26 th April, 2016 Hang Seng Index Performance Index Performance Abs chg % Change Hong Kong Close 1-Day 1-Day 1-Mth 3-Mth Hang Seng Index 21,304.44-162.60-0.76 4.71 12.96 HSCI 2,900.54-24.46-0.84 4.21 13.00 HSCCI (Red Chips) 3,839.86-23.37-0.60 4.35 15.27 HSCEI (H-Shares) 8,986.33-134.58-1.48 3.28 13.82 Mkt T/O ($ Mn) 55,912.11-8,579.43-13.30-10.73-24.87 Source: Bloomberg Market Outlook Eric Yuen - ericyuen@masonsec.com Hang Seng Index closed down 0.8% at 21,304. Market turnover decreased to $55.9 billion. AIA Group (1299) advanced 1.1% on strong quarterly operating results. Heavily weighted Tencent (700), HSBC (5) and China Mobile (941) shrank 1.8%, 1.3% and 0.9% respectively. HKEx (388) tumbled 2.1% on profit taking. Li & Fung (494) lost 2.5%. Local banks and property stocks were mixed. Tingyi (322) and Hengan Int l (1044), the best and worst performing index stock, went up 2.3% and down 2.8% respectively. HSCEI declined 1.5% led by power, railway and financial stocks. CGN Power (1816), China Longyuan (916), Huaneng Power (902) and China Resources Power (836) cut 2.3%-4.9%. China Railway Group (390), CRRC Corporation (1766) and CCCC (1800) slumped 2.5%-5.4%. Securities, insurance and banking shares in HSCEI dropped an average 2.3%, 2.0% and 1.3% respectively. Great Wall Motor (2333) and PetroChina (857) climbed 0.2%-0.5%, the most in HSCEI. We expect Hang Seng Index to decline in near term due to profit taking with a technical support at 20,800. Oversea DJIA 17,977.24-26.51-0.15 2.63 11.20 NASDAQ 4,895.79-10.44-0.21 2.56 7.18 Shanghai SE Composite 2,946.67-12.57-0.42-1.10 7.16 Crude Oil Futures (US$) 42.96 0.32 0.75 8.87 36.60 Gold Futures (US$) 1,239.70-0.50-0.04 1.48 10.67 Baltic Dry Index 690.00 2.00 0.29 69.95 94.92 USD / Euro 1.1271-0.0005-0.04 0.70 3.93 Yen / USD 109.433-0.1500-0.14 2.06.11.84 HSCEI HSI 20-Day MA 8,953.60 20,839.85 50-Day MA 8,575.58 20,174.32 9-Day RSI 49.02 59.25 We expect Hang Seng Index to decline in near term due to profit taking with a technical support at 20,800. Remarks: Mason Securities Ltd ( Mason Securities ) is licensed by the Securities and Futures Commission to carry on Types 1, 4, and 6 regulated activities in Hong Kong. Mason Futures Ltd is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong. Bullion trading service is provided by Mason Bullion Ltd. Securities Futures Bullion
Industry / Corporate News Eric Yuen - ericyuen@masonsec.com Fortune REIT (778) offers high dividend yield and low earnings risk Maintain BUY Maintain BUY Company s rental portfolio caters mainly to day-to-day shopping needs Risk Level: Low HK s economy is slowing but local consumption should be stable given low jobless rate Time Horizon: Long Low earnings risk and high dividend yield Since our BUY recommendation on Fortune REIT (778, $8.51) on February 18, its share price surged 7.0% but underperformed Hang Seng Index and HSCEI by 5.0% and 5.6% respectively as investors chased risky assets in the past two months amid the weakness in U.S. dollar and increase in crude oil price. As we believe Hong Kong s stock market may face profit-taking pressure in near term and U.S. Federal Reserve is likely to keep interest rate unchanged this week, the re-rating of high yield stocks such as