Why are investors so sensitive to pharmaceutical companies being transferred out of the "Hong Kong Stock Connect"?

One of the biggest dreams of Hong Kong stock enterprises is to enter the "Hong Kong Stock Connect"

One of the biggest dreams of Hong Kong stock enterprises is to enter the "Hong Kong Stock Connect"

For a business, liquidity is the key

It is precisely for this reason that Hong Kong Stock Connect is a compulsory course for a Hong Kong listed company

On September 5, the Shanghai Stock Exchange issued the "Announcement on the Adjustment of the List of Stocks on the Hong Kong Stock Connect under the Shenzhen-Hong Kong Stock Connect", and three 18A companies, WuXi Junuo, Hebo Pharmaceutical and Jiahe Biologics, were unfortunately transferred out of the Hong Kong Stock Connect list

This put pressure on the stock prices of the three companies: as of the close of the 6th, the shares of WuXi Junuo, Hebo Pharmaceutical and Jiahe Bio fell by 29.

It is also understandable that any one of the unfavorable factors in a bear market has the potential to deal a fatal blow

But then again, the Hong Kong Stock Connect is just a tool

/ 01 // 01 // 01 /

After being transferred out of the Hong Kong Stock Connect list:

After being transferred out of the Hong Kong Stock Connect list: After being transferred out of the Hong Kong Stock Connect list:

Mainland buying and selling orders

Mainland BuyIng And Selling OrdersLand Buying Orders Selling Orders Mainland Buying And Selling Orders

Why are investors so sensitive to pharmaceutical companies being transferred out of the "Hong Kong Stock Connect"? Before answering this question, let's first understand what the role
of Hong Kong Stock Connect is.

Why are investors so sensitive to pharmaceutical companies being transferred out of the "Hong Kong Stock Connect"? Before answering this question, let's first understand what the role
of Hong Kong Stock Connect is.

To put it simply, the Hong Kong Stock Connect enables mainland investors to directly participate in hong Kong stock capital market transactions and improve the liquidity
of hong Kong listed companies.

To put it simply, the Hong Kong Stock Connect enables mainland investors to directly participate in hong Kong stock capital market transactions and improve the liquidity
of hong Kong listed companies.

For listed companies, liquidity is the key
to supporting valuations.
A shares are precisely because they have more than 100 million shareholders, extremely abundant funds, and the market valuation center leads the world
.

For listed companies, liquidity is the key
to supporting valuations.
A shares are precisely because they have more than 100 million shareholders, extremely abundant funds, and the market valuation center leads the world
.

Therefore, the Hong Kong Stock Connect can play a greater role
in improving the liquidity of Hong Kong stock companies.
Although the threshold for investors in the Hong Kong Stock Connect is as high as "500,000" assets, there are still nearly 3 million people who
meet the conditions.

Therefore, the Hong Kong Stock Connect can play a greater role
in improving the liquidity of Hong Kong stock companies.
Although the threshold for investors in the Hong Kong Stock Connect is as high as "500,000" assets, there are still nearly 3 million people who
meet the conditions.

In recent years, the slogan of mainland investors "going south to compete for pricing power" has not been shouted in vain
.

In recent years, the slogan of mainland investors "going south to compete for pricing power" has not been shouted in vain
.

At the same time, the inclusion of Hong Kong listed companies in the Hong Kong Stock Connect also means that they have been authoritatively certified
.
In order to enter the Hong Kong Stock Connect, it is necessary to have many requirements
such as "market value, performance, liquidity" and so on.
There has also always been a claim
that entering the Hong Kong Stock Connect Company equals a quality company.

At the same time, the inclusion of Hong Kong listed companies in the Hong Kong Stock Connect also means that they have been authoritatively certified
.
In order to enter the Hong Kong Stock Connect, it is necessary to have many requirements
such as "market value, performance, liquidity" and so on.
There has also always been a claim
that entering the Hong Kong Stock Connect Company equals a quality company.

Therefore, after the Listing of Hong Kong stocks is included in the Hong Kong Stock Connect, it may usher in the "Davis Double-Click", and the stock price trend is strong
.

Therefore, after the Listing of Hong Kong stocks is included in the Hong Kong Stock Connect, it may usher in the "Davis Double-Click", and the stock price trend is strong
.

This can also be confirmed
by the past performance of many pharmaceutical companies.
For example, on March 15, 2021, WuXi Juno was included in the list
of Hong Kong Stock Connect under Shenzhen-Hong Kong Stock Connect.
The next day, WuXi Junuo's stock price rose 11.
44%.

This can also be confirmed
by the past performance of many pharmaceutical companies.
For example, on March 15, 2021, WuXi Juno was included in the list
of Hong Kong Stock Connect under Shenzhen-Hong Kong Stock Connect.
The next day, WuXi Junuo's stock price rose 11.
44%.

After understanding this logic, it is not difficult to explain why the stock prices of pharmaceutical companies that have been transferred out of the Hong Kong Stock Connect list are under pressure
.

After understanding this logic, it is not difficult to explain why the stock prices of pharmaceutical companies that have been transferred out of the Hong Kong Stock Connect list are under pressure
.

