With limited upside ahead, we suggest investors to start taking profit above 21,500. Hang Seng Index Performance. Index Performance.

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1 26 th July, 2016 Hang Seng Index Performance Index Performance Abs chg % Change Hong Kong Close 1-Day 1-Day 1-Mth 3-Mth Hang Seng Index 21, HSCI 2, HSCCI (Red Chips) 3, HSCEI (H-Shares) 9, Mkt T/O ($ Mn) 49, , Source: Bloomberg Market Outlook Eric Yuen - ericyuen@masonsec.com Hang Seng Index closed up 0.1% at 21,993. Market turnover shrank to $49.4 billion, the lowest in two weeks. Heavily weighted HSBC (5) lost 0.2%. Tencent (700) and China Mobile (941) added 1.5% and 0.5% respectively. Gaming operators Sands China (1928) and Galaxy Entertainment (27) jumped 1.9%- 2.0%. Local banking and property counters were mixed. BOC Hong Kong (2388) and New World Development (17) surged 1.1%-2.2%. Hang Seng Bank (11) and Swire Pacific (19) tumbled 0.3%-0.9%. Four largest Chinese property developers cut an average 0.7%. Lenovo (992), the worst performing index stock, plunged 2.8%. HSCEI was almost unchanged at 9,034. Dongfeng Motor (489), Anhui Conch (914) and Sinopharm (1099) soared 3.1%-4.1%, the most in HSCEI. Financial stocks had on clear direction. China Merchants Bank (3968), Haitong Securities (6837) and New China Life (1336) grew 0.9%-1.9%. CCB (939) and China Life (2628) slumped 1.7% and 0.7% respectively. Power stocks ended lower. Huaneng Power (902) and China Longyuan (916) retreated 1.1%-2.0%. Hang Seng Index may go up further in near-term, fueled by speculation of more loosening monetary policies from major central banks. However, with limited upside ahead, we suggest investors to start taking profit above 21,500. Oversea DJIA 18, NASDAQ 5, Shanghai SE Composite 3, Crude Oil Futures (US$) Gold Futures (US$) 1, Baltic Dry Index USD / Euro Yen / USD HSCEI HSI 20-Day MA 8, , Day MA 8, , Day RSI With limited upside ahead, we suggest investors to start taking profit above 21,500 Remarks: Mason Securities Ltd ( Mason Securities ) is licensed by the Securities and Futures Commission to carry on Types 1, 4, and 6 regulated activities in Hong Kong. Mason Futures Ltd is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong. Bullion trading service is provided by Mason Bullion Ltd. Securities Futures Bullion

