Core Viewpoint - The article discusses the current market conditions, highlighting the rotation of market styles and identifying sectors that have reached overvaluation, while also emphasizing the importance of earnings growth as a fundamental driver of long-term investment returns [7][15][18]. Market Performance - The overall market experienced a slight decline, closing at 4.2 stars, with large-cap stocks down and small-cap stocks slightly up [1][2]. - The technology sector in Hong Kong showed strength, with gains exceeding 1.5% [4][5]. - The A-share market has seen significant style rotation, with certain sectors experiencing rapid increases in valuation [7][15]. Overvalued Sectors - Several sectors have reached overvaluation this year: - **Banking Index**: Experienced a significant rise in 2022-2024 during a bear market, peaking in July before correcting to a normal high valuation [9][10][11]. - **Hong Kong Pharmaceutical Index**: After a sharp decline in April, it rebounded with substantial earnings growth, leading to a double-up trend before correcting to a normal high valuation [12][13]. - **Military Industry**: Saw a rise due to military exercises in September, reaching high valuation before experiencing a correction [14]. - **Chip Sector and Sci-Tech 50**: Benefited from a booming chip industry, reaching high valuations in late August before a slight pullback [14]. - **North Certificate 50**: This small-cap index also reached high valuation after significant gains in August [14]. Market Dynamics - The A-share bull market is characterized by style rotation rather than broad-based rallies, with leading sectors often reaching overvaluation first [15]. - Historical comparisons suggest that the current market resembles the 2013-2017 period, where specific sectors led the market and subsequently faced corrections [15][18]. Earnings Growth and Investment Strategy - Long-term investment returns are primarily driven by earnings growth rather than valuation increases [15][18]. - The article emphasizes that even in bear markets, indices can rise significantly over time, independent of high valuations [15][18]. Valuation Insights - A summary of various indices' valuations is provided, indicating which sectors are undervalued, fairly valued, or overvalued, aiding investors in making informed decisions [22][29][31].

Core Insights - The Hong Kong pharmaceutical market is becoming a key area for investing in future pharmaceutical trends due to its unique asset structure and industry representation [1][2] - The Southern Fund's QDII fund aims to provide investors with a high-quality tool for participating in Hong Kong pharmaceutical investments, leveraging deep insights into industry trends and active management capabilities [1][2] Market Structure - Approximately 70% of the Hong Kong pharmaceutical market consists of innovative assets, including innovative drugs and devices, while about 20% is made up of emerging medical forms such as new consumer healthcare and AI medical applications [2][3] - The market's structure positions it as a concentrated representation of new productive forces in the pharmaceutical industry, highlighting the global breakthroughs in the innovative drug industry and the rise of new consumer healthcare [2][3] Innovation as a Core Driver - The innovative drug industry chain is identified as the core asset of the Hong Kong pharmaceutical market, with long-term value derived from multiple industry dividends [3] - China's recognized capabilities in innovative drug research and development, combined with domestic healthcare payment support and access to a trillion-dollar global market, create a broad stage for commercialization [3] Fund Strategy - The Southern Fund's QDII fund aims to balance risk and return, allowing investors to participate comfortably in Hong Kong pharmaceutical investments [4][5] - During volatile periods, the fund employs strict risk control measures to minimize drawdowns, while in bullish trends, it seeks to fully capture the elastic returns of the market [4][5] Investment Approach - The fund manager emphasizes the importance of a strategic approach to investing in the pharmaceutical sector, advocating for a method that allows for accumulation during downturns and participation during upswings [5][6] - The fund's strategy includes active management to capture opportunities in innovative drugs, CXO, and new consumer healthcare sectors while avoiding the risks associated with concentrated strategies [5][6] Active Management and Experience - The fund's excess returns are derived from a systematic investment framework that includes profit-taking strategies and identifying undervalued quality stocks [6] - This diversified approach aims to capture the core trends of the Hong Kong pharmaceutical market while reducing volatility and enhancing the overall investment experience [6][7]

Core Insights - The report highlights a decline in the growth rate of social consumer goods retail sales in June 2025, with a total of 4.23 trillion yuan, reflecting a year-on-year increase of 4.8%, which is below the market expectation of 5.56% [2] - The report emphasizes the promising future of COFs (Covalent Organic Frameworks) materials in various fields such as energy storage and environmental management, with a recommendation to focus on companies like Baolidi and Yaoke for their advancements in COFs commercialization [3] - The report suggests increasing allocation to the Hong Kong pharmaceutical sector, particularly in chemical pharmaceuticals and innovative drugs, highlighting companies like Sanofi and BeiGene for their potential growth [3] Retail Sector Analysis - In June 2025, the growth rate of essential goods decreased, while the jewelry sector faced demand pressure due to high gold prices, leading to a decline in growth rates [2] - The report notes that the pre-promotion period for sales has led to an earlier release of consumer demand, impacting the overall growth figures [2] COFs Industry Insights - COFs are identified as high-performance crystalline porous polymer materials with adjustable pore structures, showing significant application potential in energy and environmental sectors [3] - The report mentions a successful scale-up of COFs production by Yaoke in 2024, marking a milestone in the commercialization of these materials [3] Pharmaceutical Sector Insights - The report recommends increasing investment in the Hong Kong pharmaceutical sector, particularly in traditional and innovative drug companies, citing the ongoing transformation and innovation within the industry [3] - Specific companies are highlighted for their stable growth and potential for stock price catalysts, including Sanofi, United Laboratories, and others [3]