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Mainland China funds increase stakes in Hong Kong biotech amid surge of licensing deals

Analysts say valuation of the sector is attractive, with biotech firms trading relatively cheaply

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Hong Kong’s skyline is seen from The Peak on June 1. Photo: Karma Lo
Julie Zhang
A growing number of mainland Chinese institutional fund managers have built up stakes in Hong Kong-listed biotechnology stocks over the past month, drawn by attractive valuations amid a surge in cross-border licensing deals in the sector.

China’s largest mutual fund manager, E Fund Management, has taken a 7 per cent stake in gene-editing biotechnology firm Biocytogen Pharmaceuticals, buying additional 91,500 shares in the Beijing-based firm at an average price of HK$46.90 each on July 2, according to the Hong Kong stock exchange website.

Fullgoal Fund Management also increased its stake in Biocytogen from 6.7 per cent to 7 per cent, acquiring shares at an average price of HK$48.2 on July 7. Biocytogen’s stock has surged about 44 per cent over the past month.

“We believe the sector’s valuation is attractive,” wrote Linda Shu, head of China healthcare research at HSBC, in a note on July 10.

Hong Kong-listed pharmaceutical stocks are trading at valuations considered relatively cheap by historical standards, Shu said, adding that multiple catalysts in the sector lay ahead in the second half of the year, such as a growing number of out-licensing deals.

The Hang Seng Innovative Drug Index, which tracks some of China’s most innovative pharmaceutical and biotechnology companies, including Innovent Biologics and Akeso, has risen by about 12.62 per cent over the past month.

The mainland-Hong Kong Stock Connect allows onshore investors to buy and sell shares listed on the city’s bourse and allows offshore investors to trade on mainland exchanges.

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