We expect Hang Seng Index to make a technical rebound in near term. Market Overview. Hang Seng Index Performance

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1 15 October 2018 Hang Seng Index Performance Source: Bloomberg Major Market Indicators % Change Hong Kong Close 1-Day 1-Mth 6-Mth 12-Mth Hang Seng Index 25, % -4.1% -18.0% -11.2% HSCEI (H-Shares) 10, % -1.4% -17.9% -12.2% Mkt T/O ($ Mn) 139, % 65.3% 5.1% 24.5% Oversea DJIA 25, % -3.6% 2.3% 9.7% NASDAQ 7, % -7.9% 2.6% 11.2% Shanghai SE Composite 2, % -2.7% -18.8% -23.7% Shenzhen Component 7, % -7.2% -29.9% -33.5% Commodities and FX Crude Oil Futures (US$) % 1.0% 5.9% 40.4% Gold Futures (US$) 1, % 1.6% -8.8% -5.6% Baltic Dry Index 1, % 5.8% 50.4% 2.4% USD / Euro % -0.3% -6.0% -2.0% Yen / USD % -0.8% -4.4% 0.1% CNH / USD % -0.8% -8.9% -4.6% Market Overview Hang Seng Index closed up 2.1% at 25,801. HSCEI added 2.0%. Heavily weighted Tencent (700) and AIA Group (1299) surged 8.0% and 4.0% respectively. HSBC (5) was unchanged. Gaming, technology, coal, cement, insurance and PRC property stocks outperformed the market. Sunny Optical (2382) and AAC Technologies (2018) soared 10.7% and 2.9% respectively. Ten largest Chinese property developers climbed an average 4.7% among which China Vanke (2202), China Evergrande (3333) and Country Garden (2007) increased 6.0%-6.7%. Galaxy Entertainment (27) and Sands China (1928) advanced 6.7% and 3.6% respectively. Seven insurance stocks in HSCEI grew an average 3.5% among which PICC P&C (2328) and New China Life (1336) jumped 4.7%- 5.1%. China Shenhua (1088) and Conch Cement (914) rose 3.7% and 5.3% respectively. Securities, railway and PRC banking stocks ended higher but underperformed the market. Nine banking stocks and five securities stocks in HSCEI grew an average 1.2% and 1.4% respectively. ICBC (1398), CCB (939), China Merchants Bank (3968) and Galaxy Securities (6881) soared 2.0%- 2.3%. Consumption, telecom, automobile, oil, power, pharmaceutical and HK property stocks lacked clear direction. Want Want China (151) and Shenzhou (2313) added 3.2%-3.3% while Hengan (1044) slid 0.8%. Geely Automobile (175), BYD Company (1211) and Great Wall Motor (2333) surged 9.1%, 5.4% and 3.9% respectively. Guangzhou Automobile (2238) retreated 0.4%. CNOOC (883) increased 1.5% while PetroChina (857) decreased 0.5%. Sino Biopharm (1177) and CSPC Pharm (1093) climbed 3.4%-5.2% while Sinopharm (1099) cut 0.8%. We expect Hang Seng Index to maintain a technical rebound in near term. We expect Hang Seng Index to make a technical rebound in near term

2 Market in Focus Kunlun Energy MKT Cap ($Bn) 69.8 Bloomberg Ticker 135 HK Equity 52-week High/Low ($) Rating Free Float (%) 38.2% Target Price $ M Avg Turnover ($, Mn) Benefit from sustainable LNG consumption growth in China, recommend Kunlun Energy s (135) We remain our long-term positive views on China gas market and expect the gas consumption in China will nearly triple by Among the gas supply sources, we expect domestic production will reach nearly 6% CAGR and LNG imports will reach approximately 13% CAGR from 2018 to Currently, the aggregate LNG terminal capacity in China is approximately 67mtpa and is expected to reach 80mtpa in We believe Kunlun Energy s (135, $8.65) LNG terminals and LNG processing business will benefit from the sustainable LNG import growth given its leading position in LNG industry. According to the company, Kunlun s LNG terminal loading and unloading capacity of the Group accounted for more than one-third of the domestic capacity and its LNG processing capacity accounted for more than one-quarter of the domestic capacity, forming a complete LNG industrial chain from loading and unloading, gasification and trucking, processing and storage, vehicle and ship refilling. In the first half of 2018, Kunlun recorded sales volume of LNG Processing and Terminal of 10,057 million cubic metres, representing an increase of 3,829 million cubic metres or 61.48% as compared with 6,228 million cubic metres for the same period of last year. Revenue reached RMB3,228 million (6.5% of total revenue vs 4.8% last year), representing an increase of 64.9% yoy. Profit before income tax was RMB1,726 million(23.9% of PBT vs 9.6% last year), representing an increase of % yoy. The processing volume of LNG processing plant was 618 million cubic metres, representing an increase of 112 million cubic metres or 22.13% as compared with 506 million cubic metres for the same period of last year. According to Bloomberg estimates, the company s revenue will reach RMB102.98bn in 2018 and RMB116.47bn in 2019, up 16.1 and 13.1 yoy respectively. Net profit will amount to RMB13.88bn in 2018 and RMB15.33bn in 2019, up 24.0% and 13.1% yoy translating into forward P/E of 11.0x and 9.8x respectively. We believe current valuation of Kunlun Energy is still attractive to long term investors and recommend a recommendation with a 12-monthk price target of $10.7 based on 12x 2019 earnings. Fig1: 1 Year Share Price Source: Bloomberg, Mason Securities

