Morning Express. Focus of the Day

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1 Focus of the Day Insurance Sector Growth of personal insurance premium moderated slightly in Oct; watch the progress of new-year products Li WAN, CFA 10M17 primary insurance premium increased by 19.9% YoY to RMB3.24 trn, which exceeded the FY16 level. Property insurance premium continued to see stable growth for nearly four months while growth of personal insurance premium moderated slightly. The market share of large-sized life insurers expanded steadily since Mar Growth of health insurance premium accelerated but the amount of premium in Oct alone was the lowest within the year. Personal insurance premium retreated in Oct after Document No.134 came into effect on 1 Oct. Yet, 4Q premium income is normally the lowest in a year. We expect the life insurers to spend more resources on next year s new-year products. It is almost certain that the insurers can achieve their 2017 premium growth targets. We maintain Market Perform on the sector and Neutral/Buy on China Life/NCI, respectively. The significant share price correction of NCI (H shares) of late provides entry opportunity, in our view. We reiterate TP of HK$61.0 on NCI. Environmental Sector Monthly Insights: Coal-to-gas conversion saw good progress in Northern China Wallace CHENG wallace.cheng@bocomgroup.com UP UP MP MP OP OP Indices Close 1d % Ytd % HSI 29, H Shares 11, SH A 3, SH B SZ A 1, SZ B 1, DJIA 24, S&P 500 2, Nasdaq 6, FTSE 7, CAC 5, DAX 13, Indicators Close 3m % Ytd % Brent Gold 1, Silver Copper 6, JPY GBP EURO bps change 3 m 6 m HIBOR US 10 yield HSI Technical HSI 29, d MA 28, d MA 26, d RSI 51 Short Sell (HK$ m) 16,617 Local governments in the Beijing-Tianjin-Hebei (BTH) region jointly announced the Action Plan for Energy Collaborative Development in Beijing-Tianjin-Hebei Region ( ) last week. So far, progress in the 2+26 cities is ahead of schedule as more than 3m households have completed coal-to-electricity and coal-to-gas conversions. Meanwhile, Ministry of Environmental Protection and Ministry of Finance estimated the investment in air, water and soil pollution prevention and control to reach RMB49.7bn in Despite the rally of key local stock indices, the HK environmental sector retreated 2.8% MoM on a simple average basis in Nov, compared with 2.0% gain in HSI. Investors should

2 stay selective on the sector. We prefer companies with better policy outlook, good project execution and relatively low gearing. We still like CEG and Canvest in the short term. Property Sector HK/China property weekly Alfred LAU, CFA Hong Kong Property Hong Kong Property Sector China Property Sector UP MP OP UP MP OP Link REIT (823 HK) sold assets at a good price (52% premium), which suggested investors positive outlook on HK retail sales and renewed interest in the HK commercial property market, in our view. We believe Champion REIT (2778 HK) will also benefit because of its potential disposal of the Langham Place Office. Therefore, we continue to prefer Link REIT (823 HK) and Champion REIT (2778 HK). China Property We expect market momentum to extend into December. Market momentum remained strong in November, and ASP remained flat in recent new launches, suggesting developers prefer volume growth to margin. Looking ahead, market momentum will remain strong in December, in our view, which helps to restore investors confidence in earnings growth. We continue to prefer Agile (3383 HK) and Shimao (813 HK), with their quality landbank and high margin fueling growth. Hang Seng Index (1 year) 32,000 30,000 28,000 26,000 24,000 22,000 20,000 HS China Enterprise Index (1 year) 13,000 12,000 11,000 10,000 9,000 8,000 Shanghai A-shares (1 year) 3,800 3,600 3,400 3,200 3,000 Shenzhen A-shares (1 year) 2,300 2,100 1,900 1,700 2