Fortune REIT will continue in our view. Share price of Fortune REIT closed at a record high of $8.57 last Friday and declined 0.7% yesterday. Fortune REIT holds a portfolio of 17 retail properties in Hong Kong including Fortune City One, Fortune Kingswood and Ma On Shan Plaza etc. Tenants in the non-discretionary retail sectors such as supermarkets, food & beverages as well as services and education made up approximately 60% of gross rentable area, signifying the strong resilience of the company against cyclical changes in the macroeconomic environment. Hong Kong s retail sales value decreased by 3.7% in 2015 and 13.6% yoy in the first two months of 2016, mainly due to a sharp decline in tourist spending on luxury items while domestic consumption is less affected. Looking ahead, Hong Kong s GDP growth is likely to slow in 2016 but local consumption should be relatively stable as unemployment rate remains low (3.3% in 2015 compared to the lowest of 3.2% in 2014 and the highest of 7.9% in 2003 since the Asian Financial Crisis in 1997) despite a slight increase to 3.4% in 1Q16. Fortune REIT s financial results for 2015 were impressive. Total revenue and net property income grew 13.7% and 14.0% yoy to $1,882mn and $1,324mn respectively, fueled by the additional income from Laguna Plaza acquired in January 2015 and a strong rental reversion rate of 20.3%. Average occupancy rate improved to 98.8% (2014: 97.3%). Passing rent as at 31 December 2015 was $40.0 per sq.ft., up 6.8% yoy. Total borrowings costs increased by 4.8% yoy but the average cost of debt reduced to 2.15% from 2.17% in 2014. Total borrowings as a percentage of gross assets stayed at relatively low level of 30.1% against 29.4% in 2014. Income available for distribution surged 13.3% yoy to $885mn. Distribution per unit grew 12.5% yoy to $0.4688 translating into a dividend yield of 5.5%. According to Bloomberg estimates, the company s total revenue is expected to grow 5.2% in 2016 and 5.1% in 2017. Distribution per unit will increase by 2.4% to $0.480 in 2016 and 3.3% to $0.496 in 2017, translating into attractive dividend yield of 5.6%-5.8%. We maintain a BUY rating on Fortune REIT and raise our 12-month price target from $8.75 to $9.60 based on 2016 dividend yield of 5.0%. The magnitude and pace of U.S. rate hikes is the key risk factor. Recent Recommendations Stock Pick Rating Recommendation Highlights TP Xinyi Glass (868) BUY Maintain BUY on Xinyi Glass (868) as profitability for float glass sets to rebound $5.53 CMEC (1829) BUY Weakness in share price offers a good buying opportunity BUY CMEC s (1829) $6.45 Nine Dragons Paper (2689) BUY Reiterate BUY on Nine Dragons Paper (2689) on lowered forex risk and improving fundamentals $7.4 China State Construction Int l Cheap valuation by historical standard Maintain BUY China State Construction Int l BUY (3311) (3311) $14.0 Techtronic Industries (669) BUY Reiterate BUY on Techtronic Industries (669) given company s strong innovation and solid results $34.5 Chow Tai Fook (1929) SELL SELL Chow Tai Fook (1929) on expensive valuation $4.70 China Lesso (2128) BUY Reiterate BUY on China Lesso (2128) to ride on recent rebound of China s infrastructure and construction activities $6.32 Geely Automobile (175) SELL Geely Automobile (175) is no longer undervalued by historical standard or compared to peers SELL $3.60 Xinhua Winshare Publishing (811) BUY BUY Xinhua Winshare Publishing (811) ahead of A shares IPO $9.0 Ju Teng (3336) BUY Reiterate Buy on Ju Teng (3336) as we expect margin expansion to continue in 2016 $5.0
