China investors energise Hong Kong biotech stocks. Is foreign money missing out?

Mainland Chinese investors can now buy shares in more than a dozen newly added Hong Kong-listed biotech and pharmaceutical companies after a reshuffle of the Stock Connect southbound trading list took effect on Monday, reflecting the sector’s growing role on the international stage.Foreign capital, however, remained cautious, analysts said.“Mainland buyers have been the main force behind the latest healthcare rally. They tend to chase smaller-cap names where a tight free float makes it easier to push prices higher,” said Jonah Chen, head of healthcare research at China Merchants Securities (Hong Kong). “They are also getting excited by a surge in big-ticket out-licensing deals.”Overseas funds were still wary of China’s biotech sector, said Chen, who has a PhD in pathology. “They tend to cherry-pick a few big-cap pharmaceutical companies with strong pipelines and truly innovative drug target design, rather than buying the sector broadly.”His comments came as at least 13 healthcare companies – including AI-driven drug discovery firm Insilico Medicine, innovative drug maker Xuanzhu Biopharmaceutical, and CARsGen Therapeutics, developer of cutting-edge cancer treatment CAR-T cell therapy – were among 42 stocks added to the southbound list, according to an exchange filing with the Shanghai-stock-exchange" class="entity-link entity-organization" data-entity-id="17136" data-entity-type="organization">Shanghai Stock Exchange.The southbound leg of Stock Connect allows mainland Chinese investors to buy and sell shares listed in Hong Kong through the Shanghai and Shenzhen exchanges.At least 13 healthcare companies have been added to the southbound list of the Stock Connect. Photo: Shutterstock