Seize the opportunity in innovative drug allocation, the China Innovation Medical ETF Huaxia Connect starts trading today.

In March 2026, the government work report for the first time listed biopharmaceuticals as an “emerging pillar industry,” marking that the sector has officially entered the core sequence of economic growth. According to the China Merchants Industry Research Institute, this year the related market size in China will reach 23,102 billion yuan. Policy tailwinds continue to be released, the industry’s growth potential is substantial, and investment opportunities in the sector are becoming more prominent. How should ordinary investors capture these opportunities? The Huaxia Kechuang Biopharmaceuticals ETF closely tracks the SSE STAR Market Biopharmaceutical Index, focusing on domestically breakthrough innovative drug companies, helping investors capture the industry’s growth value. Meanwhile, to better meet over-the-counter (OTC) allocation needs, the Huaxia Kechuang Biopharmaceuticals ETF—Connect (fund code: 027142) was officially issued on April 7, providing a convenient new option for investors who have not opened on-exchange accounts.

According to available information, the SSE STAR Market Biopharmaceutical Index (abbreviated as “Kechuang Biopharma”) selects 50 securities from the STAR Market that have relatively large market caps across areas such as biopharmaceuticals, biomedical engineering, bio-agriculture, bioenergy, and other bioproperty sectors as index constituents, in order to reflect the overall performance of listed securities representing the biopharmaceutical industry on the STAR Market. From multiple perspectives, the index brings together the most breakthrough innovative drug companies in China, with a concentrated industry distribution, strong return elasticity, and significant growth potential—its investment value for money should not be overlooked.

From an industry allocation perspective, the Kechuang Biopharma index mainly covers innovation-based hard assets such as medical devices and pharmaceuticals. Wind data shows that, based on the weight distribution by Shenwan secondary industries, as of April 1, 2026, the index covers core tracks including medical devices (36.3%), chemical pharmaceuticals (35.5%), and biological products (21.4%), among others. The combined weight of the top three industries exceeds 93%, confirming that the index is highly focused on innovation-core tracks. A further look at more granular breakdowns (Shenwan tertiary industries) shows that the index’s allocation to high-investment, long-R&D-cycle advanced medical technology fields such as formulations, equipment, consumables, and biological products reaches 80.8%, while sectors such as healthcare services and pharmaceutical distribution have relatively low weights, highlighting the index’s pure innovation-driven characteristics.

Moreover, thanks to its concentrated innovation-focused layout, the index also demonstrates stronger return elasticity. Wind data shows that during major upswings in the pharmaceutical industry in 2020, 2021, and 2024, the index’s maximum rise from the lowest point within the period was 100.16%, 59.92%, and 60.15%, respectively. In the same period, the 300 Pharmaceutical Index recorded maximum gains of 78.90%, 10.02%, and 48.31%, and the 800 Health & Medical Index recorded 73.68%, 9.42%, and 46.96%. In every round of rebounds, Kechuang Biopharma outperformed comparable pharmaceutical indices, showcasing its high-elasticity characteristics.

In addition, from the perspective of individual stock selection, the index’s leading-stock attributes are clear, with standout growth potential. As of April 1, 2026, the combined weight of the top ten constituent stocks was 48.91%, bringing together many leading companies in sub-sectors: it includes key forces in innovative drug R&D in the chemical pharmaceuticals and biological products fields, continuously driving breakthroughs in its own technologies; it also covers leading manufacturers of high-end equipment and critical consumables in the medical devices sector, leading the process of domestic substitution. With this composition, it may be an efficient tool for positioning in cutting-edge innovative drugs and innovative devices on A-shares.

Looking ahead, with multiple positive factors converging in the innovative drug sector, the Kechuang Biopharma index is expected to share the related industry’s growth dividend over the long term. At the policy level, support for innovative drugs has shifted from the past “backstop” to today’s “strong driving force,” providing the industry with unprecedented long-term certainty. Specifically, the sector’s strategic standing has been elevated; in the “15th Five-Year Plan (2026–2030)” period, for the first time biopharmaceuticals were raised to the level of “emerging pillar industries” alongside integrated circuits and aerospace/space aviation. This positioning suggests that policy support will exhibit a comprehensive, long-cycle pattern, covering every link from basic research and development, to the security of the industrial chain, to market access.

On the overseas front, external licensing (BD) has already become a core driving force for innovative drug companies to realize their value, and China’s innovative drug industry has officially entered a global value cycle. A research report from Guojin Securities shows that in the first quarter of 2026, the transaction value of China’s innovative drug external licensing exceeded $60 billion, up 135% year over year, approaching half of the total amount for all of 2025. In addition, the industry has moved into a period of earnings realization, and profit elasticity is starting to show.

At present, the Kechuang Biopharma index—featuring a pure innovation track, standout return elasticity, and the advantage of concentrated leading companies—is riding the tailwinds of policy upgrades, innovative drugs going global, and earnings realization, opening up long-term growth space. As the Huaxia Kechuang Biopharmaceuticals ETF—Connect (fund code: 027142), which closely tracks this index, was officially launched for the first time on April 7, it provides an easy investment tool for everyone to take one-click positions in core innovative assets in STAR Market biopharmaceuticals and capture the sector’s high-growth dividend. Please stay tuned.

(Editor: Wang Lei)

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