Core Viewpoint - The performance of funds in the first half of the year has been significantly influenced by the strong rally in Hong Kong's innovative pharmaceutical sector, with the top-performing fund, Huatai-PineBridge Hong Kong Advantage Selection, achieving over 85% returns [1][3]. Fund Performance - As of June 30, 2023, the top-performing fund, Huatai-PineBridge Hong Kong Advantage Selection, recorded a return of 86.00% [2][3]. - Other notable funds include CITIC Construction Investment North Exchange Selection and Great Wall Pharmaceutical Industry Selection, with returns of 82.45% and 75.18% respectively [6]. - The overall performance of the Hong Kong stock market, particularly in the innovative pharmaceutical sector, has been robust, with the Hang Seng Index and Hang Seng Technology Index rising by 20% and 18.68% respectively [3]. Market Trends - The innovative pharmaceutical sector in Hong Kong has been a key driver of fund performance, with many funds heavily invested in this area [4][6]. - The Hang Seng Hong Kong Innovative Pharmaceutical Selection Index has seen a year-to-date increase of 58.95%, indicating strong market interest and growth potential [6][7]. - Analysts predict that the innovative pharmaceutical sector will continue to benefit from policy support and market dynamics, suggesting a favorable outlook for the second half of the year [7][8]. Investment Insights - Fund managers believe that the pharmaceutical industry will experience a recovery in growth due to normalized regulations and increasing domestic medical demand [3][4]. - The current market environment is characterized by a combination of policy benefits, global liquidity, and positive market sentiment, which are expected to sustain the growth of innovative pharmaceutical companies [7][8]. - The disparity in fund performance highlights the importance of strategic investment choices, with some funds underperforming despite being in popular sectors [9].

Core Insights - The Chinese innovative drug sector is expected to experience significant growth, with 2025 marking a pivotal year for revenue, profitability, and valuation improvements [11] - The investment philosophy emphasizes a dual focus on commercial value and social impact, aiming to create returns for investors while supporting drug development [1][4] Industry Development - The rapid development of Chinese innovative drug companies is attributed to a decade of efforts, particularly following the drug review and approval reforms initiated in 2015 [3] - The industry has evolved through three stages: from rule followers to challengers, and now to rule makers, demonstrating the capability of Chinese companies to lead in global drug development [3][4] Investment Strategy - The investment approach involves identifying high-growth pharmaceutical sub-sectors and focusing on companies with strong clinical data and product cycles [7][9] - A concentrated investment strategy is employed, typically holding 15 or fewer stocks, with a focus on long-term positions to maximize growth potential [8][10] Market Outlook - 2025 is anticipated to be a year of significant revenue growth for innovative drug companies, with expectations of collective improvements starting from mid-2023 [11] - The shift in the payment system from reliance on insurance to a dual system of commercial insurance and public insurance is expected to enhance the valuation of innovative drugs [11] Global Expansion - The potential for Chinese innovative drugs to enter international markets remains strong, driven by high profit margins and the ability to create local employment opportunities abroad [12] - The concept of "AI+" in pharmaceuticals is viewed with caution, emphasizing that while AI can assist in drug development, traditional methods and clinical expertise remain irreplaceable [13]