On the morning of March 20, both the A-share and Hong Kong stock markets continued to experience volatility. The Shanghai Composite Index fell below the 4000-point mark, while the Hang Seng Index saw a slight decline. The AH innovative drug sector showed early strength but later pulled back, remaining active against the broader market trend.

Leading innovative drug companies in Hong Kong, such as Innovent Biologics, BeiGene, and Hansoh Pharma, saw gains of over 1%, providing support to the index. Conversely, Akeso Inc. and CSPC Pharmaceutical Group experienced minor declines. The Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection Trading Open Ended Index Securities Invest (520880), which focuses entirely on innovative drug R&D, initially rose by up to 2.28% before retreating, yet still managed to stay in positive territory.

In the A-share market, the pharmaceutical sector also performed well against the trend. Salubris Pharmaceuticals, a concept stock in innovative drugs, rose over 2%. Dong-E-E-Jiao, a leading traditional Chinese medicine company, reported an 11.66% year-on-year increase in net profit for 2025, leading its shares to open higher and gain over 7% in early trading. The Pharmaceutical ETF (562050), the only on-market ETF tracking the performance of the pharmaceutical sector, climbed as much as 1.42%.

Notably, on March 18 and 19, the A-shares of Rongchang Pharmaceutical hit consecutive all-time highs. Huatai Securities' pharmaceutical team pointed out that this is the first mainstream innovative drug stock to reach a new high since the 2025 innovative drug bull market began, signaling a clear bottoming-out sign for the industry and marking a significant event.

The institution also highlighted that market attention has recently increased significantly towards key data releases from the ASCO conference. Data readouts from Kelun-BoTai and Akeso Inc. on NSCLC at ASCO may further clarify that the cornerstone of next-generation cancer treatment will advance to a combination of IO bispecific antibodies and ADCs, with Chinese assets expected to account for over half of the market share.

The Shanxi Securities pharmaceutical team also believes the industry may have bottomed out. Data readouts from ASCO and the third quarter for innovative drugs will continue, while geopolitical disturbances and liquidity factors are expected to have limited impact. They anticipate a sector-wide rally in innovative drugs this year, with opportunities in bispecific antibodies, ADCs, small molecules, and technology platforms.

Regarding allocation timing, the AH innovative drug sector has now undergone adjustments for two consecutive quarters, making the current position highly attractive for investment. To capture the potential rebound in innovative drugs at low levels, investors can consider two key T+0 instruments:

For a pure play on innovative drugs, the Huabao Hang Seng Hong Kong Stock Connect Innovative Drug Selection Trading Open Ended Index Securities Invest (520880) offers 100% exposure to companies engaged in innovative drug R&D. Its top ten holdings account for over 70% of the portfolio, highlighting its focus on industry leaders. The underlying assets are Hong Kong stocks, providing high elasticity and the advantage of T+0 trading.

For investors seeking lower volatility, the Pharmaceutical ETF (562050) offers a unique allocation of "70% innovative drugs + 30% traditional Chinese medicine." It is a scarce product in the market, combining the high growth potential of innovative drugs with the high dividends of traditional Chinese medicine, offering both offensive and defensive characteristics.

A MACD golden cross signal has formed, indicating positive momentum for several stocks.