An investment tool to capture the global innovation dividend — why is there a need for an index construction with 'Hong Kong-US dual market + equal weighting'?

[Core Viewpoints]

• The Solactive Biopharmaceutical Select Index adopts an equal-weighted methodology, tailored for the biopharmaceutical sector, allowing it to better capture breakthrough innovation opportunities among small and medium-sized companies

• The current macro environment is seeing dual catalysts of industry and capital: the start of an interest rate cut cycle, significant clinical data being released intensively, and continued strong activity in overseas licensing deals

The E Fund (Hong Kong) Solactive Biomedical Select Index ETF (3186) provides a convenient channel to access core global biomedical assets.

1. Why is there a need for an index compilation that includes both Hong Kong and US markets with equal weighting?

Facing the dual-core-driven global industrial landscape of China and the US,Solactive Biomedical Select Indexoffers a unique investment framework.

1.1 Cross-border coverage between Hong Kong and the US, a rare setup

This index is the world's first and currently a rare biomedical index spanning the two major pharmaceutical core markets of China and the US. The index selects 100 biomedicine companies listed in Hong Kong and the US, among which no more than 30 are from Hong Kong stocks and no fewer than 70 are from US stocks.

However, it should be emphasized that:Biomedical companies listed in the US come from all over the world,including innovation hubs such as Israel, Switzerland, Japan, the UK, Denmark, and the Netherlands, truly achieving "Invest globally, one-click allocation"。

Top ten components of Hong Kong stocks such as Hengrui Pharma$HENGRUI PHARMA (01276.HK)$ BeiGene, $BEONE MEDICINES (06160.HK)$ and Hansoh Pharma $HANSOH PHARMA (03692.HK)$ , Innovent Bio $INNOVENT BIO (01801.HK)$ , among others.

Top ten components of US stocks such as Eli Lilly and Co $Eli Lilly and Co (LLY.US)$ , Johnson & Johnson $Johnson & Johnson (JNJ.US)$ , AbbVie Inc. $AbbVie (ABBV.US)$ , Novartis AG $Novartis AG (NVS.US)$ , among others.

1.2 Equal weighting: A "tailor-made" compilation methodology for the biopharmaceutical sector

Index AdoptionEqual weighting of constituent stocksstrategy, which holds profound investment logic within the biopharmaceutical field.

In the biopharmaceutical industry, adopting traditional market-cap weighting would inevitably lead to an over-allocation to already successful giants, while underestimating small and medium-sized innovative companies. However, excess returns in the sector often come from breakthroughs by smaller companies.innovation—approval of a blockbuster drug could multiply the market value of a small or medium-sized company several times in a short period.

The advantage of the equal weighting strategy lies in:

• Diversified investment in sources of innovation: Regardless of current market capitalization, give equal attention to each company, increasing the portfolio’s exposure to “breakthrough innovation”

• Avoid individual stock tail risk: Do not overly rely on the subsequent performance of a single giant, making the portfolio more robust

The effectiveness of this strategy has been validated by historical data: From May 2014 to February 2026, adopting equal weighting for US stocksThe S&P Biotech Select Index had an annualized return of 9.5%, outperforming during the same periodthe Nasdaq Biotechnology Index (market-cap weighted) at 7.6%。

Performance comparison between the S&P Biotech Select Index (equal weight) and the Nasdaq Biotechnology Index (market-cap weighted)

Data source: Bloomberg, as of 2026/2/26

II. Current catalysts: Dual resonance of industry + capital

2.1 Industry catalyst: Intensive readout of key data

According to Cathay Haitong Securities forecasts, in the next 2-3 years, dozens of key innovative drugs will densely reach pivotal clinical data readouts and regulatory approvals. Cathay Haintong Securities outlined key milestones across fields by 2026:

• Oncology: PD-1/VEGF bispecific antibodies moving from 'mechanism validation' into the 'clinical and industrial synergy' phase; Pan-RAS precision therapies advancing around pancreatic cancer and NSCLC, with pivotal Phase III data expected to be read out in 2026

• Weight loss metabolism: The potential of small nucleic acids combined with GLP-1 for improving weight loss quality and fat distribution could drive treatment evolution from 'single-hormone driven' to 'multi-pathway modulation'

• Autoimmune diseases: New generation antibody platforms (bispecific/multi-specific antibodies, B-cell depletion, etc.) will see dense proof-of-concept (POC) data readouts

• CNS field: Aβ monoclonal antibody treatments shifting from early symptomatic populations to preclinical populations, potentially opening up an 'early intervention' market space

2.2 Capital Catalyst: Start of Rate Cut Cycle

Historical review clearly shows:In the past five rate cut cycles, both Hong Kong and US biopharma assets have delivered strong performances, showing a high success rate during the initial phase of rate cuts。

Biopharmaceuticals, especially innovative drugs, are typical ‘long-duration assets’——High investment, long cycles, highly sensitive to interest rates and market risk appetite. Currently in a rate-cutting cycle, with two more rate cuts expected by 2026, this provides a clear macro catalyst for biopharmaceutical index investing.

