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Market Insights Weekly Call | AI Wave x Healthcare Frontier - New Investment Opportunities in the Greater China Market

[Content of This Episode]:Futu provides a brief analysis of market style rotation, in dialogue with the champion team from China AMC (HK), offering an in-depth breakdown of the new paradigm for asset allocation in Greater China under macroeconomic recovery.

[In-depth Track Analysis]:Focusing on the dual tracks of the AI wave and cutting-edge healthcare, providing an in-depth analysis of opportunities arising from the acceleration of domestic production of computing power chips and the generational revolution in innovative drugs led by small nucleic acid pharmaceuticals.

[Special Guests]

Joe Yu: Executive Director of Futu Securities' Institutional and Private Wealth Division and Head of Futu's Investment Research Team, responsible for market reviews and leading in-depth discussions.

Zhang Jun: Head of Research at China AMC (HK), with a dual background in life sciences and economics, a senior expert with over a decade of deep research experience in the pharmaceuticals industry.

Huang Shuo: Portfolio Manager at China AMC (HK), whose managed products have repeatedly ranked first in offshore markets between 2022-2025, delivering long-term outperformance as a top-tier fund manager.

[Core Conclusions]

On the macro side, focus on the liquidity restructuring brought about by PPI turning positive and the shift in deposits; on the technology side, lock in the certainty of growth as the localization rate of computing power chips rises from 30% to 60%; on the healthcare side, look favorably upon the reshaping of the chronic disease management market by small nucleic acid drugs, and the alpha opportunity for Chinese pharmaceutical companies leveraging 'engineering efficiency' to take over global MNC patent cliffs.

Part One: Market Review and Outlook for the Week (Joe Yu)

Macroeconomic Environment Analysis

United States:The macro environment is complex, affected by government shutdown risks and Trump's tariff policies (such as taxing Iranian goods). January employment data fell below expectations, with companies becoming cautious in hiring, but no signs of a short-term recession. Caution is needed regarding potential impacts of geopolitical tensions (US-Iran conflict) on the markets.

Capital flow: Quantitative strategies (CTA) are in a selling state, with market volatility remaining at high levels.

China’s Perspective:PMI data dropped below the boom-bust line, exports contracted, and both domestic and external demand were under pressure.ConsumptionConsidered this year's hidden dark horse, when exports are weak, domestic demand is often boosted.

Stock Market Sector and Individual Stock Commentary

US Stock Market:

Overall:Exhibiting a volatile and slightly weak pattern, the tech sector was the only major category that fell since January.

Broadcom:Key beneficiary, with AI revenue expected to rise rapidly from 2025 to 2027. High gross profit margins in the software business. Any pullback is an opportunity.

NVIDIA:Also considered a buying opportunity on pullbacks.

Amazon vs Meta:The market has higher capital expenditure (Capex) requirements, and Amazon may face greater pressure compared to Meta.

Hong Kong stocks/Chinese ADR market: Overall:Despite external shocks, inflows of southbound funds provide support. Technology stocks are favored due to lower valuations.

Huazhu Group:Top choice for Spring Festival travel concept, benefiting from hotel price increases and an asset-light model.

BYD:Has an absolute advantage in sales volume, with significant growth in overseas sales. Long-term prospects remain positive.

Internet giants:Tencent, Alibaba, and Kuaishou are under valuation pressure due to the impact of SaaS software. However, it is recommended to add positions if Alibaba and Kuaishou decline.

SMIC:A core allocation in Hong Kong stocks, with expectations of potential upside surprises in GPU and power semiconductor orders, along with anticipated price increases.

Horizonrobot:A high-volatility AI stock, with expectations of a major product launch in the first half of this year.

Part Two: Macro Strategy and AI Track Investment (Huang Shuo)

Macroeconomic outlook: Focus on PPI turning positive and household asset reallocation

Moderate economic recovery, with PPI as a key signal:GDP growth is expected to remain around 5% in 2026, but for investment purposes, more attention should be paid toThe turning point for the PPI (Producer Price Index). It is expected to return to positive territory from mid-year to the third quarter, which will directly benefitupstream raw materialsandConsumer sectorthe repair of profitability.

