BOCOM INTL: It is expected that the pharmaceutical sector will continue to be stable and improve this year. We recommend looking for undervalued pharmaceutical stocks.

BOCOM INTL released a research report stating that the Hang Seng Healthcare Index fell by 3.3% this week, underperforming the broader market. The proportion of domestic holdings of pharmaceutical stocks through the Hong Kong Stock Connect has slightly decreased since the fourth quarter of last year, while foreign holdings have increased. Some foreign investors have increased their positions in innovative medical devices and leading CXO companies benefiting from demand recovery. In terms of business development (BD) in the healthcare sector this year, BOCOM INTL recommends focusing on differentiated platforms such as small nucleic acids, long-acting formulations, invivo CAR-T, new generation ADC/XDC, as well as diseases areas such as autoimmune, metabolic, CNS, believing that the sector's stable and positive trend will continue this year, but short-term fluctuations may still occur. The firm believes that investors should consider the fundamentals and valuations of companies when selecting stocks, and look for undervalued stocks, such as 3SBIO (01530), HUTCHMED (00013), and GENFLEET-B (02595) which have rich catalysts but their valuation still does not reflect their true value; or leading companies in the downstream high-growth and improved financing environment such as WUXI XDC (02268); as well as sub-sectors with gradually easing regulatory uncertainties and policy favorable expectations, such as hospitals, medical devices, and diagnostics industry.