We expect Hang Seng Index to be highly volatile in the short term. Market Overview. Hang Seng Index Performance

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1 20 November Hang Seng Index Performance Major Market Indicators % Change Hong Kong Close 1-Day 1-Mth 6-Mth 12-Mth Hang Seng Index 26, % 3.2% -15.1% -9.9% HSCEI (H-Shares) 10, % 4.0% -13.9% -7.9% Mkt T/O ($ Mn) 80, % -19.4% -14.2% -32.8% Oversea DJIA 25, % -1.7% 1.2% 6.8% NASDAQ 7, % -5.6% -4.4% 3.5% Shanghai SE Composite 2, % 6.0% -15.3% -20.3% Shenzhen Component 8, % 9.8% -24.0% -29.1% Commodities and FX Crude Oil Futures (US$) % -17.0% -19.5% 2.2% Gold Futures (US$) 1, % -0.4% -5.2% -4.0% Baltic Dry Index 1, % -34.6% -19.0% -25.6% USD / Euro % -0.1% -2.7% -2.5% Yen / USD % 0.2% -1.3% 0.1% CNH / USD % 0.2% -8.3% -4.1% Source: Bloomberg Market Overview Hang Seng Index closed up 0.7% at 26,372. Market turnover improved to $80.3Bn. HSCEI climbed 0.5% at 10,632. Heavily weight Tencent ( 700 ) and AIA Group ( 1299 ) increased by 0.3% and 1.5% respectively. HSBC ( 5 ) was down 0.2%. Macau gaming, local property, technology, PRC property and automobile stocks outperformed the market. Sands China ( 1928 ) and Galaxy Entertainment ( 27 ) increased 1.9% and 1.4%. Hang Lung Properties ( 101 ) and Sun Hung Kai Properties ( 16 ) advanced 3.3%-3.6%. AAC Technologies ( 2018 ) and Sunny Optical ( 2382 ) increased 4.7% and 3.5%. AAC Technologies ( 2018 ) was the best performer in HSI. BYD ( 1211 ) and Geely ( 175 ) advanced 6.4% and 2.6%. BYD ( 1211 ) was the best performer in HSCEI. Ten largest Chinese property developers grew an average 3.9% among which China Vanke ( 2202 ), China Evergrande ( 3333 ) and Sunac China ( 1918 ) increased 5.0%-5.5%. Insurance, cement, telecom and utilities stocks underperformed the market. Seven insurance stocks in HSCEI slid an average 0.7% among which New China Life ( 1336 ) and China Pacific Insurance ( 2601 ) fell 2.3% and 1.5%. New China Life ( 1336 ) was the worst performer in HSCEI. Anhui Conch Cement ( 914 ) was down 1.5%. Telecom ended higher but underperformed the market. Securities stocks moved in line with Hang Seng Index. Consumption, HK banking, PRC banking, railway, oil and pharmaceutical stocks lacked clear direction. Shenzhou International ( 2313 ) and WH Group ( 288 ) added 1.2% and 1.1% while Mengniu Dairy ( 2319 ) and Want Want China ( 151 ) cut 2.2% and 0.5%. CITIC Bank ( 998 ), BOC ( 3988 ) and CCB ( 939 ) added 1.6%, 0.6% and 0.5% respectively while Postal Savings Bank of China ( 1658 ) and BOCOM ( 3328 ) slid 1.3% and 0.3% respectively. CCCC ( 1800 ) rose 0.6% while China Railway ( 390 ) cut 0.3%. CNOOC ( 883 ) increased 1.8% while PetroChina ( 857 ) decreased 0.2%. Sino Biopharmaceutical ( 1177 ) increased 2.0% while CSPC Pharmaceutical ( 1093 ) decreased -1.7%. We expect Hang Seng Index to be highly volatile in the short term. We expect Hang Seng Index to be highly volatile in the short term

2 Index Movers H S I H S C E I Name Price % Chg Points Name Price % Chg Points AAC Technologies ( 2018 ) % 5.6 BYD ( 1211 ) % 6.3 China Resources Land ( 1109 ) % 11.0 China Vanke ( 2202 ) % 5.3 China Overseas ( 688 ) % 12.3 China Resources Land ( 1109 ) % 4.8 Hang Lung Properties ( 101 ) % 3.3 Huaneng Power International ( 902 ) % 1.6 Sunny Optical ( 2382 ) % 5.8 Zhongan ( 6060 ) % 0.8 Sun Hung Kai Properties ( 16 ) % 13.9 China Telecom ( 728 ) % 3.3 Wharf ( 1997 ) % 5.7 CNOOC ( 883 ) % 5.7 Country Garden ( 2007 ) % 5.8 CITIC Bank ( 998 ) % 2.2 Geely ( 175 ) % 6.2 Air China ( 753 ) % 0.6 Sino Biopharmaceutical ( 1177 ) % 3.2 Sinopharm Group ( 1099 ) % 1.8 Sino Land ( 83 ) % 2.2 Sinopec ( 386 ) % 6.4 Sands China ( 1928 ) % 4.4 Shenzhou International ( 2313 ) % 1.1 CNOOC ( 883 ) % 13.1 China Gas ( 384 ) % 0.7 CK Hutchison ( 1 ) % 11.1 China Shenhua ( 1088 ) % 1.9 Henderson Land ( 12 ) % 2.4 China Galaxy Securities ( 6881 ) % 0.4 Swire Pacific ( 19 ) % 2.0 Huatai Securities ( 6886 ) % 0.5 New World Development ( 17 ) % 3.0 CCCC ( 1800 ) % 0.6 AIA Group ( 1299 ) % 35.0 Huarong Asset ( 2799 ) % 0.3 CK Asset Holdings ( 1113 ) % 6.3 BOC ( 3988 ) % 4.4 Galaxy Entertainment ( 27 ) % 4.7 Haitong Securities ( 6837 ) % 0.5 Sinopec ( 386 ) % 7.0 China Mobile ( 941 ) % 3.2 Shenzhou International ( 2313 ) % 2.6 CGN Power ( 1816 ) % 0.3 WH Group ( 288 ) % 1.9 CCB ( 939 ) % 4.7 China Shenhua ( 1088 ) % 2.1 ICBC ( 1398 ) % 3.8 Hong Kong & China Gas ( 3 ) % 2.8 PICC Property & Casualty ( 2328 ) % 0.6 BOC ( 3988 ) % 4.8 GF Securities ( 1776 ) % 0.2 China Unicom ( 762 ) % 0.9 CITIC ( 267 ) % 0.3 China Resources Power ( 836 ) % 0.5 Tencent ( 700 ) % 1.5 China Mobile ( 941 ) % 7.5 CITIC Securities ( 6030 ) % 0.2 Power Assets ( 6 ) % 1.1 Hengan International ( 1044 ) % 0.1 CCB ( 939 ) % 9.9 Great Wall Motor ( 2333 ) % 0.1 CLP Holdings ( 2 ) % 2.3 China Minsheng Banking ( 1988 ) % 0.2 ICBC ( 1398 ) % 4.5 CMB ( 3968 ) % 0.5 BOC Hong Kong ( 2388 ) % 1.1 Guangdong Investment ( 270 ) % 0.1 CITIC ( 267 ) % 0.7 CRRC Corp ( 1766 ) % 0.1 Tencent ( 700 ) % 6.6 Dongfeng Motor ( 489 ) % 0.1 MTR ( 66 ) % 0.5 Agricultural Bank ( 1288 ) % 0.0 Hengan International ( 1044 ) % 0.3 People's Insurance ( 1339 ) % 0.0 CK Infrastructure ( 1038 ) % 0.2 PetroChina ( 857 ) % -0.6 Link ( 823 ) % 0.3 Ping An Insurance ( 2318 ) % -2.1 HKEx ( 388 ) % -1.4 China Railway ( 390 ) % -0.2 PetroChina ( 857 ) % -0.6 BOCOM ( 3328 ) % -0.5 Ping An Insurance ( 2318 ) % -2.6 China Life Insurance ( 2628 ) % -2.5 HSBC ( 5 ) % -6.0 Guangzhou Automobile ( 2238 ) % -0.5 BOCOM ( 3328 ) % -0.5 Cinda Asset Management ( 1359 ) % -0.5 Want Want China ( 151 ) % -0.5 Postal Savings Bank of China ( 1658 ) % -1.5 China Life Insurance ( 2628 ) % -2.7 China Pacific Insurance ( 2601 ) % -3.3 Hang Seng Bank ( 11 ) % -3.0 Anhui Conch Cement ( 914 ) % -2.1 CSPC Pharmaceutical ( 1093 ) % -3.7 CSPC Pharmaceutical ( 1093 ) % -1.6 Mengniu Dairy ( 2319 ) % -4.6 New China Life ( 1336 ) % -2.0 Source: Bloomberg, Mason Securities