2 Industry / Corporate News Eric Yuen - ericyuen@masonsec.com Lai Sun Development (488) on distressed valuation Hong Kong s property market witnessed a slight rebound in June/July Investors may shift attention to small caps as large property stocks have been technically Risk Level: High overbought Time Horizon: Medium Valuation of Lai Sun Development is unreasonably cheap at over 80% discount to NAV We recommended an overweight position on Hong Kong property stocks dated 6 July 2016 as we believe the U.S. Federal Reserve is unlikely to raise interest rate in the third quarter after Britain s decision to leave the European Union. Market sentiment actually improved thereafter as Hong Kong s residential price advanced 0.4% in June and 1.3% in July according to statistics from Centaline Property Agency. Nine local blue-chip property stocks in Hang Seng Index climbed an average 15.9%, 11.1% and 33.8% over the past 1-month, 3-month and 6-month periods respectively and substantially outperformed the Hang Seng Index. Leading stocks such as SHK Properties (16), Wharf (4) and New World Development (17) have been technically overbought with 9-day RSI over 80. We believe the announcement of interest rate decision by U.S. Federal Reserve on Thursday and private primary housing supply by HK government on Friday may trigger profit-taking on large-cap property stocks in near term. We do maintain our overweight position on Hong Kong property stocks but believe small caps will offer a greater upside potential due to more attractive valuation. Lai Sun Development (488, $0.142) is one of our favorite small property stocks given its unreasonably cheap valuation, heavy exposure to office/commercial market and solid financial position. Its share price jumped 21.4%, 21.4% and 54.3% over the past 1-month, 3-month and 6-month periods respectively and significantly outperformed its peers and Hang Seng Index. The company s rental portfolio is estimated to be worth over $21bn, mainly office and commercial properties in Hong Kong. Core property assets include Cheung Sha Wan Plaza, Causeway Bay Plaza II, 50% stake in CCB Tower and 10% stake in AIA Central. The company completed a 1-for-2 rights issue at $0.092 per share in January 2016 to raise approximately $900mn. Current net debt-to-equity ratio is estimated at below 20% which is healthy in our view. We forecast the company s book value at $24.6bn (or $0.81 per share) and net asset value at $22.3bn (or $0.74 per share) implying the counter is trading at P/B of 0.18x and 81% discount to NAV. Nine local blue-chip property stocks are currently trading at an average P/B of 0.68x. We recommend a on Lai Sun Development with a 6-month price target of $0.185 based on a 75% discount to NAV. Recent Recommendations Stock Pick Rating Recommendation Highlights TP China State Construction China State Construction Int l (3311) witnessed a technical breakout Maintain Int l (3311) $13.0 AAC Technologies (2018) Reiterate on AAC Technologies (2018) as its growth story remains intact $75.2 Geely Automobile (175) SELL Expensive valuation by historical standard Maintain SELL on Geely (175) $3.90 Shenzhou Int l (2313) Market concern on slowing sportswear and apparel demand seems overdone. Reiterate on Shenzhou Int l (2313) $45.7 Xinyi Glass (868) Maintain on Xinyi Glass (868) as supply-demand dynamics of glass industry continues to improve $6.64 China Lesso (2128) Reiterate on China Lesso (2128) to ride on the acceleration of urban underground pipeline construction $6.32 SMIC (981) SMIC (981) is likely to announce strong 2Q16 earnings. Maintain $0.80 Tongda Group (698) Reiterate on Tongda Group (698) as company gains metal casing market share among low- and mid-end smartphones $1.92 Hui Xian REIT (87001) Hui Xian REIT (87001) is a laggard among REITs Maintain RMB3.60 Nine Dragons Paper (2689) Reiterate on Nine Dragons Paper (2689) as paper price hikes trend should be sustainable in 2H16 $7.4

3 Technical Ideas SmarTone Telecom (315, $14.28) TP: $15.9 Risk: Low Time Horizon: Short SmarTone provides mobile telecommunication and related services and sells mobile telephones and accessories. Counter rose 3.3% yesterday, testing the critical resistance of $ MACD showed positive crossing, indicating a bullish trend ahead.. Short-term target at $15.9. Cut loss at $12.9. Consensus FY6/16 PER: 18.1x Consensus target price: $13.83 Source: Bloomberg, Mason Securities Shenzhen Expressway (548, $7.13) TP: $7.9 Risk: Low Time Horizon: Short Shenzhen Expressway constructs, manages and operates toll highways and expressways in China. Counter consolidated along sma50 since end- June but trend remained intact. Yesterday, it rose 2.6% with expanding turnover, surpassing the upper-end of consolidating range. 9-day RSI rebounded to above 50, indicating a pick-up of momentum.. Short-term target at $7.9. Cut loss at $6.6. Consensus 2016 PER: 12.15x Consensus target price: $7.63 Source: Bloomberg, Mason Securities

