0503 Monthly market wrap - DBS Bank · Market Focus Monthly market wrap Page 6 HSI 1 year forward PE bands – 5yr mean and standard deviations 8,000 13,000 18,000 23,000 28,000 05

sa- JY

Foresee another pedestrian month

• HK ETF flows deteriorated in April

• Earnings cuts, potential June Fed rate hike, UK referendum, and CNY to cap upside in 2Q

• We continue to like four themes for 2Q

April was lacklustre. Hong Kong equities were largely flat in April after a sizeable bounce in March. H-shares lagged the HSI, dragged in part by A-shares and mild CNY depreciation of 0.4%. Large rebounds in global banks during April also helped the HSI (pg 18). Meanwhile, sentiment gauges deteriorated and suggest a tough start for May. HK and H-share ETFs saw the largest outflows in a month since March 2014 (pg 3). The HK$4bn outflows seen in April were a stark contrast to March’s HK$1.6bn of inflows. Short selling activity also picked up towards the end of the month, as shorts totaled 12% of turnover last week (pg 5).

Autos shined among 1Q16 results; market earnings revisions were still negative in April. 1Q16 earnings of stocks within our radar were largely in line with estimates (pