected to benefit from policies related to centralized procurement and basic medicine, as well as innovation-driven growth [2]. - The top ten weighted stocks in the Zhongzheng Traditional Chinese Medicine Index account for 54.92% of the index, indicating a concentrated market structure [3].

Core Insights - Recent inflows into the traditional Chinese medicine (TCM) sector, with TCM ETF (159647) seeing a net subscription of 3.5 million units today, marking 23 consecutive days of net inflows [1][2] - The TCM industry experienced a revenue decline of 8% year-on-year in Q1 2025, with profits down 4%. However, Q2 showed a revenue decline of only 2% year-on-year, while profits increased by 7%, indicating resilience in profit performance despite revenue challenges [1] Group 1: Industry Performance - In-hospital TCM revenue continues to decline, but the rate of decline is narrowing, with profits outperforming revenues. Factors include lower flu incidence compared to last year and the impact of price reductions from the third round of centralized procurement [1][2] - OTC TCM revenue shows divergence, with profits underperforming revenues. This is attributed to a high proportion of self-paid products and weak consumer demand, particularly in cold and respiratory categories, while stable demand products like blood tonics and orthopedic items perform better [1] Group 2: Key Factors of Focus - Policy: Centralized procurement of TCM and adjustments to the basic medicine catalog are critical. The third round of procurement saw an average price drop of 63%, but major products remain relatively unaffected. A new basic medicine catalog is expected to be released in late 2025 or 2026, potentially including more TCM products [2] - Cost: Prices of TCM materials have risen since November 2022 but are expected to decline starting in the second half of 2024, currently reverting to November 2022 levels [2] - Demand: Inventory clearance in cold and respiratory categories is anticipated, with subsequent shipments aligning more closely with end-user demand, potentially signaling a turning point for related companies [2] - Industry Structure: Ongoing mergers and acquisitions are increasing industry concentration, with companies setting clear integration goals and further acquisitions expected to strengthen leading firms [2] Group 3: Market Performance - As of October 21, 2025, the CSI Traditional Chinese Medicine Index (930641) rose by 0.21%, with notable increases in component stocks such as Huasheng Technology (000790) up 3.64% and Yiling Pharmaceutical (002603) up 2.05%. The TCM ETF (159647) increased by 0.10%, with a latest price of 1.01 yuan [2][3]

Group 1 - The core viewpoint of the news is the strong performance of the Traditional Chinese Medicine (TCM) sector, highlighted by the rise of the Zhongzheng TCM Index and its constituent stocks, driven by new regulations on the labeling of TCM decoction pieces [1][2] - As of July 30, 2025, the Zhongzheng TCM Index increased by 1.80%, with notable gains from stocks such as Da Ren Tang (up 4.85%), Yunnan Baiyao (up 3.31%), and Dong'e Ejiao (up 3.10%) [1] - The new labeling regulations for TCM decoction pieces, effective from August 1, 2025, require detailed information on product attributes, including shelf life, which is expected to impact the market positively [1] Group 2 - The Zhongzheng TCM Index (930641) includes companies involved in the production and sales of TCM, reflecting the overall performance of TCM-related listed companies [2] - As of June 30, 2025, the top ten weighted stocks in the Zhongzheng TCM Index accounted for 55.96% of the index, with key players including Pian Zai Huang, Yunnan Baiyao, and Tong Ren Tang [2] - The TCM ETF (159647) closely tracks the Zhongzheng TCM Index, indicating a strong correlation between the ETF's performance and the underlying index [3]