We expect Hang Seng Index to test 27,000 in the worst scenario. Market Overview. Hang Seng Index Performance

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1 16 August 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 27, % -4.3% -12.2% -0.3% HSCEI (H-Shares) 10, % -1.6% -16.0% -2.6% Mkt T/O ($ Mn) 111, % 32.0% 45.0% 18.2% Oversea DJIA 25, % 0.4% -0.2% 14.2% NASDAQ 7, % -0.4% 7.4% 22.5% Shanghai SE Composite 2, % -3.2% -14.9% -16.1% Shenzhen Component 8, % -7.9% -17.7% -19.1% Commodities and FX Crude Oil Futures (US$) % -4.8% 5.0% 38.5% Gold Futures (US$) 1, % -5.3% -13.5% -8.3% Baltic Dry Index 1, % 1.8% 59.1% 42.9% USD / Euro % -3.1% -8.8% -3.1% Yen / USD % 1.6% -4.1% 0.2% CNH / USD % -3.5% -9.3% -3.6% Market Overview Hang Seng Index closed down 1.5% at 27,323. HSCEI lost 1.9%. Heavily weighted Tencent (700), AIA Group (1299) and HSBC (5) dropped 3.6%, 1.6% and 1.1% respectively. PRC property, automobile, insurance, securities, gaming, pharmaceutical, railway, airline and cement stocks underperformed the market. Geely Automobile (175), Great Wall Motor (2333) and BYD Company (1211) retreated 5.3%-5.5%. Ten largest Chinese property developers dropped an average 4.2%, among which Sunac China (1918) and China Evergrande (3333) shrank 7.2% and 5.8% respectively. Five securities and seven insurance stocks in HSCEI had an average decrease of 3.4% and 3.0% respectively, among which PICC (1339), New China Life (1336) and GF Securities (1776) declined 4.0%-4.3%. Anhui Conch (914) and Air China (753) lost 3.9%-4.6%. Galaxy Entertainment (27) and Sands China (1928) retreated 4.4% and 2.5% respectively. CSPC Pharmaceutical (1093) and Sinopharm (1099) cut 3.2% and 1.1% respectively. CRRC Corp (1766), CCCC (1800) and China Railway Group (390) lost 1.5%-2.3%. China Gas Holdings (384) was the worst performing HSCEI stock, down 6.7%. We expect Hang Seng Index to test 27,000 in the worst scenario. Technology, oil and PRC banking stocks ended lower. Sunny Optical (2382) and AAC Technologies (2018) fell 0.9%-1.9%. Nine Chinese banking stocks in HSCEI cut an average 1.5% among which CMB (3968) and Postal Savings Bank (1658) dropped 2.4%-3.0%. PetroChina (857) and CNOOC (883) cut 1.2%-1.9%. Consumption, HK property and HK banking stocks lacked clear direction. Want Want China (151) and China Mengniu Dairy (2319) retreated 3.6%-3.8%. WH Group (288) surged 8.2% making it the best performing stock in HSI. Wharf REIC (1997) and CK Asset (1113) both lost 2.3%. Swire Pacific (19) rose 0.7%. BOC Hong Kong (2388) decreased 1.9% while Bank of East Asia (23) added 0.2%. We expect Hang Seng Index to test 27,000 in the worst scenario.

2 Market in Focus ANTA Sports MKT Cap ($Bn) Bloomberg Ticker 2020 HK Equity 52-week High/Low ($) Rating BUY Free Float (%) 38.1% Target Price $ M Avg Turnover ($, Mn) Anta Sports (2020) posted better than expected interim results Maintain BUY Anta Sports (2020, $38.75) has declined 7.6% since our BUY commentary dated July 19 and underperformed Hang Seng Index by 4.9% over the same period. We believe the share price correction is sentiment driven while the fundamentals of the company remain intact evidenced by better-than-expected interim results. For the first half of 2018, Anta Sports posted revenue of RMB10.55bn and gross profit of RMB5,726mn representing an increase of 44.1% and 54.6% respectively. Revenue from footwear, apparel and accessories segments grew 21.3%, 64.6% and 51.3% to RMB4.11bn, RMB6.07bn and RMB380mn, accounting for approximately 39%, 57% and 4% of revenue respectively. Strong revenue growth for apparel segment was mainly driven by FILA business. Overall gross margin rose from 50.6% in 1H17 to record high of 54.3% in 1H18 due to improved gross margins for all the three segments. Net profit surged 34.0% to RMB1,945mn. Net margin reduced from 19.8% to 18.4% partly because the ratio of advertising and promotional expenses to revenue normalized from 9.3% in 1H17 to 11.7% in 1H18. Basic EPS rose 29.4% to RMB Interim dividend grew 22.0% to HK$0.50. As at 30 June 2018, the company had net cash of RMB9.0bn or equivalent to RMB3.36 per share. Fig1: 1 Year Share Price Source: Bloomberg, Mason Securities According to Bloomberg estimates, the company s revenue will reach RMB21.7bn in 2018 and RMB26.5bn in 2019, up 30% and 22% yoy respectively. Net profit will amount to RMB3.84bn in 2018 and RMB4.71bn in 2019, up 24% and 23% yoy translating into forward P/E of 24.0x and 19.5x respectively. Strong financial position provides room for further expansion through acquisition. We believe current valuation of Anta Sports is attractive to long term investors and maintain our BUY recommendation with a 12-month price target of $48.0 based on 24x 2019 earnings.

