Reporter Zhang Yu
On Tuesday (December 5), A-shares** fell;As of press time, the Shanghai Composite Index fell below the 3,000-point mark. Whether the end of the market can regain 3000 points is in the spotlight!The analysis believes that under the expectation of economic recovery, with the removal of disturbance factors, the market will regain strength, and in the context of the approaching inflection point of innovative drugs, the pharmaceutical and biological sector that has overfallen in the early stage is worth paying attention to
A-shares test 3,000 points again, and the Fed's interest rate cut will still support innovative drugs**
The Shanghai Composite Index fell 069% at 3002At 09 points, the Shenzhen Component Index fell 094% at 9570At 02 points, the GEM index fell 098% at 1890At 19 points, the Science and Technology Innovation 50 Index fell 111% at 852At 39 points, the Beijing Stock Exchange 50 rose 589%。The market turnover is 5075100 million yuan, and the actual net sale of northbound funds was 470.2 billion yuan.
*, 233 BSE A-shares were in the red across the board. Food and beverage stocks set off a rising tide, 16 shares such as Knight Emulsion, Gaishi Food, and Oufu Egg Industry rose by more than 20%, and another 41 shares rose by more than 10%. In terms of sectors, China Securities Construction Investment** said that the allocation can focus on the pharmaceutical and biological sectors that have overfallen in the early stage.
On the macro front, the probability of the Fed raising interest rates this year is low, and it is expected to start a cycle of interest rate cuts. In 2022, the Fed has raised interest rates six times in a row, with a cumulative rate hike of 375 basis points. In the context of inflation cooling more than expected, the market ** Federal Reserve has a high probability of cutting interest rates in the second quarter of next year. BlackRock's head of fixed income expressed his opinion that the Fed should start cutting interest rates slightly in mid-2024.
The current expected time point for the Fed to cut interest rates roughly falls in the second quarter of 2024, and there are still about 4 months to go, although the specific time point may be postponed or advanced, but the overall trend will not change, that is, the Fed's so-called interest rate hike cycle is nearing the end, and it will usher in a long cycle of interest rate cuts. This is a long-term positive for biomedicine, especially innovative drugs, which will improve the overall valuation level in the context of discounted cash flow, the primary investment and financing environment for biomedicine may continue to improve, and market liquidity is expected to recover.
Funds buck the trend of innovative drugs, and the risk-return cost performance is highlighted
According to wind data statistics, this Monday, the whole market pharmaceutical ETF**, with a total net inflow of 243.33 million yuan, continued the trend of last Friday. Tianhong Hang Seng Shanghai-Shenzhen-Hong Kong Innovative Drug Select 50 ETF (517380) had a single-day net inflow of 35640,000, a new high in the past week.
In terms of valuation, the PE TTM of the Innovative Drug 50 Index is about 31X, and the absolute valuation and relative valuation are at an absolute historical low. If combined with the future earnings expectations of the entire sector, according to the consensus expectation data of sell-side analysts, the compound net profit growth rate of the Innovative Drug 50 Index in the next two years is about 29%, and the PEG of the current index has been below 1 for a long time, with a high risk-return cost performance.
Due to the long enough adjustment in the early stage of innovative drugs, the valuation has been fully digested. At present, it is the absolute bottom of the industry fundamentals, and due to the large clearing efforts, it is expected that the competition pattern of most sub-sectors of the pharmaceutical industry will be greatly optimized, or it will become the best time to deploy the pharmaceutical industry in the next three years.
The marginal impact of short-term disturbances such as centralized procurement has been gradually eliminated
The market has reached a consensus on factors such as the good fundamentals of the pharmaceutical sector and the historically low valuation level, and the difference lies in the judgment of reversal or **. When we are in the middle of the matter, it is difficult to judge the reversal or the reversal, and we can often give an accurate judgment after the fact, but we can assist in judging by reviewing the pressure factors that the market has worried about in the past two months.
The negotiation of medical insurance tends to be moderate, which is conducive to the expansion of innovative drugs. On the one hand, after the exploration and mechanism improvement of the medical insurance national talks in recent years, it no longer pursues the result of "big price reduction", and the rules and requirements are adjusted in fluctuations and become more stable and feasible, which means that the medical insurance negotiations have gradually had a relatively relaxed atmosphere and environment, which can allow innovative pharmaceutical companies to find opportunities in the dynamic balance and achieve a win-win situation for patients, medical insurance and enterprises.
On the other hand, the average decline tends to be stable, and the medical insurance negotiation is conducive to the expansion of innovative drugs. According to Shanghai ** News, BeiGene's tislelizumab sales in China in Q3 2023 will be 144.4 billion US dollars, a year-on-year increase of 126%, mainly due to the new demand brought about by the inclusion of new indications in the national medical insurance catalogue and other factors. In addition, Zai Lab's ripretinib and omadacycline tosylate both achieved large-scale growth in the third quarter after they entered the NRDL in early 2023.
On the whole, after this medical insurance negotiation, the price reduction of innovative drug renewal is likely to be more moderate than last year. The understanding between regulators and enterprises is becoming more and more sufficient, the medical insurance policy is becoming more rational, objective and stable, the rules are clearer, and the direction of the output ratio and R&D arrangements of enterprises is becoming clearer. Innovation is still the direction that policies clearly support and guide.
All in all, whether it is the impact of temporary factors or the reduction of centralized procurement prices, it is not a new thing for the market. The former is only a short-term disturbance and a long-term positive, and the market does not need to worry too much;The scope of the latter has been from regional to national, from imitation to innovation, from drugs to devices, and the marginal impact on the industry has been weak.
He Yuxuan, manager of Tianhong Hang Seng Shanghai-Shenzhen-Hong Kong Innovative Drug Selection 50 ETF (517380)**, saidCompared with the low point of the whole market on April 26, 2022, the overall increase in the pharmaceutical industry has only been 6% so far (the increase in the medical service sub-sector is even -17%), but the current industry and market environment, and business conditions are significantly better than at the end of April last year. We firmly believe that compared with the whole market, medicine is still not priced correctly, and it will be the starting point of a new round of medicine. From a bottom-up point of view, the vast majority of large and medium-sized enterprises in the pharmaceutical industry have very excellent cost performance. From the perspective of industry comparison, we believe that no matter from the perspective of industry fundamentals or valuation level, medicine should be an investment choice that is difficult to miss (correspondingly, we have also noticed that the strategy teams of many brokerages in the market have begun to pay attention to pharmaceutical investment opportunities recently). Valuations are still low (P/E ratios are at the 13% percentile and price-to-book ratios are at the 3% percentile over the past decade), while fundamentals are clearly out of the bottom. You can pay attention to the Hang Seng Shanghai-Shenzhen-Hong Kong Innovative Drugs Select 50 ETF Connection**a(014564) c(014565).