Major Market Indicators

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1 11 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) 91, 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 up 0.6% at 28,490. Market turnover decreased to $91.5 billion. Heavily weighted HSBC (5), China Mobile (941) and Tencent (700) surged 1.4%, 0.8% and 0.6% respectively. AAC Technologies (2018) added 2.4%. Gaming and property stocks outperformed the market. Sands China (1928) and Galaxy Entertainment (27) climbed 0.8%-1.0%. Link REIT (823) retreated 0.2%. Other eight local property stocks in Hang Seng Index grew an average 1.6% among which New World Development (17) and Henderson Land (12) jumped 5.1% and 3.4% respectively. Local banks moved in line with the benchmark index. Three largest oil companies were unchanged. Consumption and Chinese property stocks were mixed. WH Group (288) soared 2.5%. Want Want China (151) shrank 2.9%, the most in Hang Seng Index. HSCEI advanced 0.3%. China Telecom (728) was the best performing HSCEI stock, up 4.7%. Sinopharm (1099) rose 1.3%. Automobile, power, railway and financial stocks lacked clear direction. CRRC Corporation (1766) climbed 1.7% but Zhuzhou CRRC Times Electric (3898) retreated 0.3%. Dongfeng Motor (489) went up 0.4% whilst BYD Company (1211) slumped 0.9%. Postal Savings Bank (1658), ICBC (1398), China Merchants Bank (3968) and GF Securities (1776) increased 1.0%-1.3%. CITIC Bank (998), China Life (2628) and CITIC Securities (6030) tumbled 0.4%-0.7%. Huatai Securities (6886) and Anhui Conch (914) were the worst performing HSCEI stock, down 2.2% and 1.4% respectively. We expect Chinese financial stocks to outperform the market in near term. We expect Chinese financial stocks to outperform the market in near term.

2 Market in Focus Substantial land appreciation gains from Qianhai properties China International Marine Containers (2039) China International Marine Containers (2039, CIMC, $15.58) surged 5.8% yesterday with an exceptionally high trading volume. On 9 October 2017, CIMC announced that it had entered into the land preparation framework agreement with Urban Planning, Land & Resources Commission of Shenzhen Municipality and Authority of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen (the Qianhai Authority ) in respect of the land preparation issues for three parcels of land in Qianhai, Shenzhen. These three parcels of land measuring a total site area of 524,000 sq.m are expected to be rezoned from industrial into commercial use. The appreciation gains in land value shall be shared between the Qianhai Authority and CIMC according to the proportion of 60% and 40% respectively. Assuming a plot ratio of 3.0x, the potential redevelopment GFA of these three parcels of land is likely to reach 1.50mn sq.m with an estimated market value of RMB30bn of which 40% or RMB12bn (equivalent to $4.77 per CMIC share) will be attributable to CIMC. CIMC is a state-owned company and principally engaged in the manufacture of containers, road transportation vehicles, energy, chemical and liquid food equipment, offshore engineering, logistics service, airport equipment etc. Global market share in terms of output and sales of dry containers is close to 50%. In the first half of 2017, CIMC s revenue increased by 41.8% yoy to RMB33.4bn. Net profit amounted to RMB865mn compared with a loss of RMB502mn in 1H16. The turnaround in earnings was mainly due to strong improvemen t in container manufacturing business along with a recovery in global trade. Net profit from container ma nufacturing business reached RMB681mn in 1H17 compared with a loss of RMB140mn in 1H16. We are confident on further improvement in container manufacturing business in 2H17 and 1H18 taking into account better-than-expected economic data from U.S., Europe and China recently. According to Bloomberg estimates, CIMC s earnings are expected to grow 344% to RMB2.40bn in 2017 and 28% to RMB3.07bn in 2018 translating into forward P/E of 16.9x in 2017 and 13.1x in Earnings outlook is promising given a substanti al land appreciation gain from properties in Qianhai and strong recovery in container manufacturing business. We expect the re -rating of CIMC to continue in near term and recommend a with 6-month price target of $18.0 based on 15x 2018 earnings.

3 Technical Ideas New World Development (17, $12.04) Stock Rating: Target Price: $13.24 Company Description: New World Development develops, and invests in properties, provides contracting, property management, and transportation services. It also operates infrastructure, telecommunication services, department stores, hotels and restaurants, and media and technology businesses. Commentary: Counter advanced 5.1% yesterday, surpassing its critical resistance at $11.61 and reached its 52-week high, indicating the counter s strong uptrend momentum ahead. Recommendation:. Target at $ Cut loss at $ Company Statistics Last Closing Price $12.04 Consensus 2017 P/B 0.5x Consensus Target Price $12.63 Shanghai Pharmaceuticals (2607, $20.40) Stock Rating: Target Price: $22.44 Company Description: Shanghai Pharmaceuticals manufactures, retails, and wholesales a variety of pharmaceuticals. The company also invests in new medicine development and provides related services. Commentary: Counter rose 3.6% yesterday with large turnover, surpassing its critical resistance at $20.20, SMA50 and SMA250, indicating the counter s further upside potential ahead. Recommendation:. Target at $ Cut loss at $ Company Statistics Last Closing Price $20.40 Consensus 2017 P/E 12.9x Consensus Target Price $24.46

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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