3 Market Review Hong Kong stocks tumbled on Thursday. The Hang Seng Index fell 446 points, or 1.5%, to finish at 29,127. Smartphone component makers fell. AAC Tech (2018 HK) slumped 6.2% as the worst blue-chip performer. Sunny Optical (2382 HK) fell 6.1%. Cowell (1415 HK) dropped 4.1%. Casino operators declined. Wynn Macau (1128 HK) was down 4.7%. Melco (200 HK) fell 3.6%. Galaxy Entertainment (27 HK) fell 3.1%. Sands China (1928 HK) dropped 1.2%. Insurers fell. CPIC (2601) slumped 4.5%. NCI (1336) lost 4.1%. Ping An (2318 HK) fell 3.8%. China Life (2628 HK) dropped 2.7%. Hong Kong banking names extended gains. BEA (23 HK) rose 3% as the best blue-chip performer. BOCHK (2388 HK) rose 1.5%. Hang Seng (11 HK) climbed 1.6%. US stocks rallied. The DJIA jumped points, or 1.4%, to 24,272.35, closing above 24,000 for the first time. The S&P 500 rose points, or 0.8%, to 2, The Nasdaq Composite Index gained points, or 0.7%, to 6, European stocks fell. Stoxx Europe 600 dropped 0.33% to News Reaction NBS: Nov manufacturing sector continued to see a steady and upward momentum. Nov manufacturing PMI was 51.8, up 0.2 ppt and was 0.2 ppt above the annual average value, according to Zhao Qinghe, senior statistician at the Service Survey Centre of National Bureau of Statistics (NBS) as he interpreted Nov PMI. He expects the manufacturing sector to maintain a steady and upward momentum. NDRC: China s Oct cement output declined by 3.1% YoY. According to NDRC, China s cement output reached 220mt in Oct, down 3.1% YoY and up 3% compared with the same period last year. The output of commodity concrete increased by 6.7% from the same period last year, and the growth rate escalated by 0.1 ppt YoY. Plate glass output fell 0.3%, vs 8.8% growth for the same period last year. For 10M17, China s cement output reached bt, down 0.5% YoY, vs 2.6% growth for the same period last year. It was reported that AIIB eyed Europe to debut global bonds in As reported, Asian Infrastructure Investment Bank (AIIB) plans to issue its first international bond in Europe, which will be denominated in US dollar. According to AIIB Vice President Thierry de Longuemar as cited by the report, for regulatory reasons, the bond issue cannot be implemented until FY17 financial statements are audited and board approval is granted. Hence, the issue will not take place in early 2018, and will be subject to market conditions. 3

4 Economic releases for this week - USA Date Time Event Survey Prior 27-Nov New Home sales (k) Nov MBA mortgage applications (%) Nov Initial jobless claims (k) Dec ISM manufacturing Economic releases for this week - China Date Time Event Survey Prior 30-Nov Manufacturing PMI BOCOM Research Latest Reports Data Report Analyst 30 Nov Sands China (1928 HK) - VIP growth offers bonus upside Alfred Lau, CFA, FRM 30 Nov Internet Sector - Tecent GES 2017: Internet drives fragmentation learning and personalized education; upbeat about capability of New Oriental and TAL Education Group in capturing the industry trend 30 Nov MGM China (2282 HK) - Better late than never Alfred Lau, CFA, FRM 30 Nov Renewable Energy Sector - National carbon trading market will be launched within the year; Oct PV power generation accelerated Internet Innovation Center: Gu Xinyu (Connie), CPA, Louis Sun 30 Nov Melco Int l (200 HK) - Narrowing competitive edge Alfred Lau, CFA, FRM 30 Nov Wynn Macau (1128 HK) - Facing real competition Alfred Lau, CFA, FRM 29 Nov Momo (MOMO US) - 3Q17 results beat; live video ARPPU growth solid, valuation attractive Internet Innovation Center: Gu Xinyu (Connie), CPA, 29 Nov Link REIT (823 HK) - Disposal at a good price Philip Tse, CFA, FRM, Alfred Lau, CFA, FRM 29 Nov Healthcare Sector - Industry movement as of 28 Nov 2017 Grace Zhao, Li Zhao 29 Nov Sina SINA US) - Weibo Stories and Search increase room for monetization of traffic flows Internet Innovation Center: Gu Xinyu (Connie), CPA, 28 Nov YY Inc (YY US) - The number of paid user as key engine of growth; watch conversion of new users Internet Innovation Center: Gu Xinyu (Connie), CPA, 28 Nov Transportation and Infrastructure Sector - Weekly news wrap as of 24 November 2017 Geoffrey Cheng, CFA, Fay Zhou, Luya You 28 Nov H&H Int'l (1112 HK) - Raise TP on import tariff cut and higher valuation on Swisse Summer Wang, CFA 28 Nov China Gas Holdings (384 HK) - 1HFY18 beat on strong operations; higher FY18 gas sales and connection guidance 28 Nov Internet Sector - Playerunknown's Battleground opened up a new category by coming in as a massive hit, driving traffic growth of game live show Wallace Cheng, Spencer Luo 27 Nov Cement sector - Price soared 2.4% WoW Angus Chan, Steve Liu Internet Innovation Center: Gu Xinyu (Connie), CPA, 27 Nov Internet Sector - 20 Nov to 24 Nov Internet Innovation Center: Gu Xinyu (Connie), CPA, 27 Nov Great Wall Motor (2333 HK) - Risk-reward becoming attractive; upgrade to Buy Angus Chan 27 Nov Transportation Sector - Takeaways from Asia Logistics and Maritime Conference 2017 Geoffrey Cheng, CFA, Fay Zhou 24 Nov Want Want (151 HK) - Bottomed out but insufficient visibility in recovery pace; upgrade to Neutral Summer Wang, CFA Source: Company data, BOCOM Int l 4