3 Technical Ideas Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss Zhaojin Mining 1818 HK Equity $6.70 $7.37 $6.93 $6.37 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 712% 27.8X 1.31X 66% Technical Indicator SMA RSI (14) 61.7 SMA BB (Upper) 6.19 SMA BB (Lower) 5.90 Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss Wuxi Biologics 2269 HK Equity $65.00 $71.50 $92.59 $61.75 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 262% 111.8X 9.72X -51% Technical Indicator SMA RSI (14) 29.8 SMA BB (Upper) SMA BB (Lower) Source: Bloomberg, Mason Securities

4 Recent Recommendations Date of Issue Stock Pick Recommendation Highlights Rating (TP) Capture CNOOC s capex upcycle: China Oilfield Services (2883) for short term trading purpose 28/9/2018 China Oilfield Services (2883) 2/10/2018 CCCC (1800) 3/10/2018 CEG (1257) 4/10/2018 HHS (1347) 5/10/2018 China Gas (384) 8/10/2018 Luk Fook (590) 9/10/2018 CGR (1193) 10/10/2018 CSCI (3311) 11/10/2018 COG (581) 12/10/2018 Anta Sports (2020) Capital flows into sectors which benefit from the investment theme of stagflation in China, such as oil related players COSL is a good proxy to capture the upcycle of CNOOC s capex in coming years China s infrastructure investments is likely to increase in 4Q18 Maintain CCCC (1800) We believe the Chinese government will substantially increase infrastructure spending in the fourth quarter that will certainly benefit CCCC Traded at 2018 PER of 5.5x compared to 5-year average forward PER of 6.3x, CCCC is undervalued in our view China Everbright Greentech (1257): Expect EPS CAGR growth to reach +20% in next 3 years, reiterate We believe the relatively low gearing provides CEG sufficient rooms for future expansion We remain our bullish views on CEG given on promising industry growth, its strong project pipeline and supports from China Everbright International (257) Long term growth prospects remain promising Upgrade Hua Hong Semiconductor (1347) to We believe the underperformance is sentiment driven rather than any change in the fundamentals HHS expects revenue to grow 3%-4% qoq in 3Q18 with a gross margin of 32%-33%. Based on this management guidance, we estimate the company s net profit to reach US$44.6mn in 3Q18, down 2.6% qoq and up 26.1% yoy China Gas Holdings (384): Concerns overdone, recommend Market over-reacts news of connection fee cut under current weak market sentiments China Gas should be less impacted by any such connection fee cut given its larger portion of rural household connections and the recent share price weakness offers a buying opportunity SSSG for HK & Macau market will remain strong in 2Q FY19 - Maintain Luk Fook (590) Weakness in share price was mainly due to concerns about a slowdown in consumption and Renminbi depreciation that may eventually affect sales performance YoY growth rate of China s retail sales value of gold, silver and jewellery goods accelerated from 6.8% in the April-June period to 8.2% in July to 14.1% in August China Resources Gas (1193): Focus on the LT trend, Good entry point for LT investors, Maintain Weakness in share price was mainly due to concerns about Chongqing gas connection fee cut of Chinese downstream gas sector recently We do not believe the other regions will follow the same policy and the recent share price weakness offers a buying opportunity China s infrastructure investment is likely to increase in 4Q18 Maintain CSCI (3311) Outperformance of CSCI is mainly driven by speculation that China will increase infrastructure spending in the fourth quarter Chinese government will substantially increase infrastructure spending in the fourth quarter that will certainly benefit CSCI COG (581): Expect increasing infra. spending in 4Q, re-rating on sustainable profitability, Maintain Overall steel price and margin staying at high level which have proved our previous thoughts We believe the Chinese government will substantially increase infrastructure spending in the fourth quarter that will certainly benefit the overall steel industry Valuation looks attractive to long-term investors - Maintain Anta Sports (2020) We believe the potential earnings dilution effect has been fully discounted in share price We believe current valuation of Anta Sports is still attractive to long term investors ($9.20) ($9.20) ($8.60) ($20.0) ($30.4) ($32.5) ($38.4) ($10.0) ($9.50) ($42.0)

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