On December 31, A-Shares and Hong Kong shares ushered in the last trading day of 2021, with frequent market hot spots. In early trading that day, the main stock indexes of A-Shares were differentiated, and the Chinese medicine sector became the best performing segment, boosted by the sudden positive. In addition, the new energy sector also performed well, and photovoltaic stocks rose sharply. In Hong Kong stocks, the share price of shangtang-w, an Asian AI software giant listed yesterday, continued to rise sharply. As of noon closing, it rose 33.17% to HK $5.5, with a market value of HK $180 billion to HK $183.1 billion.

the Chinese medicine sector rose sharply

In the morning trading on December 31, the main indexes of A-Shares showed differentiation. As of midday closing, the Shanghai index rose 0.36%, the Shenzhen Component Index rose 0.06% and the gem index fell 0.21%.

In the wind concept index, the traditional Chinese medicine index rose by 5.73%, ranking first among all indexes. Among its constituent stocks, Beijing Tongrentang Co.Ltd(600085) , China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) and Yunnan Baiyao Group Co.Ltd(000538) , Tasly Pharmaceutical Group Co.Ltd(600535) also increased significantly.

In terms of news, the first batch of 7 provinces (cities) approved to build a national demonstration zone for comprehensive reform of traditional Chinese medicine has become the most favorable. According to Xinhua News Agency on December 31, it is learned from the State Administration of traditional Chinese medicine that seven provinces, including Shanghai, Zhejiang, Jiangxi, Shandong, Hunan, Guangdong and Sichuan, have been approved to build the first batch of national demonstration zones for comprehensive reform of traditional Chinese medicine. The national demonstration area for comprehensive reform of traditional Chinese medicine takes provinces (autonomous regions and municipalities directly under the central government) as the main construction body, and encourages the first trial in the service mode, industrial development and quality supervision of traditional Chinese medicine.

In fact, since this year, the heavy support policies of the traditional Chinese medicine sector have continued. In February 2021, the State Council issued several policies and measures on accelerating the development of characteristics of traditional Chinese medicine; On June 30, the National Health Commission and others jointly formulated the opinions on Further Strengthening the work of traditional Chinese medicine in general hospitals and promoting the coordinated development of traditional Chinese and Western medicine; On July 7, the five departments jointly formulated the implementation plan for the dissemination of traditional Chinese medicine culture (2021-2025).

Recently, the number of industry institutions optimistic about the potential of the sector has also continued to increase.

Everbright Securities Company Limited(601788) believes that the undervalued traditional Chinese medicine sector has the logic of stable growth of domestic consumption, policies to encourage high-quality development and continuous price increase. It has been widely recognized by the fund under the background of style switching at the end of the year. By combing the industrial policies and investment logic of proprietary Chinese medicine and traditional Chinese medicine formula particles, the traditional Chinese medicine industry has entered a high-quality development stage, waiting for performance realization and value revaluation. Under the policy encouragement, traditional Chinese medicine enterprises inherit and develop, traditional Chinese medicine innovative medicine enterprises usher in the high-speed period of examination and approval, and the traditional Chinese medicine formula granule industry embraces market expansion, standard improvement and quality improvement. It is suggested to pay attention to three types of investment opportunities in the industrial chain of traditional Chinese medicine: OTC of brand Chinese patent medicine; Traditional Chinese medicine formula granules; Traditional Chinese medicine pharmaceutical equipment.

Citic Securities Company Limited(600030) believes that since January 2019, due to the unexpected impact of industrial policies and terminal sales data, the traditional Chinese medicine sector has significantly lost the pharmaceutical index and other sub sectors, and the current valuation is at the bottom of history. At the end of the year, when high valuation sectors such as CXO in the pharmaceutical sector continued to callback, the value of the traditional Chinese medicine sector was highlighted as a haven for undervaluation. In the short-term TCM sector, the logic of drug price rise will continue to benefit from policy promotion, innovation and R & D and consumption upgrading in the medium and long term.

Guosheng securities also believes that the traditional Chinese medicine sector has become the benefit direction of the fund seesaw effect within the pharmaceutical sector and even at the industry level due to its “relatively undervalued value”, “good chip structure”, “policy environment encouragement” and “marginal positive changes (price increase and incentive)”.

new energy is still the focus

In addition to traditional Chinese medicine, new energy related sectors are still the focus of the market.

On the morning of December 31, the photovoltaic sector rose sharply, Longi Green Energy Technology Co.Ltd(601012) , Sungrow Power Supply Co.Ltd(300274) , Tongwei Co.Ltd(600438) , Flat Glass Group Co.Ltd(601865) , Center International Group Co.Ltd(603098) and so on. Power stocks also performed well, Gd Power Development Co.Ltd(600795) , Sichuan Xichang Electric Power Co.Ltd(600505) , Sichuan Mingxing Electric Power Co.Ltd(600101) pulled up strongly.

Yao Hongyao, director of Aberdeen and head of China’s equity investment department, said that China has most of the world’s renewable energy and storage capacity, accounting for 90% of Cecep Solar Energy Co.Ltd(000591) and 75% of battery capacity. Economic decarbonization requires huge investment in renewable energy and storage, and China is expected to benefit from it. Other industries will also contribute to decarbonization, so it is expected that investment in machinery upgrading and energy efficiency will increase. “We believe that companies with optimistic prospects include Cecep Solar Energy Co.Ltd(000591) wafer manufacturers, component manufacturers, battery and related component manufacturers and automation related companies.”

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(China Securities Journal)