5 Hang Seng Index Constituents Company Stock Current Mkt 5 d Ytd 52-week PE Yield P/B name code price cap chg chg Hi Lo 2016A 2017E 2018E 2017E 2017E (HK$) (HK$ m) (%) (%) (HK$) (HK$) (X) (X) (X) (%) (X) CKH HOLDINGS 1 HK , HANG LUNG PPT 101 HK , CKI HOLDINGS 1038 HK , HENGAN INTL 1044 HK , CHINA SHENHUA-H 1088 HK , HANG SENG BANK 11 HK , CHINA RES LAND 1109 HK , CK ASSET HOLDING 1113 HK , HENDERSON LAND D 12 HK , AIA 1299 HK , KUNLUN ENERGY 135 HK , ICBC-H 1398 HK ,411, CHINA MERCHANTS 144 HK , WANT WANT CHINA 151 HK , N/A N/A N/A SHK PPT 16 HK , NEW WORLD DEV 17 HK , GEELY AUTOMOBILE 175 HK , SWIRE PACIFIC-A 19 HK , SANDS CHINA LTD 1928 HK , WHARF REAL ESTAT 1997 HK , N/A N/A CLP HOLDINGS 2 HK , AAC TECHNOLOGIES 2018 HK , BANK EAST ASIA 23 HK , PING AN 2318 HK ,467, MENGNIU DAIRY 2319 HK , N/A BOC HONG KONG HO 2388 HK , CHINA LIFE-H 2628 HK , CITIC 267 HK , GALAXY ENTERTAIN 27 HK , WH GROUP LTD 288 HK , CATHAY PAC AIR 293 HK , N/A N/A HONG KG CHINA GS 3 HK , BANKCOMM-H 3328 HK , SINOPEC CORP-H 386 HK , HKEX 388 HK , BANK OF CHINA-H 3988 HK ,295, WHARF HLDG 4 HK , HSBC HOLDINGS PL 5 HK ,559, POWER ASSETS 6 HK , MTR CORP 66 HK , CHINA OVERSEAS 688 HK , TENCENT 700 HK ,780, CHINA UNICOM 762 HK , LINK REIT 823 HK , SINO LAND 83 HK , CHINA RES POWER 836 HK , PETROCHINA-H 857 HK ,673, CNOOC 883 HK , CCB-H 939 HK ,718, CHINA MOBILE 941 HK ,622, LENOVO GROUP 992 HK , HANG SENG INDEX 29,177 18,802, ,200 21,

