A medical technology student works in a laboratory as limited

Innovative drug shares plunge as Hong Kong market reopens

Hong Kong stocks resumed trading on October 2 after closing for the National Day holiday on October 1. The Hang Seng Index closed at 23,972 points, down 2.6% — its biggest one-day decline since March 23. The Hang Seng Healthcare Index fell 2.87%, while innovative drug shares suffered steeper losses. InnoCare Pharma (09969.HK) dropped 7.84%, PegBio fell 7.10%, Junshi Biosciences (01877.HK) declined 6.37%, BeiGene (06160.HK) lost 5.86% and RemeGen (09995.HK) fell 5.45%.

The broader market was also under pressure. HSBC Holdings (0005.HK) fell about 5.4%, AIA Group (1299.HK) dropped about 6%, and the Hang Seng TECH Index declined 2.26%. Market reports largely attributed the sell-off to continued rises in US Treasury yields, as well as the absence of southbound funds while mainland markets were closed.

Southbound trading suspended, leaving a gap in mainland support

The Shanghai, Shenzhen and Beijing stock exchanges had earlier announced that mainland markets would be closed from October 1 to 7, with Stock Connect southbound trading suspended during the same period and set to resume on October 8. Although Hong Kong stocks were open on October 2, mainland investors were still unable to trade through Stock Connect, leaving the market without support from those funds.

Mainland public fund managers told China Securities Journal that the absence of southbound funds had caused the declines in innovative drug shares included in the Stock Connect universe to become noticeably “distorted”. They expected share prices to return to fundamentals once southbound trading resumed. The report also said turnover in individual Stock Connect stocks had fallen significantly from levels before the holiday.

However, innovative drug shares were not the only stocks to fall. The Hang Seng Healthcare Index declined 2.87%, just 0.27 percentage points more than the Hang Seng Index’s 2.6% drop, indicating that broader market factors accounted for a substantial part of the sell-off. The innovative drug sector had already fallen 3.47% on September 24 amid expectations that the United States might raise interest rates, according to the CSI Hong Kong Connect Innovative Drug Index.

ESMO congress to be held later this month

The annual congress of the European Society for Medical Oncology (ESMO) will be held in Madrid, Spain, from October 23 to 27, about three weeks from now. According to a compilation by mainland medical media, 47 oral presentations led by Chinese researchers were included in the non-LBA list released by ESMO in July, covering the Proffered Paper and Rapid Oral sessions. The submission deadline for late-breaking abstracts was September 8.

Fund managers said clinical data released at the congress, together with continued licensing-out deals by mainland innovative drug companies, could provide positive catalysts in October. Data from Pharmcube showed that the total value of Chinese pharmaceutical licensing-out deals reached US$99.7 billion in the first half of 2026.

Three points to watch

  • Southbound fund flows: Stock Connect southbound trading resumes on October 8. Turnover and changes in shareholdings will indicate whether mainland capital is returning.
  • ESMO congress, October 23 to 27: The performance of clinical data released by mainland pharmaceutical companies.
  • US Treasury yields and expectations for Federal Reserve rate hikes: Reports say Fed officials remain divided over further rate increases, making the interest-rate path a continuing variable for the broader market.