Major Market Indicators

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1 10 th October, 2017 Hang Seng Index Performance Major Market Indicators % Change Hong Kong Close 1-Day 1-Mth 6-Mth 12-Mth Hang Seng Index 28, HSCEI (H-Shares) 11, Mkt T/O ($ Mn) 97, Source: Bloomberg Oversea DJIA 22, NASDAQ 6, Shanghai SE Composite 3, Shenzhen Component 11, Commodities and FX Crude Oil Futures (US$) Gold Futures (US$) 1, Baltic Dry Index 1, USD / Euro Yen / USD CNH / USD Market Overview Hang Seng Index closed down 0.5% at 28,326. Market turnover decreased to $97.8 billion. Heavily weighted Tencent (700) and China Mobile (941) dropped 0.8%-0.9%. HSBC (5) added 0.2%. Gaming, oil, local banking and Chinese property stocks underperformed the market. Galaxy Entertainment (27) and Sands China (1928) shrank 2.7%-3.2%. Eight largest Chinese property developers cut an average 2.6% among which Sunac China (1918) tumbled 5.4%. PetroChina (857), Sinopec (386), CNOOC (883) and Kunlun Energy (135) plunged 0.8%-1.9%. BOC Hong Kong (2388), Hang Seng Bank (11) and Bank of East Asia (23) slid 0.4%-1.0%. AAC Technologies (2018) and Geely Automobile (175) lost 2.7% and 1.8% respectively. Local property companies were mixed. Consumption stocks ended higher. Want Want China (151) and Hengan Int l (1044) surged 4.7%-6.1%. China Mengniu Dairy (2319) and WH Group (288) climbed 0.8%-1.6%. We expect Chinese financial stocks to outperform the market in near term. HSCEI dropped 0.6% led by insurance and railway related companies. Six insurance counters in HSCEI all declined with an average loss of 1.1% among which New China Life (1336) retreated 3.2%. Zhuzhou CRRC Times Electric (3898) and China Railway Group (390) slumped 0.9%-1.0%. Automobile, power, banking and securities stocks lacked clear direction. Dongfeng Motor (489) and Huaneng Power (902) advanced 0.4%-0.6%. Great Wall Motor (2333) and CGN Power (1816) both decreased 0.9%. Huatai Securities (6886) and CITIC Bank (998) rose 0.6%-0.8%. China Merchants Bank (3968) and Haitong Securities (6837) fell 1.1%-1.2%. Four largest Chinese banks cut 0.5%-0.9%. We expect Chinese financial stocks to outperform the market in near term.

2 Market in Focus Record high monthly sales volume in September 2017 Geely Auto (175) Geely Auto (175. $26.85) released its September 2017 monthly sales volume yesterday after market close, reported a record -high sales volume of 108,872 units, up 42% yoy. The four new models launched in 2016 (Emgrand GL, Boyue, Emgrand GS and Vision SUV) continued to serve as Geely s major sales driver and represented 57.4% of the company s monthly sales volume. Notably, sales performance o f the Emgrand GL and Boyue SUV recorded a 10.7% and 19.4% mom growth, indicating the company s capacity bottleneck issue on the automatic gearbox for these models might have been partially eased, in our view. In 9M2017, Geely recorded sales volume growth of 80% y oy to 827,108 units and achieved 75.2% of the full year sales target of 1.1mn units. Overall, Geely s sales performance in September is largely in-line with our expectations. Particularly, further signs of the company s capacity bottleneck issue on automatic transmission gearbox being resolved strengthened our confidence regarding Geely s ability in achieving its revised 2017 sales target. We maintain our view that Geely should face little difficulty in meeting and exceeding its 2017 s ales target, driven by: 1) further ramp-up of sales volume from its existing models launched in 2016 as the company s capacity bottleneck issue on its automatic gearbox is progressively resolved; 2) further ramp-up of the new Vision X1, several soon-to-be launched models that aim to penetrate sub-segments where Geely previously lack presence of, together with the general Chinese PV market entering into peak season, should provide strong support to Geely s sales performance notwithstanding the company s normalizing sales growth given a hig her base (4 of Geely s hot-selling models were launched in mid-2016 and were quickly ramped up during the year); and 3) soon-to-revoke purchase tax incentive on compact cars should bring forward future demand from 2018, thus benefiting auto OEMs like Geely who has a good level of exposure within the compact car segment. On the other hand, as mentioned in our previous commentaries, we note that Geely is a leading EV manufacturer in China as wel l, with a total market share of ~5.5% in the NEV PV market in 8M2017, notwithstanding several other popular NEV models that are currently sold by its parent company. With its existing product line to be equipped with a full range of engines (ICE/hybrid/electric) from onwards, alongside with Volvo s leading NEV technology, we believe Geely possesses strong growth potential within the NEV segment and shall become a key beneficiary of the soon-to-be effected CAFC and NEV scoring system (for details of the policy, please refer to our commentary dated 3 October 2017). All-in-all, Geely remains as our top pick among Chinese proprietary brands and we believe its business outlook remain intact despite an increasingly challenging market environment driven by a slowdown in the Chinese PV industry, increas ed competition and tightened emission regulations.

