Latest Developments of China AMC's Hang Seng Biotech ETF (3069 HK): Short-term Correction and Fundamental Improvement

On March 4,$ChinaAMC Hang Seng Biotech ETF (03069.HK)$ The recent pullback has raised concerns among many investors about market conditions. It is important to clarify that this sell-off is not related to the core fundamentals of the biotech industry—whether it’s licensing activities within the sector, earnings performance of relevant companies, or changes in US-China relations, none of these factors have materially impacted this ETF. On the contrary, this decline is a spillover effect from the overall weakening of the Hong Kong market, driven by factors unrelated to the biotech sector itself.

The core trigger for this correction lies in the significant decline of large-cap stocks in the Hong Kong market, including components of both the Hang Seng Tech Index and the Hang Seng Biotech Index. The structure of Hong Kong's market, which is dominated by internet technology companies, is the fundamental reason behind this market volatility. Similar to the situation in the US market, the narrative of disruption brought by artificial intelligence technologies has sparked concerns that some companies may be negatively affected. Although we do not agree with this short-term judgment from a long-term research perspective, short-term market sentiment has clearly pressured the internet sector, dragging down the overall atmosphere of the Hong Kong market.

Moreover, under current market conditions where the US dollar weakens and Japanese and Korean stock markets show strong performance, various types of global capital—including hedge funds and global allocation funds—are gradually shifting towards non-US emerging markets and Asian markets, with substantial inflows into Japanese and Korean equities. This cross-market rotation of funds has further aggravated the negative sentiment in the Hong Kong market. Previously, biotech stocks had relatively stable performances, with some even outperforming the broader market and turning profits. However, accumulated negative sentiment in the Hong Kong market continued to ferment, eventually triggering profit-taking in the biotech sector, which led to... $ChinaAMC Hang Seng Biotech ETF (03069.HK)$ A pullback. Notably, this decline represents short-term market volatility; after all, funds cannot continuously flow out of Hong Kong stocks to blindly chase highs in Japanese, Korean, or Taiwan markets.

Beneath the surface of short-term market fluctuations, $ChinaAMC Hang Seng Biotech ETF (03069.HK)$ The fundamentals of Sino Biopharm are showing changes, with continuous improvement supported by active industry development. A recent landmark industry announcement fully highlights this advantage: One of the constituent stocks of the Hang Seng Biotech Index, Sino Biopharm, through its subsidiary Zhengda Tianqing, reached an agreement with Sanofi granting the latter exclusive rights to develop, manufacture, and commercialize Rovacitinib (TQ05105) globally. According to the terms of the agreement, Sino Biopharm is entitled to receive up to $1.53 billion, including a $135 million upfront payment, as well as potential development, regulatory, and sales milestone payments. Additionally, they will receive tiered royalties of up to double-digit percentages based on the annual net sales of Rovacitinib.

Rovacitinib is a first-in-class oral small-molecule JAK/ROCK inhibitor independently developed by Zhengda Tianqing, offering unique clinical therapeutic value. This drug targets the JAK/STAT pathway, directly blocking inflammatory signaling and reducing inflammatory factors produced by myeloid cells at the source; it also targets the ROCK pathway by modulating STAT3/STAT5 phosphorylation, downregulating overactive T-helper cells (Th17), enhancing regulatory T cell (Treg) function, thereby helping patients restore immune balance. On February 28, 2026, the drug was successfully approved by the National Medical Products Administration (NMPA) for marketing, indicated for first-line treatment in adult patients with intermediate-2 or high-risk primary myelofibrosis (PMF), post-polycythemia vera myelofibrosis (PPV-MF), or post-essential thrombocythemia myelofibrosis (PET-MF). Additionally, its indication for treating chronic graft-versus-host disease (cGVHD) has been included in breakthrough therapy designation, with related Ib/IIa phase clinical data published in the journal Blood. The study results show that compared to other approved therapies, Rovacitinib demonstrated superior 12-month failure-free survival (FFS) and showed more effective performance in fibrotic treatments with promising potential.

This licensing deal not only reflects the high recognition from global pharmaceutical giants of China's biotech innovation achievements but also marks that the fundamentals of the constituents of the Huaxia Hang Seng Biotech ETF (3069.HK) may continue to improve. As an ETF tracking the Hang Seng Biotech Index, its underlying assets encompass quality biotech companies listed in Hong Kong, maintaining solid foundations. Relevant constituent companies have continued to achieve breakthroughs in R&D innovation and commercialization. Short-term market pullbacks do not alter their long-term positive development trend. Despite recent corrections, the long-term investment value remains noteworthy.

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Investment involves risks, including the loss of principal. Past performance is not indicative of future results. Before investing in the China AMC Hang Seng Biotech ETF (the "Fund"), investors should refer to the fund prospectus, particularly the risk factors. You should not rely solely on this material to make investment decisions. Please note:

• The Fund’s investment objective is to provide investment returns that closely track the performance of the Hang Seng Biotech Index ("Index") (before fees and expenses).

• The Fund is passively managed. A decline in the Index is expected to result in a corresponding decline in the value of the Fund.

• The Fund invests in equity securities and is subject to general market risks. Its value may fluctuate due to various factors.

• Since the index is a new index, this fund may face higher risks compared to other exchange-traded funds that track indices with longer operational histories.

• This fund tracks the performance of biotechnology companies and specific regions (namely Mainland China and Hong Kong), thus facing concentration risk, with volatility likely exceeding broader-based funds.

• This fund is exposed to risks associated with the characteristics of biotech companies, such as having no revenue, generating net current liabilities, lower liquidity, higher volatility, reliance on intellectual property or patents, technological changes, increased regulation, and intense competition.

• This fund involves securities lending transaction risks, including the possibility that borrowers may not return the securities on time or even at all.

• This fund involves tracking error risk.

• If the cross-counter transfer of fund units between two counters is suspended, and/or due to any restrictions on services provided by securities brokers and Central Clearing System participants, unit holders will only be able to trade their fund units on one counter. The market prices of fund units traded on each counter may deviate significantly.

• Fund unit holders will only receive distributions in Hong Kong dollars. Non-Hong Kong dollar based fund unit holders may need to bear fees and expenses related to foreign exchange conversion.

• The base currency of this fund is Hong Kong dollars, but there are also fund units traded in US dollars. Investors may incur additional costs or losses associated with foreign currency fluctuations.

• Generally, retail investors can only buy and sell the fund units of this fund on the Hong Kong Stock Exchange, and the trading price of the fund units on the Hong Kong Stock Exchange is influenced by market factors such as supply and demand for the fund units. Therefore, the trading price of the fund units may trade at a significant premium or discount to the fund’s net asset value.

Data sourced from Bloomberg, China AMC (HK), as of March 4, 2026.

Investment involves risks, including possible loss of principal. Past performance is not indicative of future fund returns. This document is for your reference only and does not constitute an offer or solicitation for the purchase or sale of any securities or funds, nor does it constitute any investment advice, nor is it prepared for any such offer. The publisher of this material is China AMC (HK) Limited. This material has not been reviewed by the Securities and Futures Commission of Hong Kong.

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