Technical Ideas Longfor Properties (960, $11.10) TP: $9.99 SELL Risk: Low Time Horizon: Short Longfor Properties operates in the property development, property investment and property management businesses in China. Share price was flat yesterday. 9-day RSI fell below 50. MACD also showed negative crossing, indicating a strong downward momentum ahead. SELL. Short-term target at $9.99. Cover short at $12.00. Consensus 2016 PER: 6.7x Consensus target price: $13.85 Source: Bloomberg, Mason Securities HKEx (388, $199.70) TP: $180 SELL Risk: Low Time Horizon: Short HKEx owns and operates the stock exchange, futures exchange, and their related clearing houses in Hong Kong. The company provides the trading platforms for a range of cash and derivatives products and the facilities for processing trades. Counter retreated 2.1% yesterday with exceptional turnover after reaching strong resistance. 9-day RSI declined after reaching 80. SELL. Short-term target at $180 Cover short at $215. Source: Bloomberg, Mason Securities Consensus 2016 PER: 36.2x Consensus target price: $177.12
RSI Indicator Overbought (9-day RSI> 80) Tickers 10, 45, 112, 148, 172, 173, 210, 220, 226, 241, 251, 291, 319, 484, 521, 526, 607, 903, 976, 1028, 1220, 1243, 1568, 1636, 1833, 2010, 2098, 2371, 3326 Oversold (9-day RSI<20) Tickers 303, 555, 622, 861, 997, 1421 Exceptional Turnover & Price Movements Stock Stock Last Price ($) Price Change (%) Turnover / 3-mth daily avg turnover Target price up / downside (%)* Rating*^ Real Nutriceutical 2010 1.03 43.1 56.6 N/A N/A N/A Tungtex Holdings 518 1.33 15.7 25.6 N/A N/A N/A Alibaba Health Information 241 5.61 9.8 4.1 N/A N/A N/A CST Mining 985 0.12 8.1 5.6 N/A N/A N/A Silverman 1616 2.49 6.4 4.2 N/A N/A N/A Rexlot 555 0.19 4.5 5.6 N/A N/A N/A Dah Sing Banking 2356 14.24 4.2 2.0 3.4 3.6 9.6 Pacific Basin Shipping 2343 1.34 3.9 2.1-0.5 3.3 N/A Evergrande Real Estate 3333 5.90 3.7 2.9-12.4 2.5 9.2 Cogobuy 400 11.68 2.6 8.0 7.7 5.0 27.6 Source: Bloomberg, Mason Securities; *Based on consensus estimates ^ The Rating indicates analysts opinions on the security. It is calculated by converting analysts recommendations into a number from 1-5 and taking the average. 5 is the best while 1 is the worst. 2016 PER*
A-H Share Premium / Discount (%) Average AH Shanghai Listed -38.3% Premium/Discount (%) Shenzhen Listed -40.5% Remark: Shenzhen-listed stocks are not included in the upcoming cross-border stock trading pilot program H Share A Share A-H Shares Shanghai Listed Company Name A Close (RMB) H Close (HKD) AH Price Gap (%) H Share A Share A-H Shares Shanghai Listed Company Name A Close (RMB) H Close (HKD) AH Price Gap (%) 1108 600876 Luoyang Glass 27.55 4.95-85 2628 601628 China Life Insurance 21.9 18.52-29 187 600860 Beijing Jingcheng 9.22 3.24-71 6837 600837 Haitong Securities 15.47 13.22-28 300 600806 Shenji Group 8.68 3.07-70 753 601111 Air China 6.8 5.85-28 38 601038 First Tractor 