Core Viewpoint - The article emphasizes that diversifying risks and aligning with trends is essential for navigating the complexities of the market, particularly in the innovative drug sector, which presents significant long-term investment opportunities through index-based investments [1]. Group 1: Industry Overview - The innovative drug industry is transitioning from reliance on generic drugs to breakthroughs in self-developed drugs, driven by advancements in technology and increased research efficiency [2]. - The Chinese innovative drug sector has seen a surge in overseas licensing fees, reaching a scale of billions of dollars, indicating a robust growth trajectory [2]. - The innovative drug sector has rebounded strongly in 2023, supported by valuation recovery, policy backing, and the expiration of patents for multinational pharmaceutical companies [2][3]. Group 2: Investment Opportunities - The article suggests that ordinary investors can mitigate risks by investing in index funds related to innovative drugs, similar to historical trends seen in the railway and internet sectors [3]. - The Hang Seng Hong Kong Stock Connect Innovative Drug Index and the CSI Innovative Drug Industry Index are highlighted as key indices for investment, with the former focusing on companies in the Hong Kong market [4][5]. Group 3: Index Characteristics - The Hang Seng Hong Kong Stock Connect Innovative Drug Index excludes CXO companies to focus solely on innovative drug firms, ensuring a more accurate reflection of the industry's development [5][6]. - The revised index has shown superior performance, with an annualized return exceeding 47% since its launch, indicating strong investment value [6]. Group 4: Policy and Market Dynamics - The Chinese government has established a comprehensive support system for the innovative drug industry, enhancing approval efficiency and market access [8]. - The market for licensing transactions has evolved, with a significant increase in the number and value of deals, indicating a shift towards more stable revenue models for innovative drug companies [9]. Group 5: Technological Advancements - China's innovative drug research capabilities have advanced significantly, with domestic companies covering 40% of global research targets and leading in several therapeutic areas [10]. - The efficiency of clinical trials in China is notably higher than in Western countries, contributing to a competitive edge in drug development [10]. Group 6: Long-term Investment Potential - The demand for innovative drugs is expected to grow due to an aging population and increasing prevalence of chronic diseases, while the supply remains limited due to high barriers to entry [11]. - The current market penetration of innovative drugs in China is below that of other G20 countries, suggesting substantial growth potential [11]. Group 7: Hong Kong Market Insights - The innovative drug sector in Hong Kong has a higher market capitalization share compared to A-shares, benefiting from a more favorable IPO environment for biotech companies [13]. - The average R&D expenditure of innovative drug companies in Hong Kong is significantly higher than that of their A-share counterparts, indicating a stronger commitment to innovation [13]. Group 8: Future Outlook - The article predicts that 2025 may mark a pivotal year for Chinese innovative drugs, with the potential for blockbuster products and record licensing deals [15]. - The Hang Seng Hong Kong Stock Connect Innovative Drug Index includes many companies not listed in A-shares, providing unique investment opportunities in leading biotech firms [15].

Core Insights - The Hong Kong stock market experienced fluctuations, with the innovative drug sector showing a peak and subsequent decline. The Hang Seng Hong Kong Stock Connect Innovative Drug Index fell over 1% during the morning session, while the only ETF tracking this index, the Hang Seng Innovative Drug ETF (159316), saw a net subscription of 15 million units, bringing its total size to 1.15 billion yuan, doubling from a month ago [1][2] Group 1 - The adjustment of the Hang Seng Hong Kong Stock Connect Innovative Drug Index compilation scheme has officially taken effect, removing CXO companies to create a "pure" innovative drug index that better reflects the overall performance of China's innovative drug companies [1] - Historical performance simulations indicate that the revised index's annualized return exceeds 47%, with an improved Sharpe ratio, suggesting a significant enhancement in performance metrics post-adjustment [1] - Analysts believe that the current trend in the innovative drug industry differs significantly from that of 2020-2021, with China's innovative drug sector transitioning from "follower" to "leader" [1] Group 2 - The amount of authorized transactions for external licensing is expected to set new records by 2025, indicating greater investment opportunities compared to the 2020-2021 period [1] - The high-risk nature of innovative drug research makes individual stock investments challenging, thus utilizing ETFs to cover the entire innovative drug sector is an effective way to diversify risk and capture overall industry growth [1]