3 Market in Focus Name Shimao Property MKT Cap ($Bn) 61.1 Bloomberg Ticker 813 HK Equity 52-week High/Low ($) Rating BUY Free Float (%) 30.2% Target Price $ M Avg Turnover ($, Mn) Fundamental remains solid - Maintain BUY on Shimao Property (813) Since our BUY commentary dated November 1, Shimao Property (813, $18.50) has climbed 20.6% compared an average gain of 14.1% for the remaining nine of the ten largest Chinese property developers and 5.6% for Hang Seng Index. We believe the sector outperformance is supported by recent news flows such as relaxation in mortgage lending and falling mortgage rates in some second-tier cities like Hangzhou, Nanjing and Wuhan. On the other hand, large property developers continued to achieve satisfactory contracted sales and expand market share in October. For the first ten months of 2018, contracted sales of the ten largest Chinese property developers increased by an average 39% yoy compared with industry growth rate of 12.5% yoy. Fig1: 1 Year Share Price Shimao remains our top favorite among large property developers. For the first half of 2018, the company s revenue and core earnings increased by 18.8% and 20.2% yoy to RMB42.57bn and RMB4.40bn respectively. Gross margin improved from 29.6% in 1H17 to 31.0% in 1H18. Interim dividend grew 25% to $0.50. As at 30 June 2018, net gearing ratio increased to 62.7% but far below the industry average of 94% by end In October 2018, the company issued US$250mn 6.375% senior notes due 2021 in order to refinance its existing indebtedness. China Evergrande (3333), Agile Group (3383) and KWG Group (1813) recently paid interest rates of 9.5%-11.0% for the issue of USD senior notes due 2020 showing that Shimao s financial position is relatively solid compared to peers. Thanks to improvement in product mix and abundant saleable resources, Shimao s contracted sales increased by 48% in 2017 and 73% yoy in the first ten months of 2018 compared to industry growth of 13.7% and 12.5% respectively. We believe Shimao s contracted sales for 2018 will exceed RMB160bn (RMB136bn in first ten months of 2018) representing an increase of 60% yoy and 14% above management target of RMB140bn. On the other hand, the company has been aggressive in share buyback. A total of 85.53mn shares were repurchased in the open market from July 5 to October 25 at a total cost of $1,813mn or average price of $21.2 per share. Source: Bloomberg, Mason Securities According to Bloomberg estimates, Shimao s underlying EPS is expected to grow 33% in 2018 and 27% in The counter is presently trading at 2018 P/E of 6.0x and 2018 P/B of 0.8x compared with an average 2018 P/E of 6.7x and 2018 P/B of 1.4x for the remaining nine largest Chinese property stocks. Current valuation of Shimao is still attractive compared to peers. We therefore maintain our BUY rating on Shimao with an unchanged 6-month price target of $21.9.