11.79 4.47-68 1138 600026 China Shipping 6.47 5.6-27 1033 600871 SSC 4.51 1.73-68 1088 601088 China Shenhua 14.77 13.06-26 3993 603993 China 3.35 1.3-67 525 601333 Guangshen Railway 4.05 3.6-26 2238 601238 GAC Group 22.31 8.74-67 1186 601186 CRCC 10.64 9.51-25 553 600775 Nanjing Panda 14.43 5.84-66 1288 601288 ABC 3.13 2.82-24 2727 601727 Shanghai Electric 8.33 3.39-66 3328 601328 BoComm 5.4 5-22 1171 600188 Yanzhou Coal 10.95 4.46-66 3968 600036 China Merchants 17.9 16.78-21 2866 601866 China Shipping 4.46 1.85-65 3988 601988 Bank of China 3.35 3.17-21 995 600012 Anhui Expressway 13.69 6.17-62 2607 601607 Shanghai Pharm 16.99 16.32-19 1053 601005 Chongqing Iron 2.77 1.31-60 6818 601818 China Everbright 3.65 3.53-19 317 600685 Guangzhou 25.88 12.4-60 6886 601688 Huatai Securities Co 17.69 17.44-17 564 601717 Zhengzhou Coal 6.17 3.25-56 1398 601398 ICBC 4.27 4.25-17 2883 601808 China Oilfield 12.57 6.66-56 2601 601601 CPIC 27.77 28.15-15 1919 601919 China Cosco 5.88 3.17-55 6030 600030 Citic Securities 16.76 17.72-11 991 601991 Datang Intl Power 4.18 2.26-55 168 600600 Tsingtao Brewery 27.7 29.4-11 338 600688 Sinopec Shanghai 6.84 3.74-54 939 601939 CCB 4.69 4.98-11 1065 600874 Tianjin Capital 8.05 4.42-54 386 600028 Sinopec 4.88 5.38-8 2600 601600 Chalco 4.4 2.61-50 2196 600196 Shanghai Fosun 18.98 21.3-6 2880 601880 Dalian Port 5.74 3.41-50 2318 601318 Ping An Insurance 5.7 36.9-4 588 601588 Beijing North Star 4.09 2.43-50 3606 600660 Fuyao Glass 14.44 17.7 3 1618 601618 MCC 4.02 2.39-50 177 600377 Jiangsu Express 6.7 10.12 4 107 601107 Sichuan 4.28 2.57-50 914 600585 Anhui Conch 15.97 20.4 7 323 600808 Magang 2.79 1.74-48 1072 600875 Dongfang Electric 10.37 6.48-48 A-H Shares Shenzhen Listed 2009 601992 BBMG 8.51 5.58-45 568 002490 Shandong Molong 9.11 2.96 2.48 1336 601336 New China Life 39.99 26.4-45 1057 002703 Zhejiang Shibao 25.28 9.04 7.58 358 600362 Jiangxi Copper 14.39 9.6-44 42 000585 Northeast Electric 7.44 3 2.51 1898 601898 China Coal Energy 5.23 3.67-41 719 000756 Shandong Xinhua 11.14 4.92 4.12 670 600115 China Eastern 6.12 4.35-40 921 000921 Hisense Kelon 7.55 3.56 2.98 2333 601633 Great Wall Motor 8.61 6.23-39 1157 000157 Zoomlion Heavy 4.38 2.72 2.28 857 601857 Petrochina 7.56 5.61-38 895 002672 Dongjiang Env 16.62 10.9 9.13 2899 601899 Zijin Mining 3.19 2.44-36 1211 002594 BYD 60.75 43.45 36.41 1988 600016 China Minsheng 9.44 7.23-36 1812 000488 Shandong Chenming 8.1 6.08 5.10 902 600011 Huaneng Power 7.69 5.99-35 1513 000513 Livzon Pharm 44.37 35.00 29.33 874 600332 Guangzhou Pharm 21.66 16.88-35 2202 000002 China Vanke 24.43 19.48 16.32 1071 600027 Huadian Power 5.36 4.18-35 2208 002202 Xinjiang Goldwind 15.44 12.38 10.37 1800 601800 CCCC 11.57 9.09-34 2039 000039 China International 14.44 12.02 10.07 1766 601766 CRRC Corp 9.65 7.73-33 763 000063 ZTE Corp 14.16 12.28 10.29 1055 600029 China Southern 6.09 4.91-32 347 000898 Angang Steel 4.38 3.98 3.34 548 600548 Shenzhen Express 8.45 6.86-32 1776 000776 GF Securities Co Ltd 15.98 17.88 14.98 390 601390 China Railway 7.62 6.21-32 2338 000338 Weichai Power 8.1 9.89 8.29 998 601998 China Citic Bank 5.88 4.91-30
