Today, the pharmaceutical sector of Hong Kong stocks generally declined. Among them, China's regenerative medicine plummeted by 10%. CRO leader Kanglong Chemical once fell more than 12%, Chunli Healthcare, Chia Tai Enterprise International, Pratt & Shun fell more than 7%. Even big pharmaceutical stocks such as Tiger Pharmaceuticals, Pharmaceuticals Kangde, and Cinda Biotech also plummeted by about 5%.

(Source: choice)

As for the reason why the biomedical sector of Hong Kong stocks is taking a collective hit of the market today, on the one hand, sentiment has declined; on the other hand, due to obvious differentiation in the pharmaceutical sector, leading pharmaceutical companies rose sharply in the early stages, and once capital is withdrawn, it may drive the overall pharmaceutical sector to decline collectively.

Since this year, the trend of Hong Kong stocks has been strong. The Hang Seng Index has risen more than 8% overall. Apart from the GEM index, it has outperformed the A-share Shanghai Index by 5 points and the Shenzhen Index by 2 points, far exceeding the increase in major US stock indices. Just yesterday, the Hang Seng Index once again reached the HK$30,000 mark. Market sentiment can be described as intense.

(Source: Wind)

Meanwhile, capital inflows from the South have been significant since January, with a cumulative net inflow of HK$250,466 billion. Capital from the South is frantically grabbing, and biomedicine is also one of the core high-quality sectors of the Hong Kong stock market. High-quality medical and pharmaceutical companies such as JD Health, BeiGene Shenzhou, and Yao Ming Biotech are listed in Hong Kong, and fund managers are rushing for allocation targets.

(Source: Wind)

However, behind the strength of the general market index, the division within the industry is becoming more and more obvious.

As far as the pharmaceutical sector is concerned, after gaps such as procurement and medical insurance catalogue adjustments were exhausted in December, the short-term driving force was mainly due to the high growth of some companies' annual reports and performance forecasts, which drove the sector marketIn particular, CRO and CDMO showed a structured market due to high performance growth in their sectors. Furthermore, the recent outbreak of the epidemic has been scattered in some provinces, and the pharmaceutical sector's attention has increased. Sectors related to the epidemic prevention needs of individuals and enterprises, such as medical testing services and epidemic prevention protection, have registered the highest increase.

Take Kang Longhua as an example. Since January of last year, its stock price has risen by more than 264.17%. The most recent major rise began at the end of November. In less than 2 months, the company's stock price has risen by nearly 70%. In just 15 trading days, Kanglong Chemical's stock price rose by 35.88%. After today's sharp drop, it also increased by about 20% during the month.

(Source: Wind)

The same is true for Minimally Invasive Healthcare. Its stock price has increased 5.5 times within a year; since November of last year, Minimally Invasive Healthcare has also increased 1.2 times; since the beginning of the year, including after today's sharp drop, the company's stock price has also risen by more than 43%

(Source: Wind)

Xianjian Technology also recently hit a record high, rising more than 23% since the beginning of the year.

(Source: Wind)

After an increase in the previous period, the absolute valuation and valuation premium rate of leading pharmaceutical companies have all increased, and they are still at the middle to high levels in ten years of history. Therefore, when market sentiment declines, group funds will loosen, which can easily cause high-ranking stocks to be trampled on.

So, is there any chance that pharmaceutical stocks will continue to grow?

After March, as pharmaceutical companies disclose quarterly reports one after another, the sector will enter the quarterly report market. Judging from performance trends, in the first quarter of last year, the performance of most companies in the pharmaceutical sector was affected by a low base, and it is expected that the pharmaceutical quarterly report will also perform well.

Societe Generale Securities believes that as the pharmaceutical industry carries out supply-side policy reforms and encourages innovation incrementally, leading companies adjust their development strategies faster and usher in higher quality development, and the trend of leading companies growing faster is expected to continue in the future. Furthermore, China has entered an era of large equity, and institutional capital is gradually becoming the dominant capital. In a situation where incremental institutional capital continues to pour in, the leader will also be a continuous choice.

Shanghai Securities said that with the gradual return of valuation and valuation premium rates in the pharmaceutical sector and the elimination of uncertainties, the time for long-term sector layout has arrived, and the medium to long term is still investing in leading individual stocks in sectors with high growth certainty, such as innovation and innovation industry chains, vaccines, and medical device platform companies.