Industry Note. January 22, 2018 A New Era for the Hong Kong Market; HTI and GTJAI Are Attractive Catch-up Plays. Hong Kong Securities Sector

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1 Industry Note Hong Kong Securities Sector Last Price TP Company Ticker Rating Wong Chi Man Head of Research (852) (HK$) (HK$) HKEx 388 HK BUY HTI 665 HK BUY GTJAI 1788 HK BUY Company PER PBR ROAA ROAE (x) (x) (%) (%) HKEx HTI GTJAI Sources: Company, CGIS Research Updated as of January 22, 2018 FY2018E January 22, 2018 A New Era for the Hong Kong Market; HTI and GTJAI Are Attractive Catch-up Plays We raise our 2018E EPS for HKEx (0388.HK)/Haitong International (0665.HK; HTI)/GTJA International (1788.HK; GTJAI) by 12.1%/20.5%/15.8%. Our 2018E EPS for HKEx/HTI/ GTJAI is 12.7%/32.2%/14.8% above market consensus, as we raise our 2018E average daily turnover (ADT) from HK$110bn to HK$135bn, driven by more southbound trading volume, the potential return of large cap ADRs to the Hong Kong market, and more TMT IPOs. We expect to see a structural increase in the trading volume of HKEx thanks to these factors and expect major brokerage players in Hong Kong, such as HTI and GTJAI, to also benefit. We reiterate our BUY ratings for HKEx, HTI and GTJAI. We lift our target prices of HKEx/ HTI/GTJAI by 14.8%/12.1%/21.7%. Currently, our top pick is HTI due to its high earnings sensitivity in a strong market, driven by its trading and investment businesses. Significant jump in southbound trading volume. In January 2018 (up to January 19), ADT reached HK$147.2bn, much higher than the ADT of HK$87.6bn in Southbound investors are one of the key drivers. Southbound daily trading volume jumped from HK$9.83bn in 2017 to HK$19.1bn in January Given that A-share prices are still higher than their H-share counterparts by 28%, based on Hang Seng AH Premium Index, we expect to see more southbound fund inflow due to the valuation advantage of the Hong Kong market. Potential return of large cap ADRs to offer huge upside. We raised this point in our HKEx report dated November 15, Based on speeches from government officials and HKEx CEO Charles Li in the past few weeks, we believe HKEx will be ready to allow companies with weighted voting rights (WVR) to be listed in Hong Kong in 2H18. This will pave the way for large cap ADRs to return to the Hong Kong market. Currently the 3-month average daily turnover of the top 10 Chinese ADRs is about HK$49bn. If about 25% of the trading volume returns to the Hong Kong market, this implies an increase in trading volume of HK$12bn. If these stocks are included in the Stock Connect universe in the future, the upside in trading volume will be even bigger. More TMT IPOs to help secondary trading. In our HKEx report dated November 15, 2017, we argued the old economy IPOs listed between 2011 and 2016 offered a limited contribution to secondary market trading volume. The situation has changed gradually since the listing of Meitu (1357.HK). This kind of TMT stock is much more welcomed by investors, and Meitu has still maintained average daily turnover of HK$300m-400m in recent months. According to press reports, there are still a lot of sizable TMT IPOs planning to list in Hong Kong, such as Xiaomi, Lufax and Tencent Music. It should not be a surprise for these companies to contribute HK$4bn-5bn in turnover per day post-ipo if they are successfully listed in Hong Kong. HTI and GTJAI to catch up. Although we still like HKEx for its attractive long-term growth potential, its valuation of 37.4x 2018E PER may look less attractive after a rally of 25% in the past two months. Last year, both HTI and GTJAI underperformed relative to HKEx, as some investors may have had concerns about risks in the margin financing business. However, we believe the risk has decreased in the strong market, and both companies have shifted their focus from small caps to large caps for the margin financing business. Therefore, we believe both companies are attractive catch-up plays to benefit from the increasing trading volume of the Hong Kong market. HTI, In particular, should enjoy higher earnings sensitivity in a strong market because of its higher exposure to the trading and investment businesses. 1