Because as companies are transferred out of the Hong Kong Stock Connect, mainland investors will not only not be able to continue to contribute liquidity, but will become a sell-off:

Because as companies are transferred out of the Hong Kong Stock Connect, mainland investors will not only not be able to continue to contribute liquidity, but will become a sell-off:

After a company is transferred out of the Hong Kong Stock Connect, mainland investors cannot buy and can only sell
the shares of the company they hold.

After a company is transferred out of the Hong Kong Stock Connect, mainland investors cannot buy and can only sell
the shares of the company they hold.

If you want to buy the company's Hong Kong stocks, you need to open a separate Hong Kong stock account
.
These cumbersome operations will shut out many investors, the liquidity of the company's stock will decline, and future expectations will also be affected
.

If you want to buy the company's Hong Kong stocks, you need to open a separate Hong Kong stock account
.
These cumbersome operations will shut out many investors, the liquidity of the company's stock will decline, and future expectations will also be affected
.

To some extent, the sharp decline in the stock price of WuXi Junuo was affected
by this factor.

To some extent, the sharp decline in the stock price of WuXi Junuo was affected
by this factor.

Since being included in the Hong Kong Stock Connect, the proportion of the company's shares held in the total share capital of the Hong Kong Stock Connect has been gradually increasing
.
As of the close of trading on September 5, WuXi Junuo Hong Kong Stock Connect held 15.
8%
of the shares.

Since being included in the Hong Kong Stock Connect, the proportion of the company's shares held in the total share capital of the Hong Kong Stock Connect has been gradually increasing
.
As of the close of trading on September 5, WuXi Junuo Hong Kong Stock Connect held 15.
8%
of the shares.

After it was transferred out of the Hong Kong Stock Connect, the sell-off order of nearly 16% of the shares may have a certain impact on
the stock price.
No wonder investors voted
with their feet.

After it was transferred out of the Hong Kong Stock Connect, the sell-off order of nearly 16% of the shares may have a certain impact on
the stock price.
No wonder investors voted
with their feet.

/ 02 /

/ 02 // 02 // 02 /

Maintain the status of Hong Kong Stock Connect,

Maintain the identity of Hong Kong Stock Connect, maintain the identity of Hong Kong Stock Connect, maintain the identity of Hong Kong Stock Connect,

Liquidity and market capitalization are key

Liquidity and market capitalization are key liquidity and market capitalization is key liquidity and market capitalization is key

So, which companies will be transferred out of the Hong Kong Stock Connect? By understanding the rules of the Hong Kong Stock Connect, we come to find the answer
.

So, which companies will be transferred out of the Hong Kong Stock Connect? By understanding the rules of the Hong Kong Stock Connect, we come to find the answer
.

There are two branches of Hong Kong Stock Connect, one is Shanghai-Hong Kong Stock Connect and the other is Shenzhen-Hong Kong Stock Connect
.
In general, the corporate standards for inclusion in the Hong Kong Stock Connect are consistent:

There are two branches of Hong Kong Stock Connect, one is Shanghai-Hong Kong Stock Connect and the other is Shenzhen-Hong Kong Stock Connect
.
In general, the corporate standards for inclusion in the Hong Kong Stock Connect are consistent:

At the end of the review period, the average market capitalization is not less than HK$5 billion, and it ranks
among the Hang Seng Composite Index.

At the end of the review period, the average market capitalization is not less than HK$5 billion, and it ranks
among the Hang Seng Composite Index.

The Hang Seng Composite Index is periodically adjusted every six months, and each adjustment is based on the market capitalization and liquidity performance of the participants in the past year as the main basis for entering the Hang Seng Composite Index, and the adjustment results are announced in February and August of each year, and come into effect
in March and September.

The Hang Seng Composite Index is periodically adjusted every six months, and each adjustment is based on the market capitalization and liquidity performance of the participants in the past year as the main basis for entering the Hang Seng Composite Index, and the adjustment results are announced in February and August of each year, and come into effect
in March and September.

Whether a company can stay in the ranks of the Hang Seng Composite Index depends on 2 points: market capitalization and liquidity
.

Whether a company can stay in the ranks of the Hang Seng Composite Index depends on 2 points: market capitalization and liquidity
.

In terms of market capitalization, the constituent stocks of the Hang Seng Composite Index implement a last-place elimination system
.
As shown in the chart below, the Hang Seng Composite Index ranks the stocks in the selectable range by 12-month average market capitalization from large to small, calculating the cumulative market capitalization coverage ratio of each stock, and the enterprises that meet the inclusion conditions are eligible for candidacy; The bottom 4% of companies will not be able to maintain their STATUS
AS Stock Connect.

In terms of market capitalization, the constituent stocks of the Hang Seng Composite Index implement a last-place elimination system
.
As shown in the chart below, the Hang Seng Composite Index ranks the stocks in the selectable range by 12-month average market capitalization from large to small, calculating the cumulative market capitalization coverage ratio of each stock, and the enterprises that meet the inclusion conditions are eligible for candidacy; The bottom 4% of companies will not be able to maintain their STATUS
AS Stock Connect.

