3800 points "tug-of-war" portfolio adjustment is timely! Is the medical device sector "relay" rally coming soon?

This week, the major A-shares started doing “sit-ups” at 3,800 points. The sector rotation speed has clearly accelerated. A very obvious example is the continuous surge in semiconductor equipment, which directly pushed down the previously hot “CPO.” Many sectors still at low levels have fundamentally changed, making it worthwhile to adjust positions—such as the medical devices sector, which has already begun to “act.”

The 11th batch of centralized procurement has just been officially announced, with comprehensive rule optimizations and clear signals of “anti-involution.” The fundamentals of the medical devices sector are accelerating their recovery, and the market shows strong potential for a rally. Currently, the Medical Devices Index ETF (159898) has been continuously attracting 27 million yuan for three days, accumulating over 100 million yuan in the past 20 days, with a slight intraday increase of 0.34% today.

This momentum is promising.

Many friends may wonder why funds are choosing to bottom fish in medical devices. Simply put, under the resonance of policy bottom, performance bottom, and overseas expansion dividends, the upward channel for medical devices is opening, and now is a good time to lay low and position.

1. Policy Support: From “Price Competition” to “Innovation Competition”

First, the biggest news in the pharmaceutical sector these days is the new wording in the 11th batch of national centralized procurement—“Stabilize clinical, ensure quality, prevent collusion, and fight internal competition.” The procurement will open on October 21, with clear optimization of price difference control to prevent “bad money driving out good,” which will undoubtedly serve as a major catalyst for the sector.

For example:

A certain cardiac stent was priced at 13,000 yuan before procurement, but after the process, it dropped to 700 yuan. While patients benefit, corporate profits are squeezed, and innovation motivation diminishes. Now, the policy shifts toward “ensuring quality + encouraging innovation,” meaning medical device companies can free up profit margins for R&D. High-end imaging equipment, surgical robots, AI-assisted diagnostics—these “hard technologies”—will directly benefit.

2. Performance Recovery: From “Darkest Hour” to “Turning Point Upward”

Wind data shows that by 2025, the CSI Medical Devices Index is expected to achieve a net profit attributable to parent company of 41.983 billion yuan, with a year-on-year growth rate of +23.71%! Remember, in 2023, industry profits were still negative, so the sector has clearly passed the “darkest hour.”

More importantly, from the second half of this year to next year, policies will continue to “support”: centralized procurement will no longer focus solely on low prices, the approval process for innovative drugs and devices entering insurance will accelerate, and equipment renewal loans with interest subsidies will be available. In simple terms, medical device companies now have both profits and direction to compete, making a performance rebound highly likely.

3. Going Global: From “Made in China” to “Global Brand”

If policy and performance are the “internal strength,” then going overseas is the “external extension” for medical devices. Today, Chinese medical device innovation is no longer “knockoff”—United Imaging’s MRI machines are sold in the US, Mindray’s monitors hold 70% of the European market, and Nanjing Microtech’s endoscopic consumables are standard in German hospitals… By 2025, many device companies’ overseas business growth rates will surpass domestic, with international revenue even overtaking domestic.

Leading companies in various medical device sectors will see higher overseas growth in the first half of 2025 compared to domestic.

Source: Company announcements, Wind, Guojin Securities Research Institute

It can be said that Chinese medical device companies have vast growth potential globally, and their valuations are gradually aligning with innovative US-listed medical device companies, offering significant room for expansion.

Recently, the continuously attracting Medical Devices Index ETF (159898) is a high-quality option for medical device layout, as its underlying index comprehensively covers leading companies in the medical device subsectors on the ChiNext and STAR Market. The combined weight exceeds 80%, making it suitable for holding during the current narrow-range fluctuations and laying the groundwork for the next major rally.

Author: ETF Golden Shovel

(Edited by: Liu Jing HZ010)

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