HSI & HSCEI Constituents Performance Price Change (%) Index 5 D 1 M 3 M vs 3M High Hang Seng Index -1 5 10-1 Hang Seng China Ent Index -1 3 10-3 Outperform Underperform Mixed Banking (HK), Property (HK), Ports, IT Hardware Coal, Power Airlines, Consumer, Gaming, Insurance Price Change (%) Price Change (%) Stock vs 3M Stock vs 3M Company Name 5 D 1 M 3 M Company Name 5 D 1 M 3 M High High 322 Tingyi 2 18 1-3 941 China Mobile -1 9 8-2 4 Wharf 2 9 23 0 293 Cathay Pac Air -1 4 9-4 1299 AIA 1 13 11 0 3988 Bank of China -1 1 5-3 27 Galaxy 1-2 29-6 1288 ABC -1 2 4-2 992 Lenovo 1 4-8 -13 1359 China Cinda -1-2 9-5 66 MTR Corporation 1 3 11 0 267 CITIC Ltd -1 1 10-3 12 Henderson Land 1 8 29-1 2319 China Mengniu -1 23 21-3 2 CLP Hldgs 1 5 17 0 3328 BOCOM -1 2 8-2 1109 China Res Land 1-2 9-6 762 China Unicom -1-7 12-9 2333 GreatWall Motor 0-3 -13-13 5 HSBC Hldgs -1 5-1 -3 857 PetroChina 0 9 21 0 939 CCB -1 2 8-3 2202 China Vanke 0 5 10-3 1398 ICBC -1 0 8-3 11 Hang Seng Bank 0 6 17-1 3323 CNBM -1 10 27-7 1880 Belle Int'l 0 6-5 -11 2628 China Life -1 0-4 -6 83 Sino Land 0 3 31-4 1336 New China Life -1 1-3 -5 823 Link REIT 0 7 10 0 1088 China Shenhua -2 5 16-5 3699 Dalian Wanda 0 36 40 0 1211 BYD Company -2 2 20-3 3 HK & China Gas 0 3 9-3 2318 Ping An -2 2 5-4 135 Kunlun Gas 0 5 25-2 3968 CM Bank -2 4 13-3 151 Want Want 0 19 31-2 1988 Minsheng Bank -2 1 9-3 19 Swire Pacific 'A' 0 7 20 0 700 Tencent -2 1 11-4 1113 CK Property 0 7 30-2 6837 Haitong Securities -2 4 18-2 144 China Mer Hldgs 0 11 12-6 388 HKEx -2 10 18-2 101 Hang Lung Prop 0 10 10 0 914 Anhui Conch -2 7 27-10 16 SHK Prop 0 6 20 0 494 Li & Fung -2 10 9-3 1038 CKI Holdings 0 1 6-6 1816 CGN Power -2 3 8-6 489 Dongfeng Group 0-6 -6-11 728 China Telecom -2-3 12-10 168 Tsingtao Brew 0 1 2-3 6030 CITIC Securities -2 0 22-6 23 Bank of E Asia 0 6 30-1 6886 HTSC -2 2 25-7 17 New World Dev 0 7 26-1 916 Longyuan Power -2 7 22-11 2388 BOC Hong Kong 0 9 18-1 753 Air China -3 12 13-7 1 CK Hutchison -1-4 2-6 1766 CRRC -3 2 6-6 1928 Sands China -1-6 24-11 836 China Resources -3 0 6-10 6 Power Assets -1-1 14-4 1776 GF Securities -3-1 9-9 883 CNOOC -1 12 38-2 1044 Hengan Int'l -3 13 4-5 688 China Overseas -1 2 15-6 2601 China Pacific -3 1 8-5 2328 PICC P&C -1 10 7-2 390 China Railway -3 12 27-6 386 Sinopec Corp -1 12 25-2 1339 PICC Group -4 3 5-5 2883 China Oilfield -1 10 27-2 902 Huaneng Power -5-12 -2-18 998 CITIC Bank -1 4 11-2 1800 China Comm Cons -5 13 44-10 1099 Sinopharm -1 12 25-3
Upcoming Events Date Stock Company Name Event Apr 26 914 Anhui Conch Cement Quarter Apr 26 3988 Bank of China Quarter Apr 26 2009 BBMG Corporation Quarter Apr 26 2388 BOC Hong Kong Quarter Apr 26 1800 China Communications Construction Quarter Apr 26 2880 Dalian Port Quarter Apr 26 1071 Huadian Power Quarter Apr 26 902 Huaneng Power Quarter Apr 26 1618 Metallurgical Corp of China Quarter Apr 26 2318 Ping An Insurance Quarter Apr 27 874 Guangzhou Baiyunshan Pharm Final Apr 27 1578 Bank Of Tianjin Dividend Apr 27 1812 Shandong Chenming Paper Final Apr 27 1898 China Coal Energy Quarter Apr 27 2202 China Vanke Quarter Apr 27 998 China CITIC Bank Quarter Apr 27 1199 Cosco Pacific Quarter Apr 27 1766 CRRC Corporation Quarter Apr 27 991 Datang Int l Power Quarter Apr 27 2238 Guangzhou Automobile Quarter Apr 27 525 Guangshen Railway Final Apr 27 6837 Haitong Securities Quarter Apr 27 323 Maanshan Iron & Steel