Major Market Indicators

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1 9 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) 102, 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 0.3% at 28,458 last Friday. Market turnover increased to $103.0 billion. Heavily weighted AIA Group (1299) and Tencent (700) surged 1.6% and 0.7% respectively. HSBC (5) and China Mobile (941) cut 0.6% and 0.1% respectively. Geely Automobile (175) jumped 5.6% making it the best performing index stock. CITIC Pacific (267) and CK Infrastructure (1038) both increased 1.7%. Consumption, local banking and property stocks were mixed. China Mengniu Dairy (2319) advanced 3.0% whilst Want Want China (151) shrank 0.7%. Bank of East Asia (23) added 0.6% but BOC Hong Kong (2388) fell 0.8%. Hang Lung Properties (101) rose 1.8%. Sino Land (83) and Link REIT (823) cut 1.0%-1.1%. Information technology, airline and gaming stocks ended lower. AAC Technologies (2018) and Cathay Pacific (293) both decreased 1.5%. Sands China (1928) and Galaxy Entertainment (27) dropped 1.9%-2.7%, the most in Hang Seng Index. We expect Chinese financial stocks to outperform the market in near term. HSCEI climbed 0.5% led by financial stocks. China Cinda Asset Management (1359) was the best performing HSCEI stock, up 4.4%. China Merchants Bank (3968) slid 0.5%. Other securities, insurance and banking shares in HSCEI grew an average 1.0%, 0.9% and 0.6% respectively among which Haitong Securities (6837) and New China Life (1336) edged up by 1.6%-2.0%. Postal Savings Bank (1658), Huatai Securities (6886) and Ping An Insurance (2318) soared 1.1%-1.3%. Automobile and power stocks also outperformed the HSCEI. BYD Company (1211), Dongfeng Motor (489) and CGN Power (1816) went up 1.3%-2.0%. Railway related counters lacked clear direction. Zhuzhou CRRC Times Electric (3898) climbed 2.6% whilst CCCC (1800) plunged 0.9%. China Shenhua (1088) was the worst performing HSCEI stock, down 1.5%. We expect Chinese financial stocks to outperform the market in near term.

2 Market in Focus Weakness in share price offers a good buying opportunity Singamas (716) Singamas (716, $1.74), the world s second largest container manufacturer, is likely to benefit from a continued recovery in the container shipping industry. Latest economic data from U.S., Europe and China were better than expected reflecting a promising outlook for the global economy in the second half of the year. In fact, OECD has recently raised global GDP growth forecast to 3.5% in 2017 and 3.7% in 2018 compared to 3.1% in The World Bank also revised China s GDP growth forecast to 6.7% in 2017 and 6.4% in 2018, up from previous forecast of 6.5% and 6.3% respectively. We expect operating performance of container shipping companies to improve significantly this year leading to higher demand for containers in the first half of Singamas manufactures a wide range of products in China including dry freight containers and specialized containers with a total annual capacity of 750,000 TEUs. In the first half of 2017, the company s revenue surged 45.0% yoy to US$595mn of which approximately 80% came from dry freight containers, 17% from specialized containers and 3% from logistics business. Sales volume and ASP of dry freight containers grew 52% yoy to 247,500 TEUs and 35% yoy to US$1,902 respectively. Hence, the company posted a net profit of US$16.6mn in 1H17 compared with a loss of US$36.6mn in 1H16. Management disclosed in interim results that positive market sentiment had already led to strong demand for the company s dry freight containers, with order books full for July and August According to Bloomberg estimates, net profits of Singamas are expected to reach US$47.8mn in 2017 and US$71.5mn in 2018 translating into forward PER of 11.1x in 2017 and 7.7x in With 2017 P/B of 1.0x and EPS growth of 50% in 2018, valuation of Singamas is undervalued in our view. After a 15% drop from intra-day high of $2.05 on September 21, current share price of Singamas is attractive to investors. We therefore recommend a with a 6 -month price target of $2.05 based on 9x 2018 PER.

3 Technical Ideas Fosun (656, $17.90) Stock Rating: Target Price: $19.70 Company Description: Fosun operates diversified businesses. The company manufactures steel, develops property, manufactures pharmaceuticals, and holds interests in retailers, financial services providers, and gold and iron mining. Commentary: Counter surged 7.2% last Friday, surpassing its critical resistance at $17.10 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 $17.90 Consensus 2017 P/B 1.3x Consensus Target Price $17.20 China Cinda (1359, $3.08) Stock Rating: Target Price: $3.39 Company Description: China Cinda provides asset management services. The company invests, disposes, and manages nonperforming assets and equity. It also provides consulting, investment, financial, and risk management services to individuals and businesses. Commentary: Counter rose 4.4% last Friday, surpassing its critical resistance at $3.01 and SMA100, indicating the counter s further upside potential ahead. Recommendation:. Target at $3.39. Cut loss at $2.85. Company Statistics Last Closing Price $3.08 Consensus 2017 P/B 0.7x Consensus Target Price $3.55

4 Recent Recommendations Date of Issue Stock Pick Recommendation Highlights Rating (TP) Likely to post strong interim results and raise contracted sales target Yuzhou Properties (1628) Yuzhou Properties 21/08/2017 Gross margin stood at 36% in past three years versus industry average of below 30% (1628) Contracted sales up 63% with ASP up 33% in 7M17 implies higher gross profit in 2017/2018 Cheap valuation with 2-year earnings CAGR of 22% 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. ($5.20) ($26.70) ($21.0) ($7.20) ($43.0) ($12.0) ($155.7) ($9.98) ($10.9) ($24.0)

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