3 Technical Ideas Want Want China (151, $5.94) Stock Rating: Target Price: $6.53 Company Description: Want Want China manufactures and trades rice crackers, snack food, beverages, and packing materials. The Company also manufactures wheat, flour, and raw materials for the manufacture of snack foods. Most of the company's production facilities are located in China and Taiwan. Commentary: Counter advanced 6.1% yesterday, surpassing its critical resistance at $5.71 and reached its 52-week high, indicating the counter s strong uptrend momentum ahead. Recommendation:. Target at $6.53. Cut loss at $5.49. Company Statistics Last Closing Price $5.94 Consensus 2017 P/E 20.2x Consensus Target Price $5.05 Hisense Kelon (921, $9.95) Stock Rating: Target Price: $10.95 Company Description: Hisense Kelon manufactures and sells refrigerators, air conditioners, freezers, and product components. Commentary: Counter surged 11.4% yesterday, surpassing its critical resistance at $9.52, SMA50 and SMA250, indicating the counter s further upside potential ahead. Recommendation:. Target at $ Cut loss at $9.00. Company Statistics Last Closing Price $9.95 Consensus 2017 P/E 7.5x Consensus Target Price $9.91

4 Recent Recommendations Date of Issue Stock Pick Recommendation Highlights Rating (TP) Reiterate on Yangtze Optical Fibre and Cable (6869) on positive gross margin surprise Yangtze Optical Interim earnings beat expectation amid strong gross margin expansion 22/08/2017 Fibre and Cable Capacity growth of preform in 2017 will continue to support gross margin recovery thanks to better (6869) internal supply ratio and lower outsourcing Management believe ASP of optical preforms and fibre will stay resilient in coming years amid strong demand Strong interim results accompanied with bright future outlook ahead - Maintain on Geely Auto (175) Interim results were in-line with market expectations plus satisfactory sales volume for July 23/08/2017 Geely Auto (175) Strong model cycle in 2018 should guarantee Geely's glamorous sales performance ahead Formation of JV with Volvo and parent co. in the development of Lynk & Co could potentially increase the possibility of success for the bran A laggard education service provider Maintain China Maple Leaf Education (1317) China Maple Leaf 24/08/2017 Growth in student enrollment is expected to accelerate from 20% in FY16 to 35% in FY17 Education (1317) Projected EPS growth of 30% in FY17 and 15% in FY18 Growing demand for high quality education service in China Reiterate on Techtronic Industries (669) amid solid interim results Techtronic Robust power tool sales in 1H17 is an indication that rollout of new DeWalt's FlexVolt series is not a 25/08/2017 Industries (669) threat to TTI Product innovation will lead to a new round of product upgrade cycle and hence margin expansion Home Depot's penetration into Pro segment will also help to expand TTI's market size A strong growth in new contracts improves earnings prospects Maintain CCCC (1800) 28/08/2017 CCCC (1800) Growth in new contracts value accelerated from 12.4% yoy in 2016 to 52.0% yoy in 1H17 Overseas expansion will be key earnings growth driver Undemanding valuation at 2017 PER of 7.5x Reiterate on AAC Technologies (2018) amid company s growth potential in optics business AAC Technologies Faster than expected capacity expansion of optical lens is a positive surprise 29/08/2017 (2018) Acoustic growth is sustainable in 2018 as adoption rate of high-end speaker box with waterproof and stereo sound feature continues to surge in android camp Valuation is undemanding given our estimates of 34% EPS CAGR from Better-than-expected 2017 interim results Maintain Zhengtong Auto (1728) Zhengtong Auto Better-than-expected interim results reaffirms our positive stance and demonstrates strong earnings 30/08/2017 (1728) momentum ahead Innovative expansion model shall enable Zhengtong to expand more rapidly at a much less burdensome way compared to traditional M&A Reiterate on Lee & Man Paper (2314) on its robust interim results Interim earnings beat estimates, with net dollar margin of containerboard and tissue paper both Lee & Man Paper 31/08/2017 reached record high (2314) Environmental inspection in China see no signs of slow down, favouring the demand/supply dynamics in 2H17 More paper price upside in 2H17 amid peak season, which will be a positive share price catalyst Interim results indicated better-than-expected performance from BBA Maintain Brilliance China (1114) BBA's strong performance in 1H2017 reaffirms our view that the JV serves as a key beneficiary of the fast Brilliance China 12/09/2017 growing luxury PV in China; (1114) BBA's strong model cycle ahead should support the JV's operational performance in the future; and Proposed cooperation with Renault in forming a JV on Brilliance's minibus and Light Commercial Vehicle (LCV) segment may potentially cause a turnaround for the currently loss-making business. Weakness in share price offers a good buying opportunity Singamas (716) 09/10/2017 Singamas (716) Share price has experienced a 15% drop from its intra-day high of $2.05 on September 21 With 2017 P/B of 1.0x and EPS growth of 50% in 2018, valuation of Singamas is undervalued in our view ($26.70) ($21.0) ($7.20) ($43.0) ($12.0) ($155.7) ($9.98) ($10.9) ($24.0) ($2.05)

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