2 Valuation for target prices. We have a target price of HK$330.2 for HKEx, based on the Gordon Growth Model, implying 41.8x 2018E PER (cost of equity: 8.4%; mid-term ROE: 21.5%). Our target price for HTI is HK$6.9, based on the Gordon Growth Model, implying 1.34x 2018E PBR (cost of equity: 10.2%; mid-term ROE: 12%). Our target price for GTJAI is HK$3.70, based on the Gordon Growth Model, implying 2.74x 2018E PBR (cost of equity: 9.4%; mid-term ROE: 17%). Figure 1: Valuation table Company Ticker Rating Price (Local currency) Market cap (US$m) PER (x) PBR (x) ROE (%) ROA (%) E 2018E E 2018E E 2018E E 2018E Haitong International 665 HK Equity BUY , GTJA International 1788 HK Equity BUY , HKEx 388 HK Equity BUY , Figure 2: Average daily turnover of the Hong Kong market HK$bn Hong Kong Stock Exchange Average Daily Turnover in the past 7 years YTD Year Figure 3: Average daily turnover in the past 12 months (HK$bn) Hong Kong Stock Exchange Average Daily Turnover in the past 12 months Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 June 2017 July 2017 Aug 2017 Sep 2017 Oct 2017 Nov 2017 Dec YTD 2

3 Figure 4: Trading volume of Top 10 most traded Chinese ADR companies Ticker Company name Current market cap (US$m) 3-month average daily turnover (HK$m) BABA US Equity Alibaba Group Holding Ltd 471,380 27,424.1 JD US Equity JD.com Inc 65,733 4,843.6 BIDU US Equity Baidu Inc 88,537 4,773.1 NTES US Equity NetEase Inc 42,373 3,843.3 CTRP US Equity Ctrip.com International Ltd 24,045 1,912.6 WB US Equity Weibo Corp 28,486 1,573.9 XNET US Equity Xunlei Ltd 1,091 1,314.8 TAL US Equity TAL Education Group 14,520 1,269.9 YY US Equity YY Inc 8,712 1,180.7 MOMO US Equity Momo Inc 5,639 1,143.1 Total 49,279.1 HKEx's 2017 ADT 87,644.2 Figure 5: Potential TMT IPOs in 2018 Company Estimated fundraising size (US$m)* Xiaomi 10,000 Lufax 5,000 Tencent Music 1,000 Maoyan 1,000 iqiyi 1,000 Ping An Good Doctor 1,000 Douyu 400 Ant Financial - Inke - Kuaishou - *According to press reports. Sources: Press reports, CGIS Research Figure 6: Rolling forward PER range of HKEx /1/2011 3/1/2012 3/1/2013 3/1/2014 3/1/2015 3/1/2016 3/1/2017 3/1/2018 Figure 7: Rolling forward EV/EBITDA range of HKEx /1/2011 3/1/2012 3/1/2013 3/1/2014 3/1/2015 3/1/2016 3/1/2017 3/1/2018 Rolling forward PER Average PER+1 standard deviation Rolling forward average PER Average PER-1 standard deviation Rolling forward EV/EBITDA Average EV/EBITDA +1 standard deviation Rolling forward average EV/EBITDA Average EV/EBITDA -1 standard deviation 3

4 Figure 8: PBR range of HTI Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Rolling forward PBR Rolling forward average PBR Average PBR+1 standard deviation Average PBR-1 standard deviation Source: CGIS Research Figure 10: PBR range of GJTAI Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Figure 9: PER range of HTI Rolling forward PER Average PER+1 standard deviation Source: CGIS Research Figure 11: PER range of GJTAI Rolling forward average PER Average PER-1 standard deviation Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Rolling forward PBR Rolling forward average PBR Rolling forward PER Rolling forward average PER Average PBR+1 standard deviation Average PBR-1 standard deviation Average PER+1 standard deviation Average PER-1 standard deviation Source: CGIS Research Source: CGIS Research 4

