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China Fund News reporter Zhang Yanbei and Sun Xiaohui

The second quarterly report of the fund shows that as of the end of June this year, the proportion of funds allocated to the pharmaceutical industry was at a historical low. However, considering that the valuations of most companies have a high cost-effectiveness, many fund companies are actively deploying related theme funds during the current low point window of pharmaceutical sentiment.

Fund companies are intensively deploying pharmaceutical funds

Statistical data show that as of the end of the second quarter of this year, the proportion of heavy holdings in the pharmaceutical industry in all funds (excluding passive funds) was 10.4%; after excluding pharmaceutical funds, the proportion of heavy holdings in the pharmaceutical industry in all funds was 5.3%, and the allocation ratio of all funds was at a historical low.

However, although the current sentiment for the pharmaceutical sector is at a low point, considering that the valuations of most companies already have a high cost-effectiveness, many fund companies are actively deploying related thematic funds during the current window period.

According to Wind statistics, as of August 5, there are currently three pharmaceutical theme funds being issued, such as Invesco Great Wall CSI Hong Kong Stock Connect Innovative Drug ETF, ICBC SSE Star Biopharmaceutical ETF, and Dongxing Pharmaceutical Biological Quantitative Stock Selection. In addition, Huaxia Pharmaceutical Quantitative Stock Selection has issued a prospectus and is waiting for issuance. Among them, the ICBC SSE Star Biopharmaceutical ETF and Huaxia Pharmaceutical Quantitative Stock Selection have a fundraising limit of 2 billion and 8 billion shares respectively.

In addition, from the perspective of newly established funds this year, as of now, a total of 19 active and passive medical theme funds have been established this year. Among them, the China Europe CSI All-Share Healthcare Equipment and Services Index and the Penghua CSI Hong Kong Stock Connect Medical and Health Comprehensive Connection were both established recently. From the perspective of issuance scale, the initial issuance scales of Caitong Asset Management Innovation Medicine, Caitong Medical Health, Fuguo Medical Innovation, Penghua Innovation Medicine, etc. are all above 300 million yuan, among which Caitong Asset Management Innovation Medicine has exceeded 700 million yuan.

It is worth mentioning that according to statistics from Tianfeng Securities, as of the end of the second quarter of 2024, the overall scale of pharmaceutical theme funds was 284.501 billion yuan, of which active pharmaceutical theme funds were 176.731 billion yuan and passive pharmaceutical theme funds were 107.769 billion yuan. Judging from the changes in fund shares, there has been no significant decline in shares compared with the end of last year.

In fact, during the second quarter, many fund managers increased their allocations to the pharmaceutical sector or maintained relatively stable holdings.

For example, during the second quarter, Hua Xia Innovative Pharmaceuticals, a leading company, invested in innovative drugs, innovative medical devices, and in-hospital treatment products, and actively sought investment opportunities in multiple innovative research and development areas such as ADC, weight loss drugs, and antibody drugs. In addition, since some innovative drug companies in the Hong Kong stock market's pharmaceutical sector already have good investment cost-effectiveness, the proportion of Hong Kong stock allocation has also been increased.

In the second quarter, BoCom Healthcare will take the turning point of the economy as a starting point and continue to increase its left-side layout, such as medical equipment, raw materials, CXO, etc. It will continue to maintain confidence and patience, waiting for the right time to attack while doing a good job of defense.

In addition, Yinhua Healthcare maintained the idea of ​​focusing on innovative drugs, but made slight adjustments to individual stocks, focusing more on leading mid-to-large market capitalization companies with R&D capabilities, financial strength, and better liquidity.

High-quality pharmaceutical stocks are expected to usher in value investment opportunities

Since February 2021, the pharmaceutical sector has been one of the most "injured" sectors in terms of both adjustment timing and adjustment magnitude.

The industry pointed out that the reason why the pharmaceutical sector continued to underperform the market is due to many factors such as domestic and foreign policies, liquidity, etc.: on the one hand, the particularity of the domestic policy environment, such as centralized procurement and anti-corruption; on the other hand, since 2021, the market style has changed, and large-cap blue chips have given way to small-cap growth; finally, there are negative factors of overseas liquidity, which have led to a continued decline in industry valuations.

Looking ahead, Wan Minyuan, manager of Rongtong Health Industry Fund, believes that the overall pharmaceutical industry is currently oversold, and the valuation of the CSI Pharmaceutical Index is 25.06 times, which is lower than 98% of the time in history. Looking forward from the current point in time, he is full of confidence in the entire pharmaceutical industry.

"The mid- and long-term investment logic of the pharmaceutical industry has always been based on the two core variables of 'quantity' and 'price'. 'Quantity' benefits from aging and changes in the disease spectrum, while 'price' is constrained by medical insurance policies. The substantial adjustments in the valuations of the pharmaceutical sector in the past two years were also mainly affected by the disturbances of medical insurance policies. The current medical insurance cost control policies have improved marginally and the boundaries have gradually become clear." Wan Minyuan said.

He further pointed out that the current market price of the sector is at a ten-year low, the valuation is near the historical bottom, and the long-term growth logic of the industry has not been destroyed. High-quality pharmaceutical stocks with matching valuations are expected to usher in real value investment opportunities.

Looking ahead, Guotai Fund believes that the innovative pharmaceutical and medical device sectors will continue to be favored by the market. Although competition is fierce in the innovative oncology and autoimmune drugs sectors, companies that have made progress in clinical research and development, especially those that have entered medical insurance and have overseas cooperation, will be more likely to stand out in the market competition. The selection of new tracks should focus on existing rigid demand to avoid the need for extensive doctor education and promotion after the product is launched.

The medical device sector is also worthy of attention, especially driven by policy support and market demand, China's medical devices are becoming increasingly competitive in the international market. Finally, the API market also shows huge investment potential. For smaller API companies, market opportunities may bring significant growth elasticity.

Editor: Captain

Review: Muyu

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