13 Biotech Companies Batch "Enter the Corridor" Biomedicine Anchors New Positioning as Emerging Pillar Industry

Recently, with the official implementation of the first batch of Hong Kong Stock Connect targets for the year on the Shanghai and Shenzhen exchanges, 42 new Hong Kong stocks have received “entry tickets” from southbound funds. Among them, the biopharmaceutical sector accounts for 13, representing over 30%, making it the most prominent highlight of this expansion.

Analysts believe that this adjustment not only represents another optimization of the connectivity mechanism but also reflects the direct response and empowerment of the capital market after the country explicitly designated biomedicine as a new pillar industry. In the context of continuous increased southbound investment into the Hong Kong stock market, this move injects valuable liquidity into unprofitable biotech companies still in R&D investment phases, marking a new stage of linkage between mainland and Hong Kong biotech capital markets focused on value discovery and industry empowerment.

Hong Kong Stock Connect Expansion: Biotech Becomes the Biggest Winner

This adjustment is an important step toward normalizing and optimizing the Shanghai-Shenzhen-Hong Kong interconnection mechanism. Strictly following core standards such as market capitalization, trading activity, and compliance, 42 companies were newly included, while 25 were removed. The adjustment took effect on March 9.

From an industry perspective, biotech and healthcare sectors are undoubtedly the biggest winners. The 13 newly included companies cover cutting-edge fields such as cell therapy, AI-driven drug development, innovative small molecules, and antibody drugs, showcasing a concentrated display of high-quality assets in Hong Kong’s innovative drug sector.

Specifically, Keji Pharmaceutical-B, a leader in CAR-T cell therapy, has attracted broad attention for its core layout in solid tumor treatment; Yingxi Intelligent leverages its AI-driven drug R&D platform, becoming a benchmark for the integration of “AI + biomedicine.” Additionally, companies like Pige Biopharma-B, Xuanzhu Biotech-B, and Jingfang Pharmaceuticals-B have rich pipelines in metabolic diseases, tumors, and autoimmune conditions, demonstrating solid R&D foundations and growth potential.

Notably, among the 13 biotech companies newly included, most are unprofitable companies listed under Hong Kong Stock Exchange Rule 18A. These companies are in the peak R&D investment phase, yet have not achieved profitability, though their core pipelines hold breakthrough potential. Meanwhile, 25 Hong Kong Stock Connect targets were removed, including five in the healthcare sector, mainly due to market cap or trading activity falling below standards, forming a dynamic “in and out, survival of the fittest” adjustment mechanism to further optimize the pool of Hong Kong Stock Connect stocks and ensure stable market operation.

Xu Chi, Chief Strategy Analyst at CITIC Securities, stated that the inclusion of 13 biotech companies in a single batch set a new record for the number of companies included at once, signaling a clear increase in the market’s tolerance for innovative drug assets. This not only reflects the expanding coverage of unprofitable high-quality tech assets under the connectivity mechanism but also indicates that regulators and markets are increasingly recognizing the valuation logic of companies with core innovation capabilities and long-term industry value despite not yet being profitable.

From “Emerging Cultivation” to “National Pillar” — a Strategic Upgrade

The concentrated inclusion of biotech companies coincides with a historic shift in the country’s industrial positioning. The 2026 government work report explicitly states the goal of cultivating and expanding emerging and future industries, implementing industrial innovation projects, encouraging state-owned enterprises to lead in opening application scenarios, and building emerging pillar industries such as integrated circuits, aerospace, biomedicine, and low-altitude economy.

Xu Chi believes this upgrade in positioning means biomedicine is no longer just an emerging industry encouraged for development but has entered a higher level within the national industrial system. From a market perspective, inclusion in Hong Kong Stock Connect means these companies are now officially within the scope of southbound funds, which helps improve sector liquidity, enhances the influence of mainland funds on Hong Kong’s innovative drug pricing, and shifts Hong Kong’s innovative drug market from a risk-prone, externally dependent growth sector to a core innovation asset pool that caters to RMB capital, with both financing and allocation functions.