5 Key financials (HKEx) P&Lsummary (HK$m) E 2018E Trading fees and trading tariff 5,469 4,428 4,833 6,140 Stock exchange listing fees 1,114 1,092 1,297 1,373 Cearing and settlement fees 3,118 2,358 2,831 3,874 Depository related fees Market data fees Other revenue ,074 Revenue 12,233 10,398 11,708 14,372 YoY 34% -15% 13% 23% Net investment income 1, ,497 1,754 Other income Revenue and other incom e 13,375 11,116 13,227 16,148 Staff costs (2,020) (2,035) (2,175) (2,260) IT expenses (517) (500) (445) (490) Premises expenses (294) (333) (350) (365) Marketing expenses (41) (54) (58) (62) Legal and professional fees (99) (106) (100) (120) Other operating expenses (396) (427) (440) (470) EBITDA 10,085 7,661 9,659 12,381 Depreciation& amortisation (684) (771) (757) (767) Operating profit 9,401 6,890 8,901 11,614 Finance costs (114) (82) (116) (90) Share of loss of JV (9) (9) (9) (9) Profit before tax 9,278 6,799 8,776 11,516 Tax (1,347) (1,058) (1,316) (1,750) Minorities (25) (28) (29) (30) Net Profit 7,956 5,769 7,489 9,795 YoY 54.0% -27.5% 29.8% 30.8% Balance Sheet summary (HK$m) E 2018E Cash 110, , , ,442 Financial assets 92,144 99,159 88, ,620 Accounts receivable 15,535 12,928 15,219 23,785 Current assets 218, , , ,847 Financial assets Goodwill 17,872 17,812 17,850 17,820 Fixed assets 1,560 1,499 1,450 1,430 Non-current assets 19,622 19,508 19,502 19,457 Financial liabilities 64,486 61,627 46,009 55,009 Margin deposits 115, , , ,000 Accounts payable 15,270 12,246 12,655 21,159 Clearing House Fund of Participants 7,474 8,656 10,062 10,510 Current liabilities 203, , , ,592 Borrowings 3,409 3,422 3,524 3,625 Deferred tax liabilities ,225 Non-current liabilities 4,255 4,246 4,569 4,983 Shareholders' Equity 29,816 32,266 36,298 41,552 Minorities Sources: Company, CGIS Research estimates 5

6 Key financials (HKEx) Cash Flow summary (HK$m) E 2018E Profit before tax 9,278 6,799 8,776 11,516 Depreciation& amortisation Net working capital adjustment (293) (321) (351) (1,112) Net cash from operations 8,321 6,164 8,324 9,877 Capex (710) (620) (746) (717) Others 290 (2,715) (2,198) (3,980) Net cash from investing (420) (3,335) (2,944) (4,697) Dividends paid (3,017) (3,329) (3,141) (4,408) Net cash from financing (3,224) (3,586) (3,459) (4,730) Free cash flow 7,611 5,544 7,578 9,160 Net cash/(debt) 9,335 5,864 7,683 8,032 Net Gearing n.a. n.a. n.a. n.a. Gross gearing 11% 11% 10% 9% Ratios E 2018E EBITDA margin 82% 74% 83% 86% Net margin 65% 55% 64% 68% ROAE 31% 19% 22% 25% ROAA 3.2% 2.4% 3.1% 3.8% PE (x) PB (x) EV/EBITDA Basic EPS (HKD) Diluted EPS (HKD) DPS (HKD) Dividend yield 2.0% 1.4% 1.8% 2.4% BVPS (HKD) 90% 90% 90% 90% Segment Income Contribution Cash 28% 26% 29% 30% Equity and financial derivatives 18% 20% 18% 17% Commodities 14% 15% 13% 11% Clearing 36% 35% 35% 37% Platform and infrastructure 4% 5% 5% 4% Key assumptions E 2018E ADT of equity products (HK$bn) ADT of DWs, CBBCs &warrants (HK$bn) Total Cash Segment ADT (HK$bn) ADT of northbound( bn) ADT of southbound(hk$bn) Southbound Contribution 3.2% 6.1% 11.2% 13.3% Number of newly listed (main board) Number of newly listed (GEM) ADT of DWs, CBBCs &warrants (HK$bn) ADnumber of derivative contracts 393, , , ,000 ADnumber of stock options contracts 374, , , ,000 ADvolume of metals contracts (LME) 670, , , ,000 Sources: Company, CGIS Research estimates 6

