Navigating fragmented cycles: Which pharmaceutical stocks are southbound domestic capital positioning?

Southbound funds double down as onshore industry booms, offshore market wilts

Mainland “southbound” capital has quietly become the most reliable marginal buyer in Hong Kong’s pharmaceutical patch. It has been reported that despite a broader slide in offshore liquidity and valuation pressure driven by geopolitical tensions and tighter global finance, southbound holdings in Hong Kong-listed drug names rose by roughly 2 percentage points over the past year. Why does this matter? For Western readers: Hong Kong is the principal offshore listing venue for many Chinese biotechs, and Stock Connect flows from the mainland are a visible barometer of institutional conviction.

From chasing growth to hunting value: the new playbook

TMTPost’s analysis of Hong Kong Exchanges data shows a clear rotation. Where mainland funds once chased high‑multiple growth stories, they are now favouring “low‑valuation, high‑odds” recovery candidates and assets with clear commercial or clinical moats. The report names 20 stocks with the fastest increases in mainland ownership, including Tongyuan Kang Medical (同源康医药), Zai Lab (再鼎医药), Jiankang Zhi Lu (健康之路), Bo’an Bio (博安生物), and Jingtai Holdings (晶泰控股), among others. Many of these have been trading at multi‑year lows, and southbound money appears to be buying price rather than narrative.

A case study: TY‑9591 and a clinical‑approval bet

One illustrative wager is Tongyuan Kang Medical (同源康医药). It has been reported that its lead candidate, TY‑9591 (艾多替尼), a third‑generation EGFR‑TKI positioned as a “me‑better” treatment for EGFR‑mutant NSCLC with brain metastases, beat osimertinib in a head‑to‑head trial and was submitted for approval in early 2025 — with market expectations that approval could close the valuation gap. Reportedly, eight third‑generation EGFR‑TKIs are already approved, and short‑term traders have been impatient; southbound investors appear to be waiting for the regulatory “boots to drop” and the subsequent rerating and commercialization payoff.

Not all names win — selective trimming and new inclusions

The flows are selective. The report also lists about 10 names where mainland holdings fell sharply (declines >6%), including Tigermed (泰格医药), Baiyunshan (白云山), and several smaller vaccine and CDMO names. Separately, a dozen new companies were added to the Hong Kong Stock Connect roster over the past year, but only a handful attracted meaningful mainland stakes; many new inclusions remain largely ignored. The overall message is clear: southbound capital has shifted from momentum chasing to a risk‑adjusted, value‑repair posture — a signal that could help both domestic and international investors navigate the fragmented cycles in China’s pharma market.