Core Viewpoint - The A-share market is experiencing fluctuations, particularly affecting the innovative drug sector, with the ETF Huatai Innovation Drug (589120) declining by 2.05% and facing a five-day losing streak, despite attracting over 7.9 million yuan in funds [1][3]. Group 1: Market Performance - The Huatai Innovation Drug ETF (589120) has seen a decline in its constituent stocks, with major players like I-Mab and Junshi Biosciences dropping over 3%, and others like BeiGene and Zai Lab falling more than 2% [3]. - The top ten constituent stocks of the ETF show a negative trend, with BeiGene-U down by 2.38% and Junshi Biosciences-U down by 3.42%, indicating a general downturn in the sector [3]. Group 2: Long-term Outlook - Despite the short-term market pressure, the long-term outlook for the innovative drug sector remains positive, with expectations of a clear beta market driven by liquidity recovery at the beginning of the year [4]. - The JPM conference highlighted the achievements of over 20 Chinese pharmaceutical companies, with projections for significant revenue growth in innovative drugs, such as a 25% increase for Heng Rui in 2026 [4]. Group 3: Business Development (BD) Trends - The BD activities in the sector are at a peak, with 17 transactions occurring since January, totaling approximately 10.15 billion USD in upfront payments, significantly exceeding market expectations [5]. - The ongoing trend of foreign companies expanding in China and the increasing flow of funds into the innovative drug sector suggest a favorable environment for growth and investment [5]. Group 4: Investment Strategy - The innovative drug sector is recommended for increased allocation, particularly in Hong Kong stocks, as the market is currently at a relative bottom, with potential for new historical highs [5]. - The ETF focuses on leading innovative drug companies, providing a high degree of exposure to the opportunities presented by the rise of Chinese innovative drugs [5].

Group 1 - The Hong Kong Innovation Drug ETF (159570) has experienced a decline for four consecutive days, with a nearly 1% drop and a trading volume exceeding 1.15 billion HKD, indicating rapid capital inflow [1] - As of January 19, the latest scale of the Hong Kong Innovation Drug ETF (159570) has surpassed 25.4 billion HKD, leading its peers in the same category [1] - The weighted stocks of the ETF have mostly shown negative performance, with notable declines including Innovent Biologics down over 3% and Hengrui Medicine down over 2% [3][4] Group 2 - At the JPMorgan Conference, over 20 Chinese pharmaceutical companies showcased their innovations, with Hengrui expected to see a 25%+ growth in innovative drug revenue by 2026 [5] - The domestic biotech sector is experiencing a surge in business development (BD) activities, with significant deals such as the 5.6 billion USD global exclusive license agreement between Rongchang Biopharma and AbbVie [5][6] - A domestic innovative drug company has projected a revenue of approximately 45.46 billion RMB for 2025, reflecting a year-on-year growth of 15.84%, with a substantial increase in net profit [7]