Major Market Indicators

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1 13 th September, 2017 Hang Seng Index Performance Major Market Indicators % Change Hong Kong Close 1-Day 1-Mth 6-Mth 12-Mth Hang Seng Index 27, HSCEI (H-Shares) 11, Mkt T/O ($ Mn) 89, Source: Bloomberg Market Overview 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 Hang Seng Index closed up 0.1% 27,972. Market turnover increased to $89.9 billion. Heavily weighted Tencent (700) and HSBC (5) advanced 0.5%-0.7%. AIA Group (1299) and China Mobile (941) cut 0.1%. Geely Automobile (175) surged 6.0%, the most in Hang Seng Index. Hang Seng Bank (11) added 0.8%. Gaming and oil stocks were mixed. Galaxy Entertainment (27) soared 1.0% whilst Sands China (1928) retreated 0.3%. PetroChina (857) and Sinopec (386) increased 0.4%-0.5% but Kunlun Energy (135) plunged 1.2%. Consumption and local property stocks ended lower. Hengan Int l (1044), Want Want China (151) and China Mengniu Dairy (2319) slid 3.0%, 1.5% and 0.6% respectively. Link REIT (823) rose 0.2%. Other eight local property stocks in Hang Seng Index dropped an average 0.8% among which CK Property (1113) and Hang Lung Properties (101) fell 1.2%- 1.7%. HSCEI climbed 0.2%. BYD Company (1211) was the best performing HSCEI stock, up 10.5%. Power and securities stocks ended higher. Huatai Securities (6886) and China Longyuan (916) rose 2.2%-2.3%. Haitong Securities (6837), GF Securities (1776) and China Galaxy Securities (6881) went up 0.6%-1.0%. Chinese banks and insurers lacked clear direction. CITIC Bank (998) and China Life Insurance (2628) grew 1.2% and 0.6% respectively. China Merchants Bank (3968), Postal Savings Bank (1658) and New China Life (1336) shrank 0.7%-1.7%. Railway stocks underperformed the market. China Railway Group (390), China Railway Construction (1186), CCCC (1800) and CRRC Corporation (1766) lost 0.3%-0.8%. Zhuzhou CRRC Times Electric (3898) was the worst performing HSCEI stock, down 1.8%. Hang Seng Index is expected to decline to 27,000-27,500 this month due to profit taking. Hang Seng Index is expected to decline to 27,000-27,500 this month due to profit taking.

2 Market in Focus Large Auto dealership groups will continue to gain market share thanks to industry consolidation Yongda Auto (3669) announced to acquire four 4S dealerships (2 Porsche 4S dealerships, 1 Jaguar/Land Rover 4S dealerships and 1 4S dealership established pending commencement of operations) on September 11. The acquisition is in line with its expansion pla n through organic growth and M&A, taking advantage of the consolidating trend and utilizing its financial (previously raised $888mn via share placement) and managerial strength compared to the majority of its peers. We believe the auto -dealership industry has entered into a consolidation phase where large dealership groups such as Yongda Auto who have the ability to rapidly expand their distributi on network both organically and via M&A/strategic cooperation arrangements should be able to experience market share increments and outperform small players. We continue to keep our positive view on large auto dealership groups with Yongda Auto (3669) and Zhengtong Auto (1728) as our top picks. CAAM and CADA released August sales volume data and dealership inventory levels of the Ch inese PV market CAAM and CADA have recently released China s auto sales volume data and dealership inventory levels for August. The Chinese P V market saw a sales growth of 4.1% yoy to 1.87mn units in August, primarily led by an increase in sales volume of sedans (+1.6% yoy) and SUVs (+17.7% yoy) on the back of new model launches. In the first eight months of 2017, the Chinese PV market recorded a tota l sales volume of 14.8mn units (+2.2% yoy) supported by a strong growth in SUV (+17.1% yoy) which more than offset a drop in sales volume of sedans (-2.2%), MPV (-16.2% yoy) and Crossovers (-27.2% yoy). Apart from a recovery in China s PV market starting June, notable improvements have been observed in the dealership channels for August, with the industry s inventory level decreased to 1.37 months in August and below the alert level of 1.50 months. Inventory level for JV brands remained healthy at 1.13 months, with propriet y brands experienced notable improvements to 1.60 months but remained above the alert level. We expect the Chinese PV market to deliver better sales in the coming months, supported by seasonality factors as well as the planned revocation of the purchase tax incentive on small PVs. Key beneficiaries are proprietary brands such as Geely Auto (175) that has strong exposure to compact cars and luxury names such as Brilliance China (1114) that shall nonetheless continue to benefit from the replacement demand trend in China. Truly International s unexpected share placement will put pressure on share price Truly International (732, $2.32), a manufacturer and sale of liquid crystal display products and electronic consumer products, announced a placement of 160mn new shares with not less than six investors at $2.02 per share and issued 53.33mn shares to a subscriber at the same price. The placing price represented a 12.9% discount to yesterday closing price and 13.7% discount to book value of $2.34 per share as at 30 June Total gross proceeds of approximately $431mn will be used for general working capital and strengthe ning the equity capital of the company. The company s business deteriorated this year with a net loss of $227.4mn in 1H17 compared to a net profit of $393.3mn in 1H16 due to a significant increase in share of loss from associates and one -off provision for bad and doubtful debt of customer, Lemobile Information Technology (Beijing) Co. Ltd. We believe a low placing price and decline in earnings will p ut pressure on share price making it continue to underperform the market in near term.

3 Technical Ideas Singamas Container (716, $1.82) Stock Rating: Target Price: $2.00 Company Description: Singamas Container manufactures containers and related parts, operates container depot businesses, and provides container storage, repair and trucking as well as mid-stream services. Commentary: Counter surged 7.7% yesterday, surpassing its resistance at $1.70 and reached its 52-week high, indicating the counter s strong uptrend momentum ahead. Recommendation:. Target at $2.00. Cover short at $1.67. Company Statistics Last Closing Price $1.82 Consensus 2017 P/B 1.0x Consensus Target Price $2.00 Chaowei Power (951, $4.63) Stock Rating: Target Price: $5.09 Company Description: Chaowei Power manufactures lead acid batteries. The company produces batteries for electric bicycles, electric cars and storage batteries for wind and solar energy installations. Commentary: Counter rose 16.0% yesterday with exceptional turnover, surpassing its critical resistance at $4.41 and SMA100. MACD also showed positive crossing, indicating the counter may have found its near-term bottom and signifies further upside potential ahead. Recommendation:. Target at $5.09. Cut loss at $4.21. Company Statistics Last Closing Price $4.63 Consensus 2017 P/E 6.5x Consensus Target Price $5.32

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 brand 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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