Reconstruction of liquidity logic:Although the room for interest rate cuts is limited, the core variable lies inthe reconstruction of household balance sheets.The decline in deposit rates has driven funds to flow from the banking system into wealth management, insurance, and equity markets. This 'deposit migration' effect is the most solid source of incremental funds for the Hong Kong stock market.

Hong Kong stock strategy: 'Mean reversion' from a quantitative perspective

Market characteristics:The current market exhibits characteristics of 'index volatility with extreme structural divergence.' High-dividend sectors (banks, telecommunications) are performing strongly, while growth sectors (internet, pharmaceuticals, automobiles) face valuation pressure.

Quantitative Signals:Our monitoring model shows that the deviation between industries has reached a historical extreme. According to statistical patterns,mean reversionIt is a high-probability event.

Allocation recommendations:It is recommended to focus on previously oversold sectors such asInternet, hardcore technology, and pharmaceuticals,especially under the catalysis of AI and related themes, which present significant short-term recovery potential. Strategically, prioritize stocks with strong alpha-generating capabilities.

Technology and Manufacturing: Locking in the most certain incremental growth

AI Computing Power (Domestic Substitution):This represents the strongest logical certainty within the technology sector.

Industry Position:Domestically produced computing chips are not merely commercial products but are regarded as the 'autonomous power grid of the AI era,' possessing attributes of strategic infrastructure.

Penetration Rate Increase:It is expected that within the next 2-3 years, the market share of domestically produced computing chips will accelerate from the current 25%-30% toOver 60%The domestic supply chain will enter a period of performance realization.

Resource products (revaluation of pricing):Resource products are moving away from their traditional cyclical characteristics.

Logic shift:On the supply side, the impact of lagging production expansion cycles and geopolitical factors has resulted in rigidity. On the demand side, national strategic reserve needs are adding pressure. The dual rigidity of supply and demand will support an upward shift in the price center of resource products, laying a foundation for long-term growth.

Overseas expansion logic (ROE-driven):The core lies in 'the global monetization of China's engineering efficiency.' Data verification shows that companies with high overseas revenue proportions have significantly outperformed purely domestic-demand companies in terms of ROE (Return on Equity) over the long term, making it a high-quality stock selection factor.

Part Three: In-depth Analysis of the Pharmaceutical Innovation Track (Zhang Jun)

Industry logic: MNC's 'patent cliff' and China's 'engineering efficiency'

Global supply-demand mismatch:US large pharmaceutical companies (MNCs) are facing a severe 'patent cliff.' The expiration of key blockbuster drug patents will lead to a sharp drop in revenue, creating an urgent need to introduce new drugs to replenish their pipelines.

China's core strengths:Not just original innovation, but extremeengineering efficiency. A Pfizer executive once commented: 'China R&D can achieve twice the speed at half the cost.' In trial-and-error iteration, clinical enrollment, and other areas, Chinese Biotech has a global comparative advantage.

Global bipolar landscape:The global biopharmaceutical industry has formed a bipolar structure of 'the US + China.' Currently, China accounts for 40% of global BD deals with upfront payments exceeding $50 million, while Europe and Japan/Korea have fallen behind.

Valuation assessment: Bubble cleared, entering configuration range

Valuation Reversion:After three years of adjustment, the valuation of the pharmaceutical sector has returned to the average level of the past decade. Trading congestion has significantly decreased, offering a high margin of safety.

Analysis of the US-China valuation gap:The market generally believes that US pharmaceutical stocks are cheap, but this is a misunderstanding. The low valuations in the US are mainly concentrated among large pharmaceutical companies (Pharma) in their mature stages, whereas Biotech companies in their growth phase still maintain relatively high valuations. Most Chinese pharmaceutical companies are in the growth phase and should not be simply benchmarked against the valuations of large-cap US blue-chip stocks.

Key disruptive sectors to focus on

Small nucleic acid drugs (siRNA): A generational revolution in chronic disease management

Technological breakthrough:Overcoming the technical bottleneck of 'liver delivery', achieving a leap from 'daily medication' to 'one injection every six months'.