Group 1 - The Hang Seng Innovation Drug Index and the Hang Seng Hong Kong Stock Connect Innovation Drug Index have undergone a composition adjustment effective from August 11 [1] - The new calculation method excludes companies primarily engaged in the CXO industry, including Contract Research Organizations (CRO), Contract Manufacturing Organizations (CMO), and Contract Development and Manufacturing Organizations (CDMO) [1] - The adjustment introduces a requirement for Southbound trading connectivity, meaning only stocks that meet the Hong Kong Stock Connect criteria can be included, enhancing investment convenience [1] Group 2 - The Hang Seng Innovation Drug Index will maintain a fixed number of 40 constituent stocks, with eligible securities selected based on their relevance to innovative drug business [1] - The adjustment reflects the latest development trends in the Hong Kong innovative drug sector, providing investors with a more precise market benchmark [1] - The changes also indicate a trend of deeper integration between the capital markets of the two regions as the connectivity mechanism continues to improve [1]

Group 1 - The Hang Seng Innovation Drug Index and the Hang Seng Hong Kong Stock Connect Innovation Drug Index will explicitly exclude CXO companies [1] - The 2025 China Solid-State Battery Technology Industry Development Conference is scheduled [1] - New stock subscription for Hongyuan Co., Ltd. is announced [1] Group 2 - The domestic refined oil will enter a new round of adjustment [2] - The Reserve Bank of Australia will announce its interest rate decision [2] - The US Consumer Price Index (CPI) for July will be released [2] - OPEC will publish its monthly oil market report [2] - The 2025 Green Low-Carbon Innovation Conference will take place in Huzhou [2] - Supermicro will host the 2025 Open Storage Summit [2] Group 3 - The EIA will release its monthly Short-Term Energy Outlook [2] - The IEA will publish its monthly oil market report [2] - Tencent will release its financial report [2] Group 4 - The 2025 World Humanoid Robot Games will be held in Beijing [2] - HTC VIVE will hold a press conference, expected to launch official products [2] - The US Producer Price Index (PPI) for July will be released [2] - JD.com and NetEase will release their financial reports [2] Group 5 - The National Bureau of Statistics will release the national economic operation data for July [2] - A summit between the US and Russian leaders will take place in Alaska [2] - The 2025 China (Guangzhou) Cross-Border E-Commerce Trade Fair is scheduled [2]

Core Viewpoint - The innovative drug sector in China is entering a revaluation cycle due to industry upgrades, technological advancements, and the rebuilding of market confidence, with domestic pharmaceutical companies gaining recognition from international giants, which is expected to be reflected in their performance [3][4][9]. Group 1: Index Optimization - The recent revision of the Hang Seng Innovative Drug Index aims to enhance the purity and representativeness of its constituent stocks, providing investors with a 100% pure innovative drug investment tool [4][5]. - The index adjustment removed five pharmaceutical outsourcing companies, ensuring that all constituent stocks are innovative drug companies, making it one of the first indices with 100% purity in innovative drugs [5][6]. Group 2: Market Dynamics - There is an increasing internal demand for refined classification management of innovative drugs, distinguishing between companies holding core patents and those providing outsourcing services [6]. - Current national policies are more focused on supporting pharmaceutical companies with independent core technology breakthroughs and continuous innovation capabilities, which are key dimensions for evaluating the value of innovative drug companies [6][7]. Group 3: Industry Recovery - The innovative drug sector has shown significant recovery since the second quarter of this year, driven by multiple factors including industry development, valuation adjustments, and renewed market confidence [7][9]. - The downturn experienced since 2019, influenced by public health events and global liquidity conditions, allowed for a recalibration of valuations, enabling the market to recognize companies with genuine R&D capabilities [7][9]. Group 4: Future Outlook - The key to the continued strength of the innovative drug sector lies in the ability of companies to deliver strong financial results in the coming quarters, as the market is increasingly focused on translating technology into actual revenue and profits [10]. - If Chinese pharmaceutical companies can consistently reflect the results of patent sales and international product launches in their financial statements, market confidence will further strengthen, potentially leading to a new upward cycle driven by fundamentals [10].

