Core Viewpoint - The Hong Kong innovative drug sector experienced significant declines after the National Day holiday, with many popular stocks dropping over 7% in a single day, despite the underlying industry fundamentals remaining strong [1][2]. Market Performance - The Hong Kong innovative drug index fell by 5.84% and 3.13% on October 9 and 10, respectively, contrasting sharply with the gains seen during the holiday period [2]. - Notable stocks such as WuXi Biologics and Zai Lab saw declines exceeding 7%, while Rongchang Biopharmaceutical and Nuo Cheng Jianhua dropped over 10% [2]. - Despite the recent downturn, the index has doubled in value year-to-date, indicating a strong overall performance for the year [2]. Fund Manager Insights - Fund managers attribute the recent volatility to a combination of "holiday effect" and short-term capital movements rather than a deterioration in industry fundamentals [2]. - The market's reaction aligns with historical patterns where significant gains during holidays are often followed by corrections [2]. - The recent U.S. drug pricing policies have had minimal short-term impact on large pharmaceutical companies, with potential long-term benefits for Chinese innovative drug firms [3]. Future Catalysts - Upcoming events such as the European Society for Medical Oncology (ESMO) annual meeting and quarterly earnings reports are expected to serve as catalysts for the fourth-quarter market [5]. - The ESMO meeting will feature 23 studies from China, which could enhance market sentiment [5]. - The release of quarterly earnings will help solidify the value foundation of innovative drug stocks, especially as many are included in medical insurance [5]. Long-term Outlook - The innovative drug sector is transitioning from emotion-driven recovery to growth driven by fundamental performance [4]. - Companies with established products and strong clinical data are likely to regain market attention [4]. - The investment landscape is shifting towards firms that can effectively translate scientific innovation into commercial success, with a focus on clinical data and financial performance [7].