Huang Hanyang, Chief Analyst of the Pharmaceutical Industry at Industrial Securities, noted that although there was some adjustment in the innovative drug sector earlier, China’s global competitiveness in innovative drugs continues to strengthen, with ongoing overseas deployment and commercialization profits remaining unchanged. Business development (BD) and performance catalysts will continue to drive growth.

For unprofitable biotech companies facing long R&D cycles and high capital needs, HKEX Rule 18A provides a financing channel. The current inclusion in Hong Kong Stock Connect further opens the key investment link between “Mainland capital and Hong Kong innovative drug companies.” Xu Chi believes this adjustment will likely strengthen Hong Kong’s role as the core listing venue and valuation discovery platform for Chinese innovative drug companies, improve financing expectations, refinancing capacity, and market attention for unprofitable biotech firms, and further facilitate the capital cycle of “primary financing - secondary pricing - industry cooperation.”

Long-term Investment Window Opens for Innovative Drugs

The most immediate effect of inclusion in Hong Kong Stock Connect is a significant improvement in liquidity. For a long time, some unprofitable biotech companies listed in Hong Kong faced thin trading and valuation pressures, with some high-quality targets unable to reflect their R&D value due to lack of incremental funds.

Cao Zeyun, Chief Analyst of the Pharmaceutical Sector at Guohai Securities, said that inclusion in Hong Kong Stock Connect helps expand the shareholder base, enhance trading liquidity, and optimize shareholder structure.

Market data on the first trading day confirmed this: most newly included stocks showed notable gains, with Keji Pharmaceutical-B and Jingfang Pharmaceuticals-B among the top performers.

Xu Chi further analyzed that once included, these companies will be officially accessible to mainland public funds, private equity, insurance capital, and various southbound thematic funds, significantly improving liquidity, including increased trading activity, higher turnover rates, narrower bid-ask spreads, and greater institutional participation, thereby enhancing their capacity for refinancing, placements, and market attention.

Historically, companies like BeiGene and Innovent Biologics, once included in Hong Kong Stock Connect, have seen continuous southbound capital inflows, with trading activity and valuation levels rising in tandem.

“Currently, most innovative drug stocks have retreated significantly from their 2025 highs, with valuations and sentiment at cyclical lows. However, short-term price fluctuations do not alter the long-term growth logic of going global for innovative drugs,” said the research team at Dongwu Securities.

However, Xu Chi also cautioned investors that this valuation recovery is more likely to be structural rather than a broad market rally. While expanding Hong Kong Stock Connect can improve trading attributes and risk appetite, it cannot replace fundamental performance. Companies with core product competitiveness, smooth clinical progress, clear overseas expansion plans, and a well-defined commercialization path are more likely to see valuation uplift.

Looking ahead, under the resonance of policy support, capital backing, and R&D breakthroughs, the biopharmaceutical industry is entering a golden period of high-quality development.

Huang Hanyang believes that future focus should be on the progress of already completed BD candidates, as these targets have higher certainty, and overseas clinical progress will continue to provide catalysts.

The Dongwu Securities research team expressed optimism about the medium- and long-term investment value of the innovative drug sector. Their specific allocation priorities are: innovative drugs, research services, CROs, traditional Chinese medicine, medical devices, and pharmacies; high-elasticity allocations should focus on innovative drugs, especially in the nucleic acid field, while high-dividend strategies can consider Chinese medicine and pharmacy sectors.

For ordinary investors, Xu Chi suggests focusing on the core assets’ realization capacity of the included unprofitable biotech companies. In R&D, key indicators include the clinical stage of core pipelines, key trial endpoint achievement, safety data, and regulatory approvals or recognitions. Commercially, attention should be paid to licensing and partnership capabilities, potential listing timelines, cash reserves, ongoing financing ability, and patent barriers, as these factors directly determine whether a company can successfully navigate R&D cycles and generate sustained value.

Overall, institutions generally believe that under the dual drivers of policy dividends and liquidity improvements, the Hong Kong biotech sector is expected to see valuation and performance recovery, becoming a clear and important investment theme in the Hong Kong market.