Starting the final “countdown”, is steady sideways trading the key to Jinfang Pharmaceutical-B (02595) “getting through”?

The end of 2025 is approaching, and it is only the last 20 days until the end of the Hong Kong Stock Connect review period for the latest round of adjustments. This means that it is now the final sprint stage of “entering the Internet” for many targets.

The next round of regular adjustments to the Hang Seng Index and Hong Kong Stock Connect will be in March next year. The review results will be announced on February 25, and the review cycle will be from January 1, 2025 to December 31, 2025. According to estimates from the Zhitong Finance App, it is currently estimated that the number of new targets included in the Hong Kong Stock Connect will be 31. Excluding the 3 targets that will be included in the “A+H” form, the remaining 28 are expected to be included because they meet the “entry threshold”. Jingfang Pharmaceutical-B (02595) is one of them.

A steady trend since listing has become the key to “entry”

According to current data, the average daily market value of Jingfang Pharmaceutical during this review period was HK$10.296 billion, which is more than HK$1 billion higher than the latest market capitalization threshold of HK$9.242 billion. Considering that it is now until December 11, only 20 days until the end of the Hong Kong Stock Connect review period, there is a high probability that Jinfang Pharmaceutical will successfully enter the new phase of the Hong Kong Stock Connect adjustment on the premise of ensuring a stable market value.

Judging from the performance of Jingfang Pharmaceutical since its listing, the stock price trend that stopped falling and stabilized after experiencing shocks and falls in the early stages of listing is undoubtedly a key factor in its “breakout.”

According to the Zhitong Finance App, on September 18, Jingfang Pharmaceutical opened high at HK$40.00. After a short period of fluctuation, it quickly rose to a high point of HK$45.58, and then maintained a medium to high fluctuation and closed at HK$41.22. In the end, it closed up 102.16%, with an overall turnover of HK$213 million.

In terms of the first listing performance of the next day, Jingfang Pharmaceutical directly jumped higher at the opening price. The stock price directly rose to HK$44, surging 115.79% from the issue price, and quickly hit an intraday high of HK$50.20. The final closing price was HK$42.10, an increase of 106.47%. The turnover reached HK$1,553 billion, and the turnover rate was 11.15%. The overall performance was better than the previous day's dark market.

However, in the context of the volatile market correction in the Hong Kong stock pharmaceutical sector at the time, the increase compared to the doubling of the issue price was compounded by the high and falling performance of the same day, which led to major market differences on the first day of listing, and a period of decline in stock prices for about 1 month thereafter. From September 19 to October 23, the stock price decline in this range reached 29.31%, and the biggest fluctuation in the stock price reached 51.55%.

On the technical side, on October 22, the closing price of Jingfang Pharmaceutical fell below the BOLL offline track of the day. The company's stock price closed down 9.73% on the same day, and the trading volume increased to 2.128,800 shares from the previous day, which meant that differences among fundraisers within the market widened; however, from the perspective of OTC holders, the increase in trading volume also meant that the OTC carrying capacity was strong, and this became more obvious the next day. On October 23, Jingfang Pharmaceutical's stock price rebounded strongly and closed up 12.22%, pulling the company's stock price back above BOLL's offline track. Maintaining a single-day trading volume of 2,079,800 also indicates that differences outside the market have increased, and coin holders are more willing to enter the market.

It is easy to see that after October 23, the stock price of Jingfang Pharmaceutical clearly stopped falling and entered a phase of steady sideways fluctuation. During this period, the buyer's funds used part of the chip to suppress the trade, and at the same time undertook to sell the chips, locking most of their chips in the fund-raising area.

Up to now, the coincidence rate of 70% and 90% of the chips on the market has reached 79.22%, which indicates a high concentration of chips in the market. Furthermore, on the one hand, the average cost of chips on the market has remained around HK$37, which is far higher than the current price, reducing the willingness of fundraisers to sell; on the other hand, a large number of locked up chips from above to increase resistance to the upside has also curbed the mood of coin holders to expand differences and stir up enthusiasm in the short term.

This performance is enough to keep the next share price fluctuation at a low level on a technical level, and this is critical for a target that is sprinting to Hong Kong Stock Connect.

How to steadily “pass through” the most popular targets?

The Zhitong Finance App observed that the Hong Kong Stock Innovative Drug Bull Market this year led the Hang Seng Healthcare Index to rise for 8 months from a low of 2152.38 points at the beginning of the year and reached an annual high of 4726.41 points on September 9. The biggest increase in the range reached 119.59%. To a certain extent, Jinfang Pharmaceutical's IPO subscription performance is the most figurative reflection of this round of the innovative drug bull market.

This time, Jinfang Pharmaceutical's Hong Kong public offering was subscribed 2662.79 times, setting a number of 18A records for Hong Kong stocks during the issuance process; in the international placement section, Jinfang Pharmaceutical also received 39.05 times oversubscription, indicating that institutional investors are optimistic about the KRAS inhibitor circuit for a long time.

More importantly, the cornerstone investors of Jinfang Pharmaceutical are composed of 9 well-known companies and institutions, with a luxury cornerstone lineup with an investment of 100 million US dollars. This endorsement of Cornerstone Capital strengthens the market's recognition of Jinfang Pharmaceutical's investment and even short-term speculation, further boosting the enthusiasm of the market to develop new developments.

However, as mentioned above, soon after the index reached a phased high, it began to fluctuate sideways and there was a correction. In October alone, the Hang Seng Healthcare Index pulled back 11.05%. In other words, from its IPO to the beginning of its listing, Jingfang Pharmaceutical was at the end of this round of the Hong Kong Stock Innovative Drug Bull Market. When the overheated sentiment meets the cooling external market, it is easy to trigger the “fall back in the bag” strategy of ordinary investors. This is one of the important reasons why Jinfang Pharmaceutical's stock price sharply lowered by more than 30% in October.

However, after the stock market value fell below HK$10 billion for the first time on October 22, Jingfang Pharmaceutical's stock price quickly stopped falling to avoid further stock price bubbles in the short term, and this is not unrelated to its IPO issuance mechanism.

According to the Zhitong Finance App, on the one hand, Jingfang Pharmaceutical adopted Plan B of the new Hong Kong stock IPO regulations, that is, there is no need to adopt a mandatory recovery or redistribution mechanism. The share of public sale is 10%, and international placement accounts for 90%. For retail investors, the allocation ratio is relatively fixed, and there will be no rebates due to the overpurchase ratio being too high. In the end, retail investors only received 7.76 million shares that were publicly sold, mechanically limiting short-term circulation, thereby reducing the instability caused by retail chip sales.

On the other hand, the cornerstone investors of Jingfang Pharmaceutical subscribed for a total of US$100 million (approximately HK$780 million), accounting for 49.27% of the total number issued. The high proportion of cornerstone subscriptions not only indicates professional investors' recognition of the company's long-term value, but also provides a stable anchoring effect for the company's issuance. The six-month lockdown period of the cornerstone means that there will be no large-scale sell-off in the short term, which is conducive to the phased stability of stock prices.

Judging from the results, Jinfang Pharmaceutical has now entered a phase of substantial low sideways trading. Liquidity in November and December of this year was only 0.52% and 0.38%, which is significantly lower than in the previous 2 months, while also meeting the entry threshold, helping Jinfang Pharmaceutical finally “break through” steadily.