Core Viewpoint - The innovation drug sector in both A-shares and Hong Kong stocks experienced a significant drop on September 10, primarily due to external media reports regarding potential restrictions from the Trump administration on Chinese pharmaceuticals. However, the sector demonstrated resilience with many stocks recovering during the day, indicating long-term investment opportunities despite short-term volatility [1][2]. Group 1: Market Reaction and Resilience - On September 10, the innovation drug sector opened sharply lower but showed strong recovery, with ETFs rebounding significantly after initial declines. For instance, an innovation drug ETF initially dropped over 5.7% but closed down only 0.51% [2]. - The Hang Seng pharmaceutical sector exhibited notable gains, with many funds recovering from early losses of over 8% to close within 2% down [2]. Group 2: Interpretation of External News - Fund managers believe that the reported policy changes from the U.S. government regarding drug imports from China are not new and will not have substantial impacts on the sector. The trend of Business Development (BD) collaborations between multinational corporations (MNCs) and Chinese innovation drug companies is expected to continue [2][3]. - The collaboration between MNCs and Chinese innovation drug firms is seen as a norm, with Chinese assets remaining globally competitive despite political noise [3]. Group 3: Fundamental Validation of Innovation Drugs - The innovation drug market has shown signs of fundamental improvement, with several companies, including Hengrui Medicine and BeiGene, expected to achieve revenue and profit growth in the first half of 2025. A report indicated that 39 Hong Kong innovation drug companies had a total revenue of 152.06 billion yuan (approximately $22.4 billion) in the first half of 2025, marking a 7.66% year-on-year increase [4]. - The underlying reasons for the current market trend include the recognition of efficient R&D and clinical innovation capabilities, which are expected to drive further market growth [4][5]. Group 4: Investment Outlook and Strategies - The investment outlook for innovation drugs is positive, with three main areas of focus: the profitability of Chinese innovation drug companies, the potential of AI in healthcare, and the valuation of leading companies in non-innovation drug sectors [5]. - Fund managers suggest that despite the recent market fluctuations, the long-term trend for innovation drugs remains upward, with a shift towards larger, more established companies that have already launched products and demonstrated performance [6]. Group 5: Short-term Risks and Opportunities - While the innovation drug sector shows resilience, there are warnings about potential short-term volatility due to market sentiment and policy uncertainties. Fund managers advise caution and suggest that recent price corrections may present good buying opportunities [6]. - Historical trends indicate that market reactions to sudden policy changes often create favorable conditions for investment, suggesting that current fluctuations could be leveraged for strategic positioning [6].