In the past five rounds of rate-cutting cycles, biopharmaceutical assets in Hong Kong and US equities have delivered strong returns.

Data source: Wind, March 2022. The US, Hong Kong, and China A-share pharmaceutical sectors are represented by the Nasdaq Biotechnology Index, Hang Seng Healthcare Index, and CSI 300 Health Care Index, respectively. Statistical start date is the Fed’s first rate cut announcement, with the rate-cutting period defined as the time from the first rate cut to the first rate hike.

III. Investment Tool: E Fund (Hong Kong) Solactive Biomedical Select Index ETF (3186) $EFund Biophar ETF (03186.HK)$

3186Closely tracks the Solactive Biomedical Select Index, providing investors with a convenient channel to access core global biomedical assets.

Core product features:

In terms of performance*, the Solactive Biomedical Select Index has outperformed mainstream comparable indices over the past five years, particularly showing stronger elasticity during the 2025 rebound rally, achieving “Controlled drawdown + Ample elasticity” dual advantages.

*Based on the current index compilation rules, applying historical weights retroactively to calculate simulated historical performance. Past index performance does not predict future results and should not be considered investment advice; investors are advised to pay attention to index volatility risks. Actual fund returns may differ from index performance due to management fees and tracking errors; please note this when investing.

Conclusion

Against the backdrop of global population aging, the biopharmaceutical sector is not only a consumer segment with defensive characteristics but also an offensive innovative asset. As the dual-core markets for global biopharmaceutical innovation, China and the US are highly synergistic and complementary in their development, jointly forming the core landscape of global biopharmaceutical investment.

E Fund (Hong Kong) Solactive Biomedical Innovation Select Index ETF (3186) With its unique Hong Kong and US dual-market positioning and scientifically constructed equal-weighted index methodology, it provides investors with an efficient tool to capture the pulse of the times, leverage the high-growth trend in biomedicine, and share in the innovation dividends of the global sector.

Important Information: The E Fund (Hong Kong) Solactive Biomedical Select Index ETF ("Sub-fund") is a sub-fund under the E Fund ETF Trust. The E Fund ETF Trust is an umbrella unit trust established under Hong Kong law. The Sub-fund is classified as a passively managed ETF under Chapter 8.6 of the Code on Unit Trusts and Mutual Funds issued by the Securities and Futures Commission ("SFC"). Units of the Sub-fund ("Units") are traded on the Hong Kong Stock Exchange ("HKEX") like stocks. The investment objective is to provide investment returns that closely track the performance of the Solactive Biomedical Select Index ("Index") (before deduction of fees and expenses). Investment involves risks.

The Sub-fund faces a) investment risk, b) stock market risk, c) new index risk, d) geographic concentration risk, e) political, economic, and social risks in Mainland China, f) biopharmaceutical sector concentration risk, g) risks associated with small- and mid-cap companies, h) securities lending transaction risk, i) different trading hours risk, j) passive investment risk, k) trading risk, l) tracking error risk, m) currency risk, n) risks of making distributions from capital / effectively making distributions from capital, o) reliance on market maker risk, p) termination risk. The value of the Sub-fund can go up or down, and may even fall significantly. Investors may suffer losses.

As the Sub-fund's investments are concentrated in securities of biopharmaceutical companies in Hong Kong and the US, which could be significantly affected by technological changes, increased government regulation, and intense competition from rivals, the Sub-fund is exposed to industry and geographic concentration risks. Therefore, its net asset value may be more volatile compared to broadly based funds.

This content is issued by E Fund Management (Hong Kong) Co., Ltd. This content does not constitute an invitation or recommendation to invest in fund units. Investment involves risks, and fund prices can rise or fall. Before investing, investors should carefully read the fund prospectus (including the "Risk Factors" section) for information on investment risks related to the fund. This content has not been reviewed by the SFC. For detailed important notices and disclaimers regarding the above fund, please visit E Fund Management (Hong Kong) Co., Ltd.

E Fund (Hong Kong) Solactive Biomedical Innovation Select Index ETF (3186)：https://www.efunds.com.hk/tc/products/52/important/

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