Business Value:This significantly improves patient compliance. In areas like lipid-lowering and blood pressure reduction, small nucleic acid drugs are expected to replicate the technological substitution logic seen in electric vehicles replacing fuel-powered carsTechnological substitution logic, and in the future, large-market-cap platform companies will emerge.

AI + Healthcare (AI for Science): Implementation is key

Preferred directions:Compared to consumer-facing internet healthcare, we are more optimistic aboutAI-driven drug development serving pharmaceutical companies (To Pharma)。

Core value: AI cannot fully replace pharmaceutical processes but can achieve tasks humans are unable to perform (e.g., predicting molecular crystal structures).

Logic Support:Pharmaceutical companies have a strong willingness to pay to shorten R&D cycles. Using AI for molecular screening and structure prediction offers a clear business model with tangible cash flow already realized, making it the most pragmatic path for AI monetization in the healthcare sector. Current AI pharmaceutical companies function more like a super CRO (Contract Research Organization), profiting by providing efficient services to large pharmaceutical firms.

Surgical Robots

Investment Logic:Not to replace doctors, but to assist them (address hand tremors, improve precision, and reduce trauma).

Typical cases:Prostatectomy.

Traditional surgery:Prone to nerve damage, leading to incontinence or loss of sexual function (high side effect rate).

Robotic surgery:Side effect rates significantly reduced, success rate increased to over 90%, becoming the clinical gold standard.

Competitive landscape:

Global leader:Intuitive Surgical (Da Vinci robot), high valuation (PE 60x), high barriers to entry, long-term growth stock.

Domestic rise:After 2021, domestic quality significantly improved, with doctors reporting it as “user-friendly.” Domestic leaders: MicroPort Robot, Jingfeng Medical (market share second only to Da Vinci).

China's Advantage:Demand side: China has the highest 'single-machine turnover rate' (extremely high surgical volume) globally. Supply side: Engineer dividend and supply chain advantages. Overseas expansion logic: European and American giants have insufficient investment in emerging markets such as Southeast Asia, South America, and Eastern Europe; Chinese companies offer high cost-effectiveness, leading to rapid overseas growth.

Brain-Computer Interface (BCI)

Reasons for optimism:Human-computer interaction revolution: In the AI era, the next-generation interaction method following large language models.

Policy catalyst:A frontier field in the '15th Five-Year Plan,' with significant attention from domestic policies. Recent catalyst: The first medical device approval for a brain-computer interface in China is expected in the first quarter of this year, and the listing of related companies will trigger a thematic investment boom.

Q&A Selected Highlights

Q1: Does AI drug development reduce costs and improve efficiency in clinical Phase II and beyond?

Answer: Not currently. AI's current strengths lie mainly in drug discovery and preclinical stages (molecular search, structure prediction). Large pharmaceutical companies primarily use AI for internal management process optimization (text processing). If AI can address cost issues in clinical trial stages, it would be an industry-transforming disruption—but this has not yet been achieved.

Q2: Will Moderna's mRNA cancer vaccine impact ADC drugs?

Answer: No, the two are complementary. ADC: Precision chemotherapy responsible for strong cancer cell killing. mRNA vaccines: Regulate the human immune system. Future trend: Combination therapy (1+1>2), jointly enhancing treatment efficacy rather than one replacing the other.

Q3: How to interpret Innovent Bio's global strategic collaboration with Eli Lilly and Co (with a $350 million upfront payment)?

Answer: This is top-level validation of China’s R&D capabilities. It’s not just about buying or selling a molecule, but a new model for multinational corporations (MNCs) to build R&D centers in China. The new division of labor: Chinese pharmaceutical companies (e.g., Innovent) handle early-stage R&D (high efficiency, low cost, strong engineering capabilities); MNCs (e.g., Eli Lilly) take charge of global clinical development and commercialization. Macro signal: Despite geopolitical noise, giants like Pfizer and AstraZeneca are actually increasing their investments in China’s R&D platforms because they cannot ignore China’s R&D efficiency.

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