4 RSI Indicator Overbought (9-day RSI> 80) Tickers 2, 4, 15, 16, 17, 20, 52, 62, 66, 127, 129, 215, 256, 258, 283, 440, 486, 536, 556, 557, 611, 630, 683, 881, 921, 989, 1103, 1125, 1175, 1236, 1243, 1310, 1317, 1386, 1438, 1566, 1573, 1812, 1899, 1988, 2009, 2317, 2388, 2638, 2669, 2869, 2880, 3331, 6869 Oversold (9-day RSI<20) Tickers 9, 582, 756, 856, 1132, 1192, 1321, 1421, 1583, 2268, 2348, 3322, 3369, 3823 Exceptional Turnover & Price Movements Stock Stock Last Price ($) Price Change (%) Turnover / 3-mth daily avg turnover Target price up / downside (%)* Rating*^ Value Convergence N/A N/A N/A City E-Solutions N/A N/A N/A Goldin Properties N/A N/A N/A Amco United N/A N/A N/A Hisense Kelon Electic Dongfeng Motor Anhui Conch China Overseas Property N/A N/A N/A China Aircraft Leasing Group China Lesso Aluminum Corp Of China N/A Source: Bloomberg, Mason Securities; *Based on consensus estimates ^ The Rating indicates analysts opinions on the security. It is calculated by converting analysts recommendations into a number from 1-5 and taking the average. 5 is the best while 1 is the worst PER*

5 A-H Share Premium / Discount (%) Average AH Shanghai Listed -38.2% Premium/Discount (%) Shenzhen Listed -40.8% Remark: Shenzhen-listed stocks are not included in the upcoming cross-border stock trading pilot program H Share A Share A-H Shares Shanghai Listed Company Name A Close (RMB) H Close (HKD) AH Price Gap (%) H Share A Share A-H Shares Shanghai Listed Company Name A Close (RMB) H Close (HKD) AH Price Gap (%) Luoyang Glass China Life Insurance Chongqing Iron Shenzhen Express Dalian Port China Citic Bank Beijing Jingcheng China Railway Shenji Machinery Group China Group Minsheng Kunming SSC China Bank Everbright Nanjing Panda Guangshen Bank Railway Yanzhou Electronics Coal Shanghai Fosun GAC Mining Group Tsingtao Pharm Brewery Anhui Expressway ABC China Shipping BoComm Guangzhou Container Bank of China Shanghai Shipyard Electric Shanghai Pharm First Tractor China Shenhua China Moly China Energy Merchants Tianjin Capital Bank CPIC Datang Environment Intl Power ICBC China Oilfield Citic Securities China Services Cosco CRCC Sichuan CCB Zhengzhou Expressway Coal Ping An Insurance Beijing Mining North Star Sinopec Group Dongfang Electric Fuyao Glass Jiangxi Copper Jiangsu Express China Southern Anhui Conch MCC Air Cement China Eastern A-H Shares Shenzhen Listed Sinopec Airlines Shanghai Zhejiang Shibao Huaneng Petrochem Power Shandong Molong Chalco Intl Northeast Petroleum Electric Magang Shandong Develop Xinhua Huadian Power Hisense Pharm Kelon New China Intl Life Zoomlion Heavy China Insurance Shipping Dongjiang Industry Env Development BBMG China International Petrochina Xinjiang Marine Goldwind China Coal Energy ZTE Sci&Tec Corp Guangzhou Pharm Shandong Chenming Air China Livzon Paper Pharm Great Wall Motor BYD CRRC Corp Angang Steel CCCC China Vanke Zijin Mining GF Securities Co Ltd Haitong Securities Weichai Power Huatai Securities Co Ltd

