On October 31, the Hong Kong stock market concluded the final trading day of October, with the market showing a significant pullback for the month.

At the close, the Hang Seng Index settled at 25,906.65 points, down 376.04 points or 1.43%, accumulating a 3.53% decline for October.

The Hang Seng Tech Index settled at 5,908.08 points, down 143.68 points or 2.37%, accumulating an 8.62% decline for October.

Sector-wise, major sectors fell across the board. Semiconductors, electrical equipment, coal, machinery, discretionary consumption, software services, and other sectors performed poorly. However, Hong Kong's innovative drug sector bucked the trend and rose strongly. Among them, 3SBio (01530.HK) surged over 11%, Duality Biologics -B (09696.HK) rose over 10%, Innovent Biologics (01801.HK) gained over 7%, and Fosun Pharma (02196.HK) increased over 6%.

On the news front, the 2025 National Medical Insurance Negotiation commenced in Beijing on October 30. Building on the conventional adjustment mechanism for the medical insurance catalog, this year's negotiation formally introduced the "Commercial Insurance Innovative Drug Catalog" mechanism for the first time. Brokerage institutions believe that China's innovative drug industry is currently integrating into the global pharmaceutical innovation system with strong momentum. From being dominated by generics a decade ago to now significantly increasing its share in global innovative drug business development (BD) transactions, and progressing from "following" and "running alongside" to "leading" in some areas, China's innovative drug sector has achieved a leap from "using others' boats to go to sea" to "building its own boats to go to sea," relying on policy support, clinical breakthroughs, and capital assistance.

In other areas, technology stocks mostly declined. Alibaba fell over 4%, Tencent Holdings and Kuaishou dropped over 3%, JD.com, Baidu, and Xiaomi decreased over 2%, while NetEase and Bilibili fell over 1%. The semiconductor sector plunged, with Hua Hong Semiconductor down over 7% and SMIC falling over 5%. Airline stocks weakened, with Air China dropping over 6%.

Regarding capital flows, as of the market close, southbound funds recorded a net purchase of over HK$8.7 billion in Hong Kong stocks.

Outlook:

CITIC Securities believes that, judging from the performance of the Hang Seng Index, the recent decline might reflect an adjustment after "favorable factors are exhausted." Short-term uncertainties from Sino-US frictions are expected to decrease significantly, which may consequently boost risk appetite in the Hong Kong stock market. Looking at the relevant negotiation outcomes, the extension of rare earth export controls and the reduction of export tariffs to the US could potentially drive both volume and price increases in the raw materials sector. Hong Kong-listed industries with a high proportion of revenue from the US, such as information technology, staple and discretionary consumption, and industrials, will also benefit from the lower export tariffs. Furthermore, historically, when China and the US signaled eased tensions in November 2018, the RMB exchange rate bottomed out and rebounded, serving as a reference. If the RMB subsequently enters an appreciation channel, sectors like papermaking might benefit significantly.