Group 1 - The Hang Seng Index Company announced adjustments to the calculation methods of several indices, including the Hang Seng Hong Kong Stock Connect Innovative Drug Index, Hang Seng Innovative Drug Index, Hang Seng Biotechnology Index, and Hang Seng Hong Kong-US Biotechnology Index [1] - The adjustments aim to enhance the focus on pure innovative drug companies by excluding companies primarily engaged in the CXO industry, which includes Contract Research Organizations (CRO), Contract Manufacturing Organizations (CMO), and Contract Development and Manufacturing Organizations (CDMO) [2][4] - The changes will result in a more concentrated index composition, with the top five constituents of the Hang Seng Hong Kong Stock Connect Innovative Drug Index shifting to companies like Innovent Biologics, BeiGene, and others, while the previous weight of excluded companies was approximately 18.1% [3] Group 2 - The Hang Seng Biotechnology Index will see a reduction in the number of constituents from 50 to a fixed number of 30, along with new trading qualification requirements under the Stock Connect program [6] - The Hang Seng Hong Kong-US Biotechnology Index will also reduce its constituent count from 60 to a fixed number of 40, indicating a significant decrease in the number of stocks included [9] - The adjustments to the indices will take effect on June 30, 2025, with the changes in constituent stocks implemented on September 8, 2025 [9]

Group 1 - Hong Kong innovative drug concept stocks saw significant gains in early trading, with companies like Ascentage Pharma-B, CanSino Biologics, Kelun-Biotech, and Zai Lab rising over 5% [1] - The Hang Seng Innovative Drug ETF (159316) experienced a net inflow of over 17 million yuan recently, reaching a historical high in scale, with nearly 200 million yuan added in June alone [1] - The Hang Seng Hong Kong Stock Connect Innovative Drug Index announced a revision to its compilation scheme, focusing solely on innovative drug companies, achieving a 100% "purity" in its index [1] Group 2 - Major multinational pharmaceutical companies have significantly increased their procurement of innovative drug patents in China, with the procurement amount from January to May nearing the total for the entire year of 2024, indicating the competitiveness of China's innovative drugs in the international market [2] - The Hang Seng Innovative Drug ETF (159316) is the only ETF tracking the Hang Seng Hong Kong Stock Connect Innovative Drug Index, with its scale surpassing 400 million yuan, providing investors with opportunities in the innovative drug industry [2]

Core Insights - The Hang Seng Hong Kong Stock Connect Innovative Drug Index has seen a remarkable increase of over 60% year-to-date, highlighting the significant development of China's innovative drug sector and attracting interest from overseas pharmaceutical companies [1][8] - The index has revised its compilation scheme to exclude CXO companies, focusing solely on innovative drug companies, thus becoming the first index with a "purity" of 100% in tracking innovative drugs [1][2] Index Revision Details - Five CXO companies will be removed from the Hang Seng Hong Kong Stock Connect Innovative Drug Index, resulting in a composition entirely made up of innovative drug firms [2] - The previous weight of the excluded CXO companies was approximately 20%, and their performance lagged behind the overall index [3][5] Performance Metrics - The revised index has shown better performance since its announcement, with an annualized return exceeding 30% and a higher Sharpe ratio compared to the original index [5][7] - The annualized volatility of the revised index is 37.7%, while the original index had a volatility of 40.0% [7] Market Trends - Multinational pharmaceutical companies have significantly increased their procurement of innovative drug patents from China, with procurement amounts nearing the total for the entire year of 2024 within the first five months of this year [8] - The trend of multinational companies sourcing innovative drug patents from China is expected to continue, driven by pressures such as drug price reductions and patent expirations [8] Investment Opportunities - The Hang Seng Innovative Drug ETF (159316) is currently the only product tracking the Hang Seng Hong Kong Stock Connect Innovative Drug Index, providing investors with a convenient way to access leading innovative drug companies in Hong Kong [9] - Other investment products, such as the E Fund Innovative Drug ETF (516080), also cover the entire innovative drug industry chain, including major players like Hengrui Medicine and Fosun Pharma [9][10]

Group 1 - The calculation method for the Hang Seng Hong Kong Stock Connect Innovative Drug Index will be updated [1] - New liquidity requirements will be added to the index calculation method [1] - Industry requirements will be modified, and thematic requirements will be removed [1] - The method for selecting constituent stocks will be revised [1] - These changes will take effect during the index review as of June 30, 2025, with constituent stock changes implemented on September 8, 2025 [1]