6 HSI & HSCEI Constituents Performance Price Change (%) Index 5 D 1 M 3 M vs 3M High Hang Seng Index Hang Seng China Ent Index Outperform Underperform Mixed Property (HK), Utility (HK) Airlines, Coal, Securities (PRC) Automobile, Banking (HK), Cement Price Change (%) Price Change (%) Stock vs 3M Stock vs 3M Company Name 5 D 1 M 3 M Company Name 5 D 1 M 3 M High High 489 Dongfeng Group Belle Int'l China Telecom Galaxy GreatWall Motor Entertainment BOCOM Wharf Hang Seng Bank Anhui Conch ABC BOC Hong Kong Bank of China New World Dev CITIC Bank Li & Fung China Oilfield CK Property China Unicom China Vanke Swire Pacific 'A' China Mobile Hang Lung Prop CLP Hldgs China Railway Henderson Land Dalian Wanda Longyuan Power CM Bank China Res Land China Life Power Assets Haitong Securities Sands China China Cinda Link REIT Bank of E Asia Minsheng Bank PICC Group MTR Corporation Ping An Tencent New China Life SHK Prop Tsingtao Brew China Resources Tingyi Kunlun Power Gas PICC P&C CGN Power China Comm Cons Sino Land CCB CRRC Air China CK Hutchison Cathay Pac Air HK Hldgs & China Ltd Gas CITIC Securities Sinopharm HTSC HSBC Hldgs Sinopec Corp CKI Holdings BYD Company China Overseas PetroChina HKEx Want Want AIA China Pacific China Mer Hldgs Hengan Insurance Int'l CITIC Ltd GF Securities Lenovo China Mengniu ICBC CNBM Dairy CNOOC China Shenhua Huaneng Power

7 Upcoming Events Date Stock Company Name Event July China Polymetallic Mining Interim July China Green Holdings Final July HK Electric Investments Interim July Hui Xian REIT Final July Lisi Group Dividend July Vongroup Ltd Final July CITIC Dameng Interim July AIA Group Interim July China Automation Group Interim July Hang Lung Group Interim July Hang Lung Properties Interim July QPL International Final July Tic Tac International Final Disclosures Investment Rating System Ratings Description Mason Securities Limited s investment Buy Expected positive return of > 10 % rating system is divided into investment Investment Ratings Hold Expected return range of ~ ±10 % ratings, risk rating and investment time Sell Expected negative return > 10% horizon. The rating scale is subject to change upon periodic review of market by High (H) 90-day volatility of > 50% research department. Assigned ratings are Risk Ratings Medium (M) 90-day volatility of > 30-50% based on company and sector historical Low (L) 90-day volatility of < 30% performance and analysts intrinsic Long (L) 6 12 Months valuation of the stock Investment Time Medium (M) 3 6 Months Horizon Short (S) Less than 1 Month Note: 90-day volatility is measured from the security s standard deviation of day to day logarithmic historical price changes. The 90-day price volatility equals the annualized standard deviation of the relative price change for the 90 most recent trading days closing price, expressed as a percentage Mason Securities Limited 12/F, The Center 99 Queen s Road Central Hong Kong Tel: (852) Fax: (852) This report is for information only and is not to be construed as investment advice or as an offer to buy or sell securities or financial instruments. Your investment decision should be based upon your personal investment objectives and should be made only after evaluating the stock s expected performance and risk. While the report is compiled using sources believed to be reliable, no assurance or guarantee is given regarding its accuracy or completeness. Neither Mason Securities Limited nor any of its affiliates, nor any employees or other persons connected with any of them, accepts any responsibility or liability arising from any use of this report. To the extent permitted under applicable law, the above-mentioned companies or individuals may have used the research materials before publication. Mason Securities Limited (or any of its affiliates) and their respective officers, directors, analysts, or employees may or may not have a position in or with respect to the securities or financial instruments covered herein, and may, as principal or agent, buy and sell such securities or financial instruments. However, it is hereby declared that the writer, at the time of writing, does not have any interest in any of the securities or financial instruments covered in this report. An employee, analyst, officer, or a director of Mason Securities Limited( or any of its affiliates), may serve as a director for companies covered in this report. Mason Securities Limited (or any of its affiliates) may from time to time perform investment banking or other services or solicit investment banking or other business for any companies covered in this report. Mason Securities Limited is licensed by the Securities and Futures Commission to carry on Types 1, 4, and 6 regulated activities in Hong Kong. Mason Futures Limited is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong. Bullion trading service is provided by Mason Bullion Limited.