4 Technical Ideas Name Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss Maanshan Iron & Steel 323 HK Equity SELL $4.05 $3.65 $5.33 $4.25 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 116% 4.2X 0.94X 80% Technical Indicator SMA RSI (14) 46.2 SMA BB (Upper) 4.50 SMA BB (Lower) 4.11 Name Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss BYD 1211 HK Equity BUY $58.50 $64.35 $52.96 $55.58 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 299% 42.6X 2.43X 81% Technical Indicator SMA RSI (14) 62.2 SMA BB (Upper) SMA BB (Lower) Source: Bloomberg, Mason Securities

5 Recent Recommendations Date of Issue Stock Pick Recommendation Highlights Rating (TP) Attractive valuation after a deep correction in share price Maintain BUY on A-Living Services (3319) 7/11/2018 A-Living Services (3319) 8/11/2018 CTCM (570) We believe the underperformance is partially due to worries about an increase in employee benefit expenses after a strict enforcement of China s social security taxes in 2019 With share price falling some 30% in three months, the negative impact on 2019 s earnings should be fully discounted in share price in our view Promising growth with undemanding valuation Maintain BUY on CTCM (570) We believe CTCM will benefit from 1) solid industry development; 2) channel expansion in high-tolow tier hospitals; 3) the increasing penetration rate of TCM granules due to more and more provinces including TCM granules in medical insurance in the future BUY ($14.0) BUY ($6.70) 9/11/2018 China Overseas Property Attractive valuation after a deep share price correction Maintain BUY China Overseas Property (2669) Recent outperformance indicates that market concern about an increase in employee benefit expenses after a strict enforcement of China s social security taxes in 2019 has been over BUY ($2.60) (2669) We remain optimistic about the growth prospects of COPH given strong support from parent company and ongoing industry consolidation 12/11/2018 China Gas (384) Focus on long-term trend Maintain BUY China Gas Holdings (384) Recent rally in share price was mainly due to concerns relieved about city connection fee cut of Chinese downstream gas sector The valuation of China Gas is still reasonable to long term investors BUY ($30.40) 13/11/2018 Hua Hong Semiconductor (1357) Substantial 2019 EPS dilution from share placement Downgrade Hua Hong Semiconductor (1347) to HOLD The outperformance is mainly driven by better-than-expected quarterly results, completion of share placement and bullish management guidance for the fourth quarter EPS growth will be 19.2% in 2018 and -13.9% in 2019 due to dilution from the share placement HOLD ($17.0) 14/11/2018 PetroChina (857) Main beneficiary of gas price hike; A good entry opportunity today after international oil price slump BUY PetroChina (857) for short-term trading purpose We expect more cities to raise the gas price for non-residential use during the heating season. PetroChina is the main beneficiary of the price hike given its high earnings sensitive to gas price BUY ($6.54) 15/11/2018 A-Living Services (3319) Weakness in share price presents a good buying opportunity Maintain BUY A-Living Services (3319) Investors have over-reacted on unexpected resignation of the CEO. Undemanding valuation at forward P/E of 16.3x in 2018 and 11.1x in 2019 with a 2-year EPS CAGR of 48%. BUY ($13.0) 16/11/2018 CSCI (3311) China s infrastructure investment picked up in October Maintain BUY China State Construction (3311) As at 31 October 2018, the unfinished contract value grew 21.2% yoy to $235.35bn of which 77% or $181.47bn were infrastructure investments in China Traded at 2018 P/E of 5.1x and 2019 P/E of 4.4x, CSCI looks unreasonably cheap compared with its historical valuation at 5-year average forward P/E of 9.7x BUY ($9.00) 19/11/2018 Huadian Fuxin (816) Huadian Fuxin (816): Improving fundamentals with undemanding valuation; BUY Underperformance was mainly due to a drag of hydropower generation which recorded a negative growth of 47.3% for 10M18 Sequential improvement on the main earnings driver will serve a ST catalyst for the company BUY ($1.84)

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