Hong Kong and US Market Review (11.05) Is there still opportunity in Hong Kong's innovative drug sector?

Dear friends, is it a good time to invest in Hong Kong's innovative drug stocks? Many people have been asking me this question these past two days. This year, the best-performing sector in the A-share market has been technology, such as the STAR Market, which has risen by over 40% this year. As for the Hong Kong market, the main theme is actually innovative drugs. As of October 31, the Hong Kong Innovative Drug Index has surged by 87.8% year-to-date, far outpacing the Hang Seng Index (30.4%) and the Hang Seng Tech Index (32.55%). At first glance, everyone's immediate reaction would be—with such a big rise, is there a bubble? Is it still worth buying? I want to make it very clear: it's not a bubble; this sector still has room to grow.

1. The surge in innovative drugs is not hype—it's a rebound.

First, this wave of gains in Hong Kong's innovative drug stocks isn't driven by "storytelling" but rather by low valuation rebound + better-than-expected fundamentals. Let's look at valuations first. At the beginning of the year, the price-to-book ratio of the CSI Hong Kong Connect Innovative Drug Index was only 2.1x, while the Hang Seng Tech Index's P/B ratio was 2.5x at the same time. Comparatively, innovative drugs were cheaper; historically, this 2.1x was already at the lower end of the range.
So, once market liquidity improved, the rebound in valuations naturally followed. That's why I say this rally is logically supported, not just mindless speculation.

2. Two surprises: BD overseas expansion + clinical breakthroughs

The second key point is the "better-than-expected" developments in the industry. This year, the core drivers of the innovative drug sector are two-fold: one is better-than-expected BD overseas expansion, and the other is better-than-expected clinical data. BD overseas expansion, in simple terms, refers to Chinese pharmaceutical companies licensing the overseas rights of their innovative drugs to multinational pharmaceutical companies, receiving upfront payments, milestone payments, and sales royalties through "License-out" deals.

This year, such collaborations have been incredibly frequent: in early 2023, Harbour BioMed signed a deal with AstraZeneca; mid-year, 3SBio partnered with Pfizer;
in October, Innovent Biologics reached a collaboration with Takeda Pharmaceutical. What do these cases tell us?—They show that our innovative drugs can not only compete domestically but also go global, with competitiveness truly recognized internationally. As for clinical data, at this year's ESMO conference (European Society for Medical Oncology), Bio-Thera Solutions' bispecific ADC drug achieved a major breakthrough in Phase III clinical results—significantly reducing the risk of death in nasopharyngeal cancer; 3SBio and Akeso's PD-1 drug data were also very impressive. What does this mean? It means higher certainty in drug commercialization, stronger future profit expectations, and naturally, better valuation support.

So, from an industry perspective, Hong Kong's innovative drug sector hasn't overextended expectations—instead, it keeps "exceeding expectations." Moreover, with a nearly 20% drop from its peak, I believe this is actually a good opportunity.

$Hang Seng Index(00HSI.HK) : The trend isn't broken—don't fear volatility

Back to the Hang Seng Index. The same old saying—ignore short-term volatility, focus on the long-term trend. As long as the overall trend is higher highs, there's no need to worry about short-term ups and downs. I said it right after this drop—don't be afraid; I'd choose to add or open positions. If you're not trading short-term, don't stress over one or two days of movement. The market always works this way—pullbacks pave the way for further gains.

Hong Kong stocks: Clear opportunities to add positions

$MEITUAN(03690.HK) , $JD-SW(09618.HK) , $BABA-W(09988.HK) , $AAC TECH(02018.HK) —for these long-term holdings, my stance is clear—add positions when appropriate. Especially for AAC Technologies, today's low opening around 38 is a perfect opportunity to add; also, as I mentioned in the group, Xiaomi is another stock worth adding around 42. Now isn't the time to worry—it's the time to slowly pick up the chips.

US stocks: Slow pace—wait for opportunities

As for US stocks, the same rule applies—opportunities take time. Current prices generally aren't attractive; patience is key.
$Tesla(TSLA.US) —don't act until news materializes;
$NVIDIA(NVDA.US) —yesterday, I couldn't resist shorting a bit at 202, short-term target at 185;
$Apple(AAPL.US) —still holding the 265 short position;
$Amazon(AMZN.US) —the safest short-term play, entered at 217, take profit at 255, now just watching it perform.

To sum up briefly

Hong Kong's innovative drug sector isn't a bubble—it's a trend. The industry logic remains intact, valuations are still low, and there are plenty of international collaborations paving the way. Don't fear the highs, but don't blindly chase either—the key is to pick the right entry points and add positions gradually. The Hang Seng Index's uptrend remains intact, individual stock opportunities are clear, and US stocks require patience. The market ultimately rewards not those who "see the farthest" but those who can endure the most and stick to their logic.