Green energy stocks collectively retreat from high levels, while funds shift into low-priced innovative drugs. Menovahud hits 6 consecutive daily limit-ups in 7 days.

(Source: Caixin)

Morgan Stanley believes that the internationalization of China’s innovative drugs is accelerating, multinational pharmaceutical companies are speeding up their layout of local innovative assets, and the cash flow and valuation system of the sector will continue to be reshaped. The current sector is in a left-side allocation window.

On March 30, the concept stocks of green power all retreated, as funds fled in search of high cuts and low buys. Huadian Energy (600726.SH), Jinkai New Energy (600821.SH), Jinkong Power (000767.SZ), Huadian Liaoning Energy (600396.SH), Yunnan Energy Holdings (001896.SZ), Liaoning Energy (600758.SH), and Ningbo Energy (600982.SH) all hit the daily limit down, while Hunan Development (000722.SZ) and Huayin Power (600744.SH) saw significant declines.

At the same time, the innovative drug sector, which is at a low valuation, continues to rise. Minophagen (603538.SH) achieved six consecutive trading limits in seven days, while Jiuan Medical (002432.SZ), Jin Pharmaceutical (600488.SH), and Lianhuan Pharmaceutical (600513.SH) both hit two consecutive limits. Saili Medical (603716.SH) and Shuanglu Pharmaceutical (002038.SZ) reached their daily limit up, with Shutaishen (300204.SZ) also following the trend.

CICC research report points out that under the current circumstances, a more effective allocation strategy is to start from the win rate and odds, and look for assets with high cost-effectiveness. If the position is relatively low, one can allocate left-side assets that have fully reflected pessimistic expectations, are highly correlated with interest rates and risk appetite, and are at low valuations after deep adjustments, such as Hang Seng Tech, gold, and innovative drugs. These assets may not be the strongest in the short term, but as market expectations are already low enough, the space for further declines is relatively limited. Once the situation eases or extreme market expectations do not materialize, they are more likely to recover first. From an allocation perspective, these assets are suitable for gradual left-side positioning.

Zhongyou Securities stated that domestic innovative drugs are gradually catching up with or even surpassing Europe and the United States in early research stages, and will inevitably usher in a harvest period in the medium term, continuing to be optimistic about investment opportunities in the sector. Morgan Stanley believes that the internationalization of China’s innovative drugs is accelerating, multinational pharmaceutical companies are speeding up their layout of local innovative assets, and the cash flow and valuation system of the sector will continue to be reshaped. The current sector is in a left-side allocation window.

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