3 Technical Ideas Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss WH Group 288 HK Equity BUY $6.57 $7.23 $9.55 $6.24 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 215% 10.4X 1.54X 23% Technical Indicator SMA RSI (14) 41.6 SMA BB (Upper) 6.49 SMA BB (Lower) 5.98 Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss JNBY Design 3306 HK Equity BUY $16.18 $17.80 $21.67 $15.37 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 191% 16.8X 5.02X -55% Technical Indicator SMA RSI (14) 39.9 SMA BB (Upper) SMA BB (Lower) Source: Bloomberg, Mason Securities

4 Recent Recommendations Date of Issue Stock Pick Recommendation Highlights Rating (TP) 2/8/2018 Wisdom Education (6068) 3/8/2018 CRG (1193) 6/8/2018 China Maple Leaf (1317) Capacity expansion for flagship schools in Dongguan will boost earnings for FY19 Mainain BUY Wisdom Education (6068) We continue to take a positive view on China s education services industry given a fast-growing middle class and rising demand for quality education service. China Resources Gas (1193): Downside risks driven by China economy and industrial activities slowdown in 2H18 ; Downgrade to HOLD Valuation does not fully factor in downside risks driven by China economy and industrial activities slowdown and property floor space completion decline The factors mentioned above will pose a negative impact on CRG and limit upside risks in 2H18 Share price weakness presents a good buying opportunity Maintain BUY China Maple Leaf (1317) We reiterate our BUY rating on MLES given its good earnings track record and continued expansion through acquisition We are optimistic about the private education industry in China and believe current valuation of MLES is attractive to long term investors China Resources Power (836): Defensive player with fundamental turnaround this year; Maintain Buy BUY ($7.50) HOLD ($38.9) BUY ($7.10) 7/8/2018 CRP (836) 8/8/2018 CSCI (3311) 9/8/2018 Suntien Green Energy (956) China Overseas 10/8/2018 Property (956) 13/8/2018 CTCM (570) 14/8/2018 A-Living Services (3319) 15/8/2018 Dali Foods (3799) Thermal coal prices have already peaked out Valuation of CRP remains attractive to long term investors in our view given its stable dividend, lower coal price in 2018 and good track record of management and execution ability Robust new contract value growth for 1H18 Maintain BUY China State Construction (3311) Outperformance of CSCI is mainly driven by speculation on the increase in China s infrastructure investments in the second half of 2018 and company s robust growth in new contract value in the first half of 2018 CSCI looks cheap compared with its historical valuation at 5-year average forward P/E of 10.4x China Suntien Green Energy (956): Solid growth in coming years; reiterate BUY Tariff cut overhang is removed Traded at 2019 P/E of 5.48x and 2019 P/B of 0.72x with a ROE of >13%, valuation of Suntien is still undervalued in our view Room for further expansion through acquisition Maintain BUY China Overseas Property (2669) We remain optimistic about the growth prospects of COPH given strong support from parent company and ongoing industry consolidation Thanks to the acquisition of CITIC Property Service, the GFA under management of COPH increased by 37.3% in 2017 to 128.3mn sq.m. China Traditional Chinese Medicine (570): Bullish on the industry growth, Maintain BUY We believe CTCM will benefit from 1) solid industry development; 2) channel expansion in highto-low tier hospitals; 3) the increasing penetration rate of TCM granules due to consumption upgrade more and more provinces including TCM granules in medical insurance in the future Better than expected interim earnings results Maintain BUY on A-Living Services (3319) The company announced better-than-expected earnings results for the first half of 2018 As at 30 June 2018, ALS had net cash of RMB4.17bn providing sufficient funds for future acquisition and expansion Dali Foods (3799): Share price is expected to react positively to solid interim results In short-term, we expect Dali to deliver solid revenue and net profit growth in upcoming interim results (+ve low double digit growth) and the share price should react positively to the solid interim results BUY ($17.5) BUY ($10.5) BUY ($2.80) BUY ($3.20) BUY ($8.20) BUY ($18.0) BUY ($8.5)

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