CICC International: It is recommended to gradually layout in the innovative pharmaceutical sector during the pullback.

Guotai Junan International published a report that reviewed institutional holdings. Since September, domestic holdings through the Hong Kong Stock Connect have remained stable, while foreign holdings in Hong Kong's healthcare sector have slightly declined since the middle of the year. This week, domestic investors increased their holdings in leading and innovative pharmaceutical companies, while foreign investors increased their holdings in CXO companies with high cost-effectiveness. They reduced their holdings in innovative targets that domestic investors increased their positions in. After a general rise in the innovative pharmaceutical sector, it is recommended to gradually position in the sector on pullbacks. It is recommended to focus on the following sub-sectors: three pharmaceuticals with rich short-term catalysts, valuation still not reflecting the value of core blockbuster products, Xian Sheng Pharmaceutical, Wah Hong Pharmaceuticals, Legend Biotech, which are significantly undervalued and have clear long-term growth logic; on the CXO side, benefiting from downstream high prosperity and marginal financing adjustments, leading companies in specific sub-sectors such as Pharmaron.