A growing number of institutional fund managers from mainland China have accumulated stakes in Hong Kong-listed biotechnology stocks over the past month, attracted by appealing valuations as cross-border licensing activity in the sector accelerates.

E Fund Management, China’s largest mutual fund manager, acquired a 7 per cent stake in gene-editing biotechnology company Biocytogen Pharmaceuticals. On July 2, it purchased an additional 91,500 shares in the Beijing-based company at an average price of HK$46.90 each. Biocytogen’s shares have risen by about 44 per cent over the past month.

According to Shu, Hong Kong-listed pharmaceutical stocks are trading at valuations considered relatively inexpensive by historical standards. Shu added that the sector could benefit from several catalysts in the second half of the year, including a growing number of out-licensing agreements.

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

The Stock Connect programme between mainland China and Hong Kong allows mainland investors to buy and sell shares listed on the city’s stock exchange, while overseas investors can trade shares on mainland Chinese exchanges.

China Universal Asset Management, a government-backed firm managing about 1 trillion yuan (US$147.72 billion) in assets, has actively traded its holdings in innovative drug developer CSPC Pharmaceutical Group since the beginning of July. On July 10, it increased its stake in the drugmaker’s issued voting shares from 5 per cent to 5.05 per cent.

The fund also raised its holding in the issued voting shares of biopharmaceutical company 3SBio to 6.9 per cent as of July 10.