The valuation of the innovative drug sector has entered a reasonable range. The Hong Kong Stock Connect Innovative Drug ETF, E Fund (159316), offers a cost-effective tool for portfolio allocation.

Fee rate advantages stand out with low-cost deployment

The E Fund Hong Kong Stock Connect Innovative Drug ETF (159316) announced today that starting March 6, the management fee will be reduced from 0.50% to 0.15%, and the custody fee from 0.10% to 0.05%. After the adjustment, the total fee rate is only 0.20%, giving it a cost advantage among similar products in the market and providing investors with a lower-cost tool to allocate to core assets in Hong Kong’s innovative drug sector.

Industry trends remain unchanged

1. The BD outbound wave continues: Since 2026, China has conducted 44 BD deals in innovative drugs, with an initial payment of approximately $3.123 billion and a total amount of $53.276 billion, surpassing one-third of the total for 2025. Meanwhile, several Chinese innovative drug companies are progressing steadily in R&D and commercialization.

2. CXO performance growth confirms high industry prosperity: WuXi AppTec’s net profit attributable to shareholders in 2025 reached 19.151 billion yuan, a 102.65% increase year-over-year; WuXi Biologics’ revenue in 2025 grew by over 45% year-over-year.

Valuations enter a reasonable range, and the sector is entering a “sweet spot” for allocation

After nearly two quarters of correction, the Hong Kong Stock Connect Innovative Drug Index’s current P/E ratio is about 33 times, at a relatively low level over the past five years (20.3 percentile). The sector may have entered a mid- to long-term allocation “sweet spot.”

Key product - Hong Kong Stock Connect Innovative Drug ETF E Fund (159316, linked A/C: 024328/024329)