7 Key financials (Haitong International) Income Statement (HKD'000, except for per share amount) Year ended 31 December E 2018E Brokerage 556,518 1,031, , ,840 1,081,514 Margin financing 624,776 1,272,095 1,567,890 1,593,125 1,823,113 Corporate finance 396, , ,409 1,237,189 1,408,687 Asset management 123, , , , ,594 Leveraged and acquisition finance 421, , , , ,000 FICC, trading and market making 591,040 1,991,841 1,608,392 2,381,837 2,614,190 Revenue 2,713,291 5,805,514 5,350,817 6,975,518 8,107,098 Other income 20,512 9,791 6,899 20,000 6,000 Operating Expenses Staff costs 545, , ,234 1,005,741 1,177,000 Commission to accounts executives 240, , , , ,236 Depreciation 33,494 32,250 39,980 35,786 38,139 Other operating expenses 356, , , , ,000 Finance costs 375,475 1,036,569 1,395,816 1,602,368 1,697,944 Investments gains accounted for using the equity method 33,212 (53,522) (27,658) 200, ,000 Operating Profit 1,215,748 2,986,388 1,992,473 3,475,351 4,195,780 Income tax expense 197, , , , ,283 Non-controlling interests Net income 1,018,269 2,510,052 1,680,225 2,884,541 3,482,497 EPS (HK cents per share): Basic Diluted DPS (HKD) Dividend payout ratio 42% 37% 49% 45% 42% Dividend Yield 2.8% 4.2% 2.8% 4.4% 4.9% Revenue Breakdown(%) Brokerage 21% 18% 12% 11% 13% Margin financing 23% 22% 29% 23% 22% Corporate finance 15% 14% 17% 18% 17% Asset management 5% 3% 3% 4% 4% Leveraged and acquisition finance 16% 9% 8% 10% 10% FICC, Trading and market making 22% 34% 30% 34% 32% Growth Ratio YOY: Brokerage 21% 85% -37% 20% 39% Margin financing 83% 104% 23% 2% 14% Corporate finance 136% 112% 7% 37% 14% Asset management 34% 20% 19% 70% 11% Leveraged and acquisition finance 5% 24% -13% 53% 23% FICC, Trading and market making 222% 237% -19% 48% 10% Total Revenue 65% 114% -8% 30% 16% Operating profit 103% 146% -33% 74% 21% Net profit 92% 147% -33% 72% 21% EPS growth 27% 88% -49% 70% 23% Margins and Ratios: Adjusted Operating Margin* 58% 68% 54% 69% 70% Adjusted Net Margin** 49% 58% 45% 57% 58% Effective tax rate 16% 16% 16% 17% 17% Cost-to-income ratio 56% 47% 62% 53% 50% Staff cost-to-income ratio 20% 16% 15% 14% 15% Average daily turnover of HKEx (HK$ m) 69, ,630 66,280 87, ,000 Margin financing balance(hk$ m) 9,627 18,886 20,817 20,563 26,184 *Adjusted Operating Margin=Operating profit/(revenue-commission and interest expenses) **Adjusted Net Margin=Net profit/(revenue-commission and interest expenses) Source: Company Data, CGIS Research estimates 7

8 Key financials (Haitong International) Balance Sheet (HKD'000, except for per share amount) Year ended 31 December E 2018E Non-current assets 4,230,761 14,348,605 22,972,273 21,466,210 23,862,572 Financial assets designated at fair value through profit or loss - 5,705, Available-for-sale investments 471,083 6,253,682 17,846,297 16,000,000 17,700,000 Others 3,759,678 2,389,224 5,125,976 5,466,210 6,162,572 Current assets 43,929,212 77,570, ,532, ,878, ,097,425 Advances to customers in margin financing 9,619,965 18,879,155 20,817,335 20,485,535 26,105,948 Other loans and advances 1,819,200 3,550,880 8,083,096 10,150,000 10,950,000 Accounts receivable 4,495,624 3,820,611 5,113,753 7,673,070 8,917,808 Financial assets at fair value through profit or loss 9,962,803 18,257,597 25,252,697 26,600,000 30,100,000 Financial assets designated at fair value through profit or loss 2,485,154 6,154,656 16,742,585 18,930,000 22,930,000 Cash held on behalf of customers 11,668,936 18,265,360 20,186,813 24,080,364 37,473,975 Cash and cash equivalents 3,236,317 6,405,963 7,171,169 6,000,000 3,000,000 Others 641,213 2,236,173 5,165,527 6,959,795 7,619,695 Total assets 48,159,973 91,919, ,505, ,344, ,959,997 Non-current liabilities 6,994,275 14,939,548 14,790,690 13,774,531 13,804,531 Non-convertible bonds 4,580,804 9,937,201 9,973,074 9,960,000 9,990,000 Financial liabilities designated at fair value through profit or loss 620,000 4,225,698 18, Others 1,793, ,649 4,799,173 3,814,531 3,814,531 Current liabilities 32,569,196 56,150,666 94,265, ,663, ,415,348 Accounts payable 15,630,644 20,945,837 28,240,926 33,712,510 48,716,168 Financial liabilities at fair value through profit or loss 326, ,979 3,143,726 3,551,841 3,895,591 Financial liabilities designated at fair value through profit or loss 1,645,886 3,263,051 14,216,393 17,000,000 21,000,000 Loans and other borrowings 12,741,730 20,124,598 33,626,574 33,100,259 35,110,689 Repo 1,189,696 7,028,919 9,586,163 9,100,000 9,800,000 Others 1,035,168 3,830,282 (69,526,095) 7,199,191 10,892,901 Total liabilities 39,563,471 71,090, ,056, ,438, ,219,879 Capital and reserves 8,596,502 20,828,786 22,449,024 24,906,642 27,740,117 Share capital 218, , , , ,653 Reserves 8,039,480 20,088,197 21,488,448 23,723,967 26,475,140 Proposed final dividend 338, , , , ,324 Total equity 8,596,502 20,828,786 22,449,024 24,906,642 27,740,117 Finance Ratios: PER(x) PBR(x) Book value per share(hkd) ROAE 15.1% 17.1% 7.8% 12.2% 13.2% ROAA 2.6% 3.6% 1.5% 2.1% 2.2% Dupont Analysis: Brokerage 1.4% 1.5% 0.6% 0.6% 0.7% Margin financing 1.6% 1.8% 1.4% 1.2% 1.2% Corporate finance 1.0% 1.2% 0.8% 0.9% 0.9% Asset management 0.3% 0.2% 0.2% 0.2% 0.2% Leveraged and acquisition finance 1.1% 0.7% 0.4% 0.5% 0.5% FICC, trading and market making 1.5% 2.8% 1.4% 1.7% 1.7% Revenue 7.0% 8.3% 4.8% 5.1% 5.2% Operating Expenses -4.0% -4.0% -3.0% -2.7% -2.6% Operating Profit 3.1% 4.3% 1.8% 2.5% 2.7% Income tax expense -0.5% -0.7% -0.3% -0.4% -0.5% Net income 2.6% 3.6% 1.5% 2.1% 2.2% Leverage [Total assets/equity] Net leverage [(Total assets-accounts payable to clients)/total equity] ROAE 15.1% 17.1% 7.8% 12.2% 13.2% Source: Company Data, CGIS Research estimates 8