6 China Ent Index Constituents Company Stock Current Mkt 5 d Ytd 52-week PE Yield P/B name code price cap chg chg Hi Lo 2016A 2017E 2018E 2017E 2017E (HK$) (HK$ m) (%) (%) (HK$) (HK$) (X) (X) (X) (%) (X) CHINA SHENHUA-H 1088 HK , SINOPHARM-H 1099 HK , CHINA RAIL CN-H 1186 HK , BYD CO LTD-H 1211 HK , ABC-H 1288 HK ,410, NEW CHINA LIFE-H 1336 HK , PICC GROUP-H 1339 HK , CHINA CINDA-H 1359 HK , ICBC-H 1398 HK ,411, POSTAL SAVINGS-H 1658 HK , CRRC CORP LTD -H 1766 HK , GF SECURITIES-H 1776 HK , CHINA COM CONS-H 1800 HK , CGN POWER-H 1816 HK , MINSHENG BANK-H 1988 HK , CHINA VANKE-H 2202 HK , PING AN 2318 HK ,467, PICC P&C-H 2328 HK , GREAT WALL MOT-H 2333 HK , CHINA PACIFIC-H 2601 HK , CHINA LIFE-H 2628 HK , BANKCOMM-H 3328 HK , SINOPEC CORP-H 386 HK , ZHUZHOU CRRC T-H 3898 HK , CHINA RAIL GR-H 390 HK , CM BANK-H 3968 HK , BANK OF CHINA-H 3988 HK ,295, DONGFENG MOTOR-H 489 HK , CITIC SEC-H 6030 HK , HAITONG SECURI-H 6837 HK , CGS-H 6881 HK , HUATAI SECURIT-H 6886 HK , CHINA TELECOM-H 728 HK , AIR CHINA LTD-H 753 HK , PETROCHINA-H 857 HK ,673, HUANENG POWER-H 902 HK , CONCH CEMENT-H 914 HK , CHINA LONGYUAN-H 916 HK , CCB-H 939 HK ,718, CITIC BANK-H 998 HK , HANG SENG CHINA ENT INDX 11,476 5,221, ,101 9,

7 BOCOM International 10/F., Man Yee Building, 68 Des Voeux Road Central, Hong Kong Main: Fax: Rating System Analyst Stock Ratings: Buy: The stock's total return is expected to exceed that of the corresponding industry over the next 12 months. Neutral: The stock's total return is expected to be in line with that of the corresponding industry over the next 12 months. Sell: The stock's total return is expected to be below that of the corresponding industry over the next 12 months. Not-Rated: The analyst does not have conviction regarding the outlook of the stock's total return relative to that of the corresponding industry over the next 12 months. Trading Buy: The stock's absolute return is expected to be very attractive in the near term. This rating can be different from the rating with a view over the next 12 months. Analyst Industry Views: Outperform: The analyst expects the industry coverage universe to be attractive relative to the relevant broad market benchmark over the next 12 months. Market perform: The analyst expects the industry coverage universe to be in line with the relevant broad market benchmark over the next 12 months. Underperform: The analyst expects the industry coverage universe to be unattractive relative to the relevant broad market benchmark over the next 12 months. Broad market benchmark for Hong Kong is the Hang Seng Composite Index, for China A-shares is the MSCI China A Index, for US-listed Chinese companies is S&P US Listed China 50 (USD) Index. Trading Sell: The stock's absolute return is expected to be very unattractive in the near term. This rating can be different from the rating with a view over the next 12 months. Research Team Head of Deputy Head of Hao HONG, CFA (852) hao.hong Geoffrey CHENG, CFA (852) geoffrey.cheng Macro-Strategy Internet Hao HONG, CFA (852) hao.hong Yuan MA, PhD (86) yuan.ma Karen TAN (852) karen.tan Connie GU, CPA (86) connie.gu Grace HUA, CFA (852) Grace.hua Mengqi SUN (86) mengqi.sun Zhe ZHOU (86) zhe.zhou Shan Ying (86) ying.shan Banks/ Non-Bank Financials Property Li WAN, CFA, FRM (86) wanli Alfred LAU, CFA, FRM (852) alfred.lau Hannah HAN (852) hannah.han Philip TSE, CFA, FRM (852) philip.tse Jennifer ZHANG (852) yufan.zhang Carmen WONG (852) carmen.wong Consumer Renewable Energy Summer WANG, CFA (852) summer.wang Louis SUN (86) louis.sun Environmental Services Technology Wallace CHENG (852) wallace.cheng Chris YIM (852) christopher.yim Gaming & Leisure Transportation & Industrials Alfred LAU, CFA, FRM (852) alfred.lau Geoffrey CHENG, CFA (852) geoffrey.cheng Fay ZHOU (852) fay.zhou Healthcare Automobile & Defense Lilian WAN (852) lilian.wan Angus CHAN (86) angus.chan Grace ZHAO (86) grace.zhao 7

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