The pharmaceutical industry suddenly "changed face." What happened? Huabao Fund Hong Kong Stock Connect Innovative Drug ETF (520880) shows a consecutive weekly rise against the market!

On April 3, China’s A-share market opened higher but then fell back, with the Shanghai Composite Index continuing to drop 1% and losing another 3900 points. The recently hot pharmaceutical sector suddenly adjusted, and the largest medical ETF in the entire market—Huabao (512170)—closed down 2.65%, falling below the 20-day moving average. The only drug ETF trading in the market—Huabao (562050)—declined 1.45% and ended its two-day winning streak.

Hong Kong stocks were closed for the Good Friday holiday, so the trading prices of the Hong Kong Stock Connect Innovational Drug ETF Huabao (520880) and the Hong Kong Stock Connect Medical ETF Huabao (159137) on the A-share side are determined entirely by capital market games and today they both fell by about 1% to 1%.

Why did the pharmaceuticals suddenly “change their face”—what happened? On April 2 in U.S. Eastern Time, the White House officially announced a 100% tariff on imported patented drugs and pharmaceutical ingredients. The move is intended to pressure drug companies via tariffs to either bring production back to the domestic market or accept pricing agreements.

The news immediately sparked strong market attention. It was the last trading day before the Qingming holiday, and with worries compounding and market risk appetite falling, some funds chose to sell pharmaceutical assets.

Returning to rationality, how much impact does this move have on China’s pharmaceutical industry? To put it plainly: the direct impact is limited.

Judging from China’s export structure of pharmaceutical companies to the U.S., it is currently mainly active pharmaceutical ingredients (API) and generic drugs rather than patented drugs. According to data from the China Chamber of Commerce for Import and Export of Medicines and Health Products, in 2024, among the total $19.05B of China’s pharmaceutical product exports to the United States, exports of APIs were $4.52 billion, accounting for 70.35% of Western pharmaceutical exports. These products are not within the scope of the tariff increase in this round.

From the perspective of the innovation drug industry chain, China’s core export model for overseas expansion of innovative drugs is mainly technical licensing (License-out), and does not involve exporting finished drug products, thus naturally avoiding tariff barriers. Domestic CXO companies mainly supply intermediates and APIs rather than finished patented drugs.

Some analysts point out that this policy has limited actual impact on China’s pharmaceutical industry chain, and instead may accelerate the restructuring of global supply chains—benefiting CXO companies with global capacity layouts and innovative drug companies whose main overseas expansion model is BD transactions.

Caitong Securities is explicit in stating that it is optimistic about the prospects for China’s innovative drugs going global. The current tariff increase has limited impact on potential BD transactions, and it continues to recommend innovative drugs and the innovative drug industry chain. *

In the secondary market, driven by fundamentals accelerating their repair, the AH pharmaceutical sector has recently been leading the overall market repeatedly. With multiple positive factors overlapping—turnaround in profitability for leading companies + a surge in going-global activity + meeting catalysts—innovative drug performance has been especially strong. On April 1, the 100% innovative-drug R&D underlying asset—Hong Kong Stock Connect Innovational Drug ETF Huabao (520880)—surged nearly 7% in a single day, setting a record for the largest one-day gain.

This week, 520880 rose 6.63% cumulatively, with gains across the week and strong weekly momentum, significantly outperforming the Hang Seng Index (0.66%). Weekly turnover was 3.5B yuan, the second-highest since listing. Judging from the weekly K-line arrangement, a V-shaped pattern is beginning to emerge, and a market turning point may be on the way.

Market analysis believes that based on industry trend logic and market reaction, innovative drugs/pharmaceuticals are expected to become the strongest main theme across the entire market in April. Zhongtai Pharmaceutical has advised to actively seize opportunities for a bottom rebound in innovative drugs. *

To invest in innovative drugs, choose Hong Kong Stock Connect Innovational Drug ETF Huabao (520880). It allocates 100% to companies in the innovative drug R&D category; the top ten weight holdings account for more than 70%, highlighting strong “leading company” characteristics. If you want to reduce volatility, choose Drug ETF Huabao (562050), with an exclusive allocation of “70% innovative drugs + 30% traditional Chinese medicine.” It combines high-growth potential from innovative drugs with high dividend yield from traditional Chinese medicine.

To invest in healthcare, choose the largest medical ETF in the entire market—Huabao (512170). It holds a heavy allocation to medical services (CXO) + medical devices, balancing aesthetics, AI healthcare. If you want a high-beta “T+0” tool, pay attention to Hong Kong Stock Connect Medical ETF Huabao (159137). The CXO exposure is over 40%, covering popular themes such as AI healthcare, brain-computer interface, innovative drug devices, and more.

Source of data: China Securities Index Company, Shanghai/Shenzhen/Hong Kong exchanges, etc. Note: ETF funds do not charge sales service fees. When investors apply for subscriptions or redemption of fund shares, the subscription/redemption agent securities firms may charge a commission of no more than 0.5%, which includes related fees charged by the stock exchanges, registration institutions, and so on. For fund fee rates, please refer to the respective fund legal documents.

Institutional viewpoints source: Caitong Securities 20260403《The U.S. announces a 100% tariff increase on imported patented drugs and pharmaceutical ingredients, with limited disruption to China’s innovative drug industry chain》; Zhongtai Pharmaceutical 20260403 April monthly report teleconference;

Risk warning: The index constituent stocks mentioned in the article are for demonstration purposes only. Descriptions of individual stocks do not constitute any form of investment advice, nor do they represent the portfolio holdings information and trading movements of any fund managed by the manager. The risk level of the medical ETF, drug ETF Huabao and its linked funds assessed by the fund manager is R3—medium risk, suitable for balanced (C3) investors and above. The risk level of the Hong Kong Stock Connect Innovational Drug ETF Huabao and its linked fund, the Hong Kong Stock Connect Medical ETF and its linked fund, and the Medical ETF linked fund is R4—medium-high risk, suitable for proactive (C4) investors and above. Any information appearing in this article (including but not limited to individual stocks, comments, forecasts, charts, indicators, theories, and any forms of statements, etc.) is for reference only. Investors must be responsible for any investment decisions they make independently. Also, any viewpoints, analyses, and forecasts in this article do not constitute any form of investment advice to readers, and no responsibility is assumed for any direct or indirect losses arising from the use of the contents of this article. The performance of other funds managed by the fund manager does not guarantee the performance of the fund. Past performance of a fund does not represent future performance. Investing in funds involves risk.

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责任编辑：Yang Hongbu