9 Key financials (GTJA International) Income Statement (HKD'000, except for per share amount) Year ended 31 December E 2018E Brokerage 501, , , , ,630 Loans and Financing 722,470 1,076,018 1,297,278 1,429,300 1,632,794 Corporate Finance 287, , , , ,533 Asset Management 46,387 53,092 28,487 35,000 42,000 Investment Holding & Market Making 98, , , , ,925 Revenue 1,656,582 2,276,608 2,519,187 3,250,138 3,930,883 Other income 4,459 1,899 2,608 2,500 2,500 Operating Expenses Staff costs 368, , , , ,000 Commission to accounts executives 68, ,530 55,117 80, ,462 Depreciation 23,643 28,664 34,695 40,000 40,000 Other operating expenses 170, , , , ,316 Finance costs 95, , , , ,313 Operating Profit 929,216 1,168,122 1,131,867 1,652,397 2,064,292 Income tax expense 127, , , , ,965 Non-controlling interests 2,124 1, Net income 799,791 1,013, ,139 1,387,213 1,743,527 EPS (HK cents): Basic Diluted DPS (HK cents): Dividend payout ratio 50% 50% 53% 50% 50% Dividend Yield 2.1% 2.4% 2.3% 3.1% 3.8% Revenue Breakdown(%) Brokerage 30% 32% 16% 19% 24% Loans and Financing 44% 47% 51% 44% 42% Corporate Finance 17% 12% 18% 22% 14% Asset Management 3% 2% 1% 1% 1% Investment Holding & Market Making 6% 6% 14% 14% 20% Growth Ratio YOY: Total Revenue 46% 37% 11% 29% 21% Brokerage 33% 44% -45% 58% 49% Loans and Financing 82% 49% 21% 10% 14% Corporate Finance 92% -2% 62% 54% -21% Asset Management 47% 14% -46% 23% 20% Investment Holding & Market Making -45% 49% 135% 34% 68% Operating profit 59% 38% 8% 41% 22% Net profit 49% 27% -4% 43% 26% EPS growth 33% 7% -5% 41% 25% Margins and Ratios: Adjusted Operating Margin* 62% 61% 55% 62% 64% Adjusted Net Margin** 54% 53% 47% 52% 54% Effective tax rate 14% 13% 14% 16% 16% Cost-to-income ratio 43% 47% 50% 48% 47% Staff cost-to-income ratio 22% 22% 21% 21% 20% Average daily turnover of HKEx (HK$ m) 69, ,630 66,280 87, ,000 Margin financing balance(hk$ m) 8,407 11,963 13,385 15,295 17,435 *Adjusted Operating Margin=Operating profit/(revenue-commission and interest expenses) **Adjusted Net Margin=Net profit/(revenue-commission and interest expenses) Source: Company Data, CGIS Research estimates 9

10 Key financials (GTJA International) Balance Sheet (HKD'000, except for per share amount) Year ended 31 December E 2018E Non-current assets 521, , , ,323 1,058,323 Property, plant and equipment 513, , , , ,000 Others 7, , , , ,323 Current assets 21,483,380 36,688,686 44,187,854 62,116,432 79,105,865 Loans and advances to customers 9,099,164 12,375,857 14,286,666 16,594,060 18,934,075 Accounts receivable 1,001,103 1,932,119 1,495,924 2,275,097 2,751,618 Financial assets at fair value through profit or loss 1,353,089 4,506,947 13,261,624 20,600,000 24,780,000 Cash held on behalf of customers 9,009,909 14,662,991 12,400,917 19,909,276 29,652,173 Cash and cash equivalents 889,286 2,408,666 1,964,398 2,000,000 2,200,000 Others 130, , , , ,000 Total assets 22,004,881 37,329,435 45,000,745 63,024,755 80,164,188 Non-current liabilities 1,023,208 3,112,269 2,133,262 10,436,341 9,785,142 Bank borrowings 990,000 3,090,000 2,100,000 10,383,464 9,721,149 Others 33,208 22,269 33,262 52,877 63,993 Current liabilities 13,916,459 26,581,909 32,333,649 41,573,530 58,450,423 Accounts payable 10,004,468 18,218,312 14,871,038 23,214,215 34,574,433 Bank borrowings 3,472,719 4,765,662 6,811,433 1,500,000 3,500,000 Debt securities in issue - 505,340 3,485,520 4,500,000 5,000,000 Others 439,272 3,092,595 7,165,658 12,359,315 15,375,990 Total liabilities 14,939,667 29,694,178 34,466,911 52,009,871 68,235,565 Capital and reserves Share capital and share premium 5,852,194 6,004,362 6,054,025 6,104,025 6,154,025 Retained profits 2,172,562 2,685,718 3,171,842 3,597,319 4,461,059 Proposed final dividend 292, , , , ,000 Other reserves (1,261,777) (1,340,811) (1,361,282) (1,341,460) (1,351,460) Total equity 7,055,413 7,623,564 8,175,198 8,679,884 9,593,624 Perperutal debt - - 2,346,685 2,325,000 2,325,000 Minority 9,801 11,693 11,951 10,000 10,000 Finance Ratios: PER(x) PBR(x) Book value per share(hkd) ROAE 14.5% 13.8% 12.3% 16.5% 19.1% ROAA 4.1% 3.4% 2.4% 2.6% 2.4% Dupont Analysis: Brokerage 2.6% 2.4% 1.0% 1.2% 1.3% Loans and Financing 3.7% 3.6% 3.2% 2.6% 2.3% Corporate Finance 1.5% 0.9% 1.1% 1.3% 0.8% Asset Management 0.2% 0.2% 0.1% 0.1% 0.1% Investment Holding & Market Making 0.5% 0.5% 0.8% 0.9% 1.1% Revenue 8.5% 7.7% 6.1% 6.0% 5.5% Operating Expenses 3.7% 3.7% 3.4% 3.0% 2.6% Operating Profit 4.8% 3.9% 2.7% 3.1% 2.9% Income tax expense 0.7% 0.5% 0.4% 0.5% 0.4% Net income 4.1% 3.4% 2.4% 2.6% 2.4% Leverage [Total assets/equity] Net leverage [(Total assets-accounts payable to clients)/total equity] ROAE 14.5% 13.8% 12.3% 16.5% 19.1% Source: Company Data, CGIS Research estimates 10

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Explanation on Equity Ratings BUY SELL HOLD : : share price will increase by >20% within 12 months in absolute terms share price will decrease by >20% within 12 months in absolute terms : no clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to outright SELL Copyright Reserved No part of this material may be reproduced or redistributed without the prior written consent of China Galaxy International Securities (Hong Kong) Co., Limited. China Galaxy International Securities (Hong Kong) Co. Limited, CE No.AXM459 20/F, Wing On Centre, 111 Connaught Road Central, Sheung Wan, Hong Kong. General line: