A migration of funds exceeding 680 billion.
The global capital markets are witnessing a silent migration of funds.
As the Federal Reserve's rate hike cycle comes to an end, Europe struggles with stagflation, and the Japanese stock market faces valuation bubble controversies after the 'lost thirty years', the Hong Kong stock market's Hang Seng Index leads global major stock indices with a 19% increase this year.
In this capital feast, driven by policy easing, valuation recovery, and industrial upgrades, ETFs tracking the Hong Kong stock market have become a hub for mainland funds planning in China's new economy, thanks to their unique advantages of low cost, high transparency, and cross-cycle adaptability.
01
The Hong Kong Innovative Drugs ETF (513120) has become the leader in gains.
In this wave of the Hong Kong stock bull market, the Hong Kong Innovative Drugs ETF (513120), which was selected as one of the top ten core ETFs by Gelonghui for 2025, has taken the lead, with its tracked index rising 87% in the past year, becoming the leader in gains.
The innovative drug sector has endured a harsh winter over the past four years and is considered one of the most unfortunate sectors in the market.
Due to lengthy R&D cycles, massive investments, and high failure risks, coupled with fluctuations in the macroeconomic environment and a tightening of the investment and financing climate, the stock prices of innovative drug companies have continued to decline.
After extreme adversity, the year 2025 is expected to be a turning point for the Hong Kong innovative drug ETF.
The recent surge in Hong Kong innovative drugs is primarily based on the following three driving factors:
1. A significant number of innovative drugs have been approved for listing. By the end of May, 54 new drugs had been approved globally (34 domestic + 20 imported), compared to only 37 domestic innovative drugs approved in the entire last year; now, in just five months, it has nearly reached last year's total.
2. Major BD transactions have been successfully executed. In the first quarter of 2025, domestic innovative drug license-out transactions reached 41, totaling 36.9 billion USD (close to the total amount for all of 2023), with many companies receiving large milestone payments through licensing, diversifying tariff risks via international strategies, while boosting valuations with increasing overseas revenues. The industry as a whole demonstrates a clear competitive advantage in overseas BD, confirming the global competitiveness of China’s innovative drug sector.
3. Domestic innovative drugs shine on the ASCO international stage. Recently, at a top global oncology conference, Chinese pharmaceutical companies showcased 71 original research achievements in one go, with several enterprises' clinical data selected, demonstrating strong R&D capabilities.
Driven by policy support, enhanced R&D capabilities, and internationalization progress, leading innovative drug companies with core competitiveness and those with differentiated innovation are currently entering a harvest period.
02
As prices rise, innovative drug companies are entering a performance realization period.
In the process of soaring, the Hong Kong Stock innovative drug ETF has exhibited a unique phenomenon of becoming "cheaper" as prices rise.
The reason for this is mainly due to the performance release of Hong Kong Stock innovative drug companies. As R&D results are transformed into products for sale, company revenues and profits have significantly increased. Although stock prices have risen, the faster growth of earnings has led to a decrease in valuation indicators such as PE, with historical valuations not rising in sync after the price increase.
Wind data shows that as of June 15, 2025, the latest PE of the Hong Kong Stock innovative drug index is 31 times, still lower than the 52 times at the beginning of the year. The index has surged 65% since the beginning of the year, indicating that the rise of the index is not driven by valuation bubbles, but by corporate profitability, supported by tangible growth, which has absorbed valuations through earnings.
Liu Jie, fund manager of the Hong Kong Stock innovative drug ETF (513120), stated in a media report that after years of valuation suppression, Hong Kong Stock pharmaceuticals have certain advantages in valuation.
Liu Jie said:
The research and development cycle for innovative drugs is 5 to 7 years. Based on AI-driven R&D applications, the投入产出比 of Chinese innovative drugs, enhanced capabilities, increased overseas cooperation, and the accumulation of investment and regulatory guidance from the previous years, innovative drugs may gradually enter the harvest period by 2025 or even 2026, and Hong Kong stocks for innovative drugs will gradually enter the performance realization period.
In the past six months, the continuous introduction of related policies has also provided more expectations for innovative drugs, such as the recently released related consultation drafts, the future release of a Class B catalog for medical insurance, and various measures aimed at gradually improving and resolving the core contradictions in pharmaceutical payments for commercial health insurance. All these factors have made the market realize the investment opportunities in Hong Kong stocks for innovative drugs, believing that innovative drugs in the Hong Kong stock market will develop more independent trends compared to other industries in the future.
With the continuous launch of industrial policies, the innovative drug sector has become the focus of the capital market, attracting the attention of numerous funds.
However, from the laboratory to the market, the R&D of innovative drugs is a complex and lengthy process, involving various stages such as basic research, clinical trials, and regulatory approval for market entry.
Investment in innovative drugs faces inherent high risks, with the R&D of innovative drugs presenting the "three 10" dilemma: on average, only 10% of R&D projects can succeed, the R&D cycle lasts about 10 years, and an investment of around 1 billion is required. These characteristics mean that the industry requires substantial upfront investment, and after R&D and market launch, it urgently needs payers to fund "returns" to address the challenges of developing new drugs.
For many investors, due to the difficulty of researching specific companies in innovative drugs, using ETFs to layout the entire sector has become an option for some funds.
Thus, a large amount of funds has flowed into Hong Kong stock ETFs. On June 13, amidst global market adjustments due to tense situations in the Middle East, the Hong Kong innovative drug ETF (513120) even garnered 0.609 billion yuan despite the adverse conditions, ranking fifth in terms of fund inflows across all ETFs on that day; in the past five trading days, the net inflow exceeded 1.21 billion yuan, while the fund size continued to reach new highs.
The latest size of the Hong Kong innovative drug ETF exceeds 12 billion yuan. As the first and only Hong Kong innovative drug thematic index fund among the All Market with a scale of 100 billion, the Hong Kong innovative drug ETF has had a daily trading volume exceeding 10 billion multiple times this year, with liquidity consistently ranking first in its category.
03
Over 680 billion in funds have poured in, with ETFs becoming a "dimensionality reduction tool" for participating in Hong Kong stocks.
The waters of Xiangjiang surge; some are excited while others take action.
Funds from the south are surging in. As of June 16, net inflow from the south has exceeded 687 billion Hong Kong dollars this year, nearing 85% of the historical record of 2024.
Funds are flooding into the Hong Kong stock market, with a significant portion of investors choosing to position themselves through ETFs.
For instance, according to Wind data, as of June 16, the Hong Kong non-bank ETF (513750), the leading Hang Seng TECH Index ETF (513380), the Hang Seng Consumption Index ETF (159699), and the Hong Kong Autos ETF (520600) have attracted 1.66 billion yuan, 1.063 billion yuan, 0.721 billion yuan, and 461 million yuan respectively this year.
In this round of the Hong Kong stock wave, the ETF has become a "dimensionality reduction tool" for A-share investors to participate in the Hong Kong stock market.
As we all know, the investment threshold for Hong Kong stocks is high (account opening, exchange rates, differences in trading rules), individual stock volatility is significant (no price limit), and there is information asymmetry (language barriers in earnings reports). However, the ETF, through the "bundling of leading stocks + diversified combinations" model, incorporates core symbols such as TENCENT, Alibaba, Meituan, WUXI BIO, and JD.com into "a basket", lowering the investment threshold (starting from 1 lot).
At the same time, these "money-absorbing" Hong Kong stock ETFs exhibit refined and diversified characteristics:
For instance, during the DeepSeek moment in the technology industry, the Hang Seng TECH Index ETF leading (513380) captures the new industry waves of AI computing power and humanoid robots.
When the market's risk aversion sentiment rises, the HONGLIETF Hong Kong stocks (520900) bundle a group of high-quality companies that provide stable dividends (State-owned central enterprises' dividend assets).
When policy-driven expectations change, the Hong Kong non-banking ETF (513750) with more than 65% insurance company content becomes a keen liquidity reactor.
A close observation of these "money-absorbing" ETFs reveals that they all come from fund managers who have deeply cultivated the ETF market for many years—GF Fund.
If the Hong Kong stock market is likened to a rich mine, GF Fund has provided gold seekers with a useful "gold digging shovel" early on—carefully creating innovative drugs, new consumption, pure technology, dividends, autos, and other special "shovels" tailored to different mineral layer characteristics, helping investors accurately capture investment opportunities in various tracks.
This year, multiple sectors such as innovative drugs, new consumption, pure Technology, dividends, and Autos, which are very popular, have been covered to meet various demands.
For instance, the Hong Kong stock innovative drugs ETF (513120), which ranks first in scale and liquidity among similar products, focuses on high-quality biotech companies in the Hong Kong market, covering leading companies in subfields such as innovative drugs, gene therapy, and cutting-edge biotechnology, with a combined weight of 91.1% for ShenZhen New Industries Biomedical Engineering and chemical pharmaceuticals, resulting in a high concentration of innovative drugs.
The Hang Seng TECH Index ETF (513380) bundles together 30 leading Technology companies listed in Hong Kong, covering core fields such as the Internet, AI hardware, semiconductors, and Consumer Electronics.
The China concept Internet ETF (159605) focuses on 30 leading Chinese Internet companies listed on Hong Kong and U.S. stock markets, covering core areas such as social media, e-commerce, and gaming, with the lowest comprehensive fee rates among similar products.
The Hong Kong stock non-bank ETF (513750), as the only product focused on leading non-bank stocks in the All Market, is positioned in insurance (with a total weight exceeding 65%), brokerages + Exchanges (with a total weight exceeding 30%), and other scarce symbols, with a highly concentrated holding weight on top-grade insurance companies, continuously seeing net inflows for 19 trading days, attracting very high attention.
The dividend ETF Hong Kong (520900) focuses on high-dividend central state-owned enterprises under the Hong Kong Stock Connect, combining the triple aura of 'Hong Kong stocks + state-owned central enterprises + dividends.' This ETF is evaluated monthly, and if conditions are met, dividends can be distributed. When market uncertainty increases and stock price volatility intensifies, high-dividend assets provide stable cash flow.
The Hang Seng Consumption Index ETF (159699) is positioned in trendy blind boxes, affordable milk tea, and traditional Gold for Generation Z to enjoy food and fun, and the tracked Hang Seng Consumption Index is currently the index with the highest content of POP MART, with a weight of 11.5%.
The Hong Kong Stock Auto ETF (520600) includes leading companies with first-mover advantages in smart driving, such as BYD, Xpeng Motors, Ideal, and Geely Automobile, making it the largest and most liquid in its category.
The Hang Seng ETF Hong Kong Stock Connect (159312) fully covers leading enterprises in the Hong Kong Stock Connect. Compared to the Hang Seng Index, the Hang Seng Stock Connect Index has outperformed the Hang Seng Index every year over the past four years.
The currently issued Hong Kong Stock Connect Technology ETF (159262) has removed indices related to non-pure technology attributes such as pharmaceuticals, automobiles, and home appliances, focusing heavily on the technology sector. It integrates both 'soft (Internet)' and 'hard (chips)' technologies, with higher purity and concentration in technology, making it sharper in expressing Hong Kong's technology assets.
These 'shovels' all have their own characteristics and can help investors dig out their own rich veins in the complex geological market.
In this era filled with opportunities for gold mining, choosing the right tools often means success is halfway achieved.
04
As funds flood in, high-quality Chinese assets are facing a value reassessment.
The Hong Kong stock market is currently experiencing an unprecedented trading boom.
According to Wind data, as of June 16, the daily average turnover of the Hang Seng Index since 2025 has reached 0.24 trillion Hong Kong dollars, hitting a historic high. Compared to the daily average turnover of 0.1-0.13 trillion during 2022-2024, this year has seen more than double the activity.
The core driving forces of this round of market vitality are, on one hand, the continuous inflow of southbound funds, and on the other hand, the international capital's re-evaluation of the value of high-quality Chinese assets.
Global capital is re-evaluating the pricing of Chinese assets, whether in the innovative drug sector, the non-bank financial sector, or the auto industry representing advanced manufacturing...
In the tide of the times, ETFs as an investment tool not only lower the participation threshold but also allow investors to directly participate in every pulse of the era in a securitized equity manner, becoming a micro carrier witnessing monumental changes.
In this era where asset prices reflect expectations, value will not remain silent forever; it will only accumulate greater potential in valuation hollows. When the technological revolution resonates with global capital flows, a surge of funds will further promote the re-evaluation of high-quality Chinese assets.
The above content only reflects the current market situation and may change in the future; it does not represent any investment opinions or recommendations. Past performance of the index does not guarantee future performance, nor does it constitute a guarantee of fund investment returns or any investment advice. The index has a short operation time and cannot reflect all stages of market development. Index funds may have tracking errors, and past performance of the fund does not represent future performance. Please read legal documents such as the 'Fund Contract' and 'Prospectus' before purchasing any fund product, and select products suitable for you based on your risk tolerance, investment goals, etc. The market has risks, and investments should be made with caution.
