China's A-share market experienced a rebound last week, lifting equity asset prices and significantly benefiting FOF funds, which saw widespread net value increases. Additionally, the number of new FOF product launches surged last week, with total fundraising shares this year reaching a record high.

Meanwhile, the consistently strong innovative drug sector remains a key focus for public funds. Looking ahead, the performance of the pharmaceutical and biotech sector is expected to further enhance the returns of related products and FOF funds.

Last week, from August 3 to 7, the market was supported by easing overseas interest rate expectations and continued domestic policy support, leading to a notable recovery in sentiment. Major indices rebounded from lows with increased trading volumes. Broad-based indices saw the Shanghai Composite Index close at 3,940.04 points, up 2.81%; the Shenzhen Component Index rose 5.39%; and the ChiNext Index gained 6.55%. By sector, electronics, non-ferrous metals, and machinery equipment led the gains.

Driven by this, public FOF fund performance generally improved. Wind statistics show that all equity-based FOFs posted positive returns last week, with the top performer being ICBC Credit Suisse Smart Aggressive One-Year A, achieving a return of 7.76%. Other top performers included Huaxia Industry Allocation A, Torrent Positive Allocation 3-Month A, and Guotai Sector Rotation A. The second-quarter holdings of these top-performing funds align with the leading sectors from last week. For example, the second-quarter report for ICBC Credit Suisse Smart Aggressive One-Year A showed that its top holdings, including Communication ETF Huaxia, Non-Ferrous Metals ETF Southern, and Semiconductor Equipment ETF E Fund, all posted gains exceeding 10% in the past week.

Hybrid FOFs and target-date retirement FOFs also performed well on a weekly basis. The top weekly return for hybrid FOFs was 6.72%, achieved by Bosera Jixing Allocation Preferred 6-Month A. For retirement FOFs, Huaxia Retirement 2060 Five-Year Holding A led with a return of 5.37%. Certain index funds tracking the ChiNext and CSI 1000 were among the top holdings of related funds, showing strong gains in the past week.

Furthermore, the consistently strong innovative drug sector is a persistent focus for public funds. The future performance of the pharmaceutical and biotech sector is expected to further boost the returns of related products and FOF funds. According to public fund ranking data, 112 institutions participated in A-share research activities last week, covering 41 stocks across 16 Shenwan primary industries, with a total of 384 research sessions. Notably, research interest in the pharmaceutical and biotech sector surged, making it the only Shenwan primary industry with over 100 research sessions. Among the top ten most-researched stocks, three were from the pharmaceutical and biotech sector.

Last week, public fund issuance rebounded. A total of 29 institutions launched products, with 35 products issued in total, a 118.75% increase week-over-week and the highest in three weeks. This suggests that investor enthusiasm has recovered after some market risk was released. Among these, five FOF funds began fundraising, a 400% increase week-over-week, marking the highest number of FOF fund launches in five weeks. Data from the Public Fund Ranking Network shows that, based on fund establishment dates, 120 FOF funds have been established year-to-date as of August 3, 2026, significantly surpassing the 93 funds launched in all of last year and second only to the 143 funds launched in 2022. Additionally, as of August 3, the total subscription shares for FOF funds this year reached 123.159 billion, nearly double the full-year 2025 figure and a new historical high.

In fact, newly launched products since August have covered sectors like pharmaceuticals, semiconductors, automotive, and cyclical resources, with the pharmaceutical and biotech sector having the most products. This reinforces that sponsor-initiated funds remain a key tool for public funds to position in equities at low valuations and carve out niche segments. Some FOF funds have already accumulated positions in related pharmaceutical-themed funds or directly in biotech stocks. In the second quarter, two FOF funds under Bank of Communications Schroders held positions in Frontier Biotech stock, which has performed well recently.

Regarding the outlook for the innovative drug sector, Chen Ximing, fund manager of Bosera Healthcare Hybrid Fund, stated that based on current tracking, the mid-year reports for innovative drug companies are generally expected to be positive. In terms of financial metrics, attention should be paid to revenue growth, reflecting the current sales volume of key products, and whether net profit turns positive. In recent years, many innovative drug companies have turned profitable due to BD payments or increased product sales. The turnaround in profitability for these companies is a critical milestone.