However, based on past experience, this standard will usually be significantly higher than the minimum market capitalization standard
of HK$5 billion.
In other words, if 18A companies want to be kicked out of the Hong Kong Stock Connect, the market value requirements during the review period are not low
.

However, based on past experience, this standard will usually be significantly higher than the minimum market capitalization standard
of HK$5 billion.
In other words, if 18A companies want to be kicked out of the Hong Kong Stock Connect, the market value requirements during the review period are not low
.

In addition to meeting the market capitalization factor, it is also necessary to meet the liquidity requirements, the specific volume requirements are shown in the figure below, where the turnover rate is obtained
through the median daily trading volume of a specific month / the number of shares issued after the adjustment of circulation at the end of the month.

In addition to meeting the market capitalization factor, it is also necessary to meet the liquidity requirements, the specific volume requirements are shown in the figure below, where the turnover rate is obtained
through the median daily trading volume of a specific month / the number of shares issued after the adjustment of circulation at the end of the month.

In summary, only enterprises that meet both market capitalization and liquidity requirements can maintain the status of Hong Kong Stock Connect and will not be kicked out of the list
.

In summary, only enterprises that meet both market capitalization and liquidity requirements can maintain the status of Hong Kong Stock Connect and will not be kicked out of the list
.

WuXi Junuo is a loss
that is not enough in market value.
As shown in the figure below, WuXi Juno is able to meet the liquidity requirements
.

WuXi Junuo is a loss
that is not enough in market value.
As shown in the figure below, WuXi Juno is able to meet the liquidity requirements
.

However, the average market value of the company in 12 months was HK$4.
805 billion, which no longer met the corresponding requirements
.

However, the average market value of the company in 12 months was HK$4.
805 billion, which no longer met the corresponding requirements
.

/ 03 /

/ 03 // 03 // 03 /

In or out of the Hong Kong Stock Connect,

In or out of the Hong Kong Stock Connect, in or out of the Hong Kong Stock Connect, in or out of the Hong Kong Stock Connect,

Does not affect the long-term value of the enterprise

Does not affect the long-term value of the enterprise does not affect the long-term value of the enterprise does not affect the long-term value of the enterprise

It is foreseeable that the experience of WuXi Juno will be repeated in the biotechnology sector in the future
.

It is foreseeable that the experience of WuXi Juno will be repeated in the biotechnology sector in the future
.

Because under the cold winter of biopharmaceuticals, Biotech, which has declined in liquidity and significantly reduced its market value, is not in the minority, and there will inevitably be companies facing the situation of being transferred out of hong Kong stock connect in the
follow-up.

Because under the cold winter of biopharmaceuticals, Biotech, which has declined in liquidity and significantly reduced its market value, is not in the minority, and there will inevitably be companies facing the situation of being transferred out of hong Kong stock connect in the
follow-up.

Of course, this is only a short-term annoyance
for the growth of 18A companies.
As mentioned above, the Hong Kong Stock Connect is just a tool to increase liquidity
.

Of course, this is only a short-term annoyance
for the growth of 18A companies.
As mentioned above, the Hong Kong Stock Connect is just a tool to increase liquidity
.

For biotechnology companies, being moved out of Hong Kong Stock Connect does not exactly mean a dead end
.
In the end, the value of pharmaceutical companies still has to return to the performance level
.

For biotechnology companies, being moved out of Hong Kong Stock Connect does not exactly mean a dead end
.
In the end, the value of pharmaceutical companies still has to return to the performance level
.

Although WuXi Junuo transferred out of the Hong Kong Stock Connect list, it caused the market to worry about and avoid the company's risks, and investors voted
with their feet.
But back to rationality, WuXi Junuo, as a leading enterprise in domestic CAR-T therapy, has been listed on the market to achieve commercialization
.

Although WuXi Junuo transferred out of the Hong Kong Stock Connect list, it caused the market to worry about and avoid the company's risks, and investors voted
with their feet.
But back to rationality, WuXi Junuo, as a leading enterprise in domestic CAR-T therapy, has been listed on the market to achieve commercialization
.

According to the performance of the first half of the year, although there is still a certain distance from the shore, the performance is also continuing to improve
.
In the first half of this year, WuXi Junuo issued 77 Benodal prescriptions, completed the infusion of 64 patients, and brought 66 million operating income
to the company.

According to the performance of the first half of the year, although there is still a certain distance from the shore, the performance is also continuing to improve
.
In the first half of this year, WuXi Junuo issued 77 Benodal prescriptions, completed the infusion of 64 patients, and brought 66 million operating income
to the company.

In the future, if the company continues to prove itself at the commercial level, it is not impossible
to return to the Hong Kong Stock Connect.

In the future, if the company continues to prove itself at the commercial level, it is not impossible
to return to the Hong Kong Stock Connect.

For more Biotech, being in or out of the Hong Kong Stock Connect does not affect the long-term value
of the enterprise.
The most critical thing is to strive to build its own moat and break the ceiling
of development.

For more Biotech, being in or out of the Hong Kong Stock Connect does not affect the long-term value
of the enterprise.
The most critical thing is to strive to build its own moat and break the ceiling
of development.