On July 29, seven ETFs and five actively managed equity funds, mostly related to innovative drugs, saw their year-to-date returns double. Currently, the number of funds with year-to-date returns exceeding 100% in the all market has increased to 16, with the highest year-to-date net asset value (NAV) return approaching 140%.
Cailian Press, July 30 (Reporter Xiaoya Zhou) Seven ETFs achieved a doubling of their year-to-date returns in a single day.
Driven by the strong performance of the innovative drug sector, not only have actively managed equity funds that heavily invest in this sector taken the lead, but thematic ETFs tracking this sector have also seen their returns double. Wind data shows that as of July 29, 16 funds have achieved a year-to-date net asset value (NAV) growth rate of over 100%, including seven ETFs and nine actively managed equity funds.
Notably, many of the funds that doubled their returns did so on July 29. The seven ETFs, which had year-to-date NAV returns of just over 90% before this, saw single-day gains of more than 4%.
Similarly, for actively managed equity funds, there were only four funds with year-to-date returns exceeding 100% as of July 28, all of which were actively managed equity products.
Overall, the 16 funds with year-to-date returns exceeding 100% are managed by 15 different fund managers. Huitianfu Fund is the only manager with two funds achieving year-to-date returns of over 100%. What does this doubling of returns indicate about the future prospects of the innovative drug sector?
Seven 'doubled-return ETFs' emerge in a single day
On July 29, the innovative drug sector continued to perform strongly, with multiple indices tracking the Hong Kong-listed innovative drug sector, such as the CSI HK Innovation Drug Index, Guo Zheng HK Innovation Drug Index, and Hang Seng Innovation Drug Index, all rising by more than 4%.
For the ETFs that had already achieved a net value return of over 90% year-to-date, it is now certain that their year-to-date returns will double following the latest net value update.
According to Wind data, as of July 29, the Huitianfu CSI HK Innovation Medicine ETF led the ETF market with a year-to-date net value return of 107.67%; followed by the Wanjia CSI HK Innovation Medicine ETF, which achieved a year-to-date net value return of 106.87%; and the GF CSI HK Innovation Medicine ETF, which reported a year-to-date net value return of 106.39%.
In addition, the Huatai-PineBridge Hang Seng Innovation Medicine ETF, Yinhua CSI HK Innovation Medicine ETF, Invesco CSI HK Innovation Medicine ETF, and Fullgoal Hang Seng HK Biomedical Healthcare ETF also saw their year-to-date net value returns more than double, at 106.36%, 105.67%, 103.36%, and 101.21%, respectively.
The unit net values of these seven products all reached new highs since their inception yesterday. Among these seven products, all but the Fullgoal Hang Seng HK Biomedical Healthcare ETF are linked to the innovation medicine sector index.
In addition to these products, three ETFs linked to the Hang Seng Biotechnology Index have also seen their year-to-date net value returns exceed 90%.
On the same day, five more actively managed equity funds doubled their year-to-date returns. As of July 29, the Huitianfu Hong Kong Advantageous Selection Fund continued to lead the market with a year-to-date net value return of 138.9%; the Great Wall Pharmaceutical Industry Select Fund's year-to-date net value return also approached 130%, at 129.35%.
Additionally, the Bank of China HK Biomedical Fund and the Yongying Pharmaceutical Innovation Intelligence Select Fund both achieved year-to-date returns exceeding 110%, at 119.64% and 114.79%, respectively.
Among the five newly added actively managed equity funds that have doubled in value, Huaxia Healthcare saw a single-day net asset value (NAV) growth of over 5%, with its year-to-date NAV return surging to 109.26%.
The year-to-date NAV returns for the other four funds—Nuoan Select Value, Harvest Mutual Selection, Zhonghang Preferred Navigator, and Ping An Core Advantage—are 105.67%, 100.87%, 100.45%, and 100.09%, respectively.
These newly added, high-performing actively managed equity funds are all heavily invested in the healthcare sector, with a focus on innovative drugs. For example, since 2021, the Harvest Mutual Selection fund has been managed by Hao Miao, who focuses on opportunities in the biopharmaceutical industry. Given Hao Miao's bullish outlook on innovative drugs and medical devices in both A-shares and H-shares, the fund's allocation to the biopharmaceutical industry reached 90% starting in 2023, with its top ten holdings remaining relatively stable.
Compared to ETFs, actively managed equity funds still outperformed in terms of year-to-date returns. The aforementioned Huitianfu SSE HK Connect Innovative Drugs ETF ranked 5th among all funds.
Is it still worth buying after the funds have doubled in value?
How should one view the investment opportunities in the innovative drug sector following the year-to-date doubling of returns? The research department at Huatai-PineBridge Funds mentioned that three factors have driven the exceptional performance of innovative drug-themed funds this year.
Firstly, overseas multinational corporations (MNCs) are facing patent cliffs, leading to an increased demand for business development (BD). Chinese pharmaceutical companies are entering the harvest phase of their 2.0 era of innovation, with supply and demand well-matched. As a result, the pace of innovative drug exports is expected to accelerate from the second half of 2024.
Secondly, many biotech companies are likely to reach a breakeven point within the next three to five years.
Third, there is comprehensive policy support from the payment and R&D ends.
In their view, at present, the valuation of the innovative drugs sector as a whole is reasonable, with some internal structural differentiation. Some individual stocks may be overvalued, but the valuations of leading companies may still be at a reasonable level.
Hao Miao, the Director of Research for Healthcare at Harvest Fund Management and the Fund Manager of Harvest Mutual Integration Select, also mentioned that the performance of innovative drugs stands out. The main reason is the acceleration of international development in China's innovative drug industry, with numerous product co-development agreements reached with multinational companies, and BD (Business Development) transaction amounts reaching new highs, greatly boosting investor confidence in the investment value of Chinese innovative drug companies.
"The innovative drugs sector has seen significant gains, and it is expected that the subsequent volatility may increase," Hao Miao believes. In the medium to long term, the new cycle of global development for Chinese innovative drug companies is just beginning, and high-quality leading enterprises still have substantial growth potential."
Sang Xiangyu, the Fund Manager of Huaan Pharmaceutical and Biotechnology, also believes that, in the medium to long term, the development logic of the innovative drugs Industry has not changed. Domestic innovative drug companies are continuously increasing their R&D investment and technological innovation, gradually narrowing the gap with international pharmaceutical companies, and have enormous growth potential in the future.
"However, we have also reminded everyone that the innovative drugs sector saw a significant rise in the first half of the year, accumulating a certain amount of profit, and some investors have the need to lock in gains, which may lead to a correction in the sector," he believes. Subsequently, with continuous policy support, ongoing R&D progress, and accelerated internationalization, the innovative drugs sector is expected to maintain a positive development trend. However, investors should remain rational, as the innovative drugs industry is characterized by high investment, high risk, and a long cycle. The international competition in innovative drugs is becoming increasingly fierce, and Chinese innovative drug companies and CROs need to continuously enhance their competitiveness."