Quarter Apr 27 338 Sinopec Shanghai Petrochem Quarter Apr 27 1065 Tianjin Capital Environ Quarter Apr 27 3331 Vinda International Quarter Disclosures Investment Rating System Ratings Description Mason Securities Limited s investment Buy Expected positive return of > 10 % rating system is divided into investment Investment Ratings Hold Expected return range of ~ ±10 % ratings, risk rating and investment time Sell Expected negative return > 10% horizon. The rating scale is subject to change upon periodic review of market by High (H) 90-day volatility of > 50% research department. Assigned ratings are Risk Ratings Medium (M) 90-day volatility of > 30-50% based on company and sector historical Low (L) 90-day volatility of < 30% performance and analysts intrinsic Long (L) 6 12 Months valuation of the stock Investment Time Medium (M) 3 6 Months Horizon Short (S) Less than 1 Month Note: 90-day volatility is measured from the security s standard deviation of day to day logarithmic historical price changes. The 90-day price volatility equals the annualized standard deviation of the relative price change for the 90 most recent trading days closing price, expressed as a percentage Mason Securities Limited 12/F, The Center 99 Queen s Road Central Hong Kong Tel: (852) 2218-2828 Fax: (852) 2218-2992 This report is for information only and is not to be construed as investment advice or as an offer to buy or sell securities or financial instruments. Your investment decision should be based upon your personal investment objectives and should be made only after evaluating the stock s expected performance and risk. While the report is compiled using sources believed to be reliable, no assurance or guarantee is given regarding its accuracy or completeness. Neither Mason Securities Limited nor any of its affiliates, nor any employees or other persons connected with any of them, accepts any responsibility or liability arising from any use of this report. To the extent permitted under applicable law, the above-mentioned companies or individuals may have used the research materials before publication. Mason Securities Limited (or any of its affiliates) and their respective officers, directors, analysts, or employees may or may not have a position in or with respect to the securities or financial instruments covered herein, and may, as principal or agent, buy and sell such securities or financial instruments. However, it is hereby declared that the writer, at the time of writing, does not have any interest in any of the securities or financial instruments covered in this report. An employee, analyst, officer, or a director of Mason Securities Limited( or any of its affiliates), may serve as a director for companies covered in this report. Mason Securities Limited (or any of its affiliates) may from time to time perform investment banking or other services or solicit investment banking or other business for any companies covered in this report. Mason Securities Limited is licensed by the Securities and Futures Commission to carry on Types 1, 4, and 6 regulated activities in Hong Kong. Mason Futures Limited is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong. Bullion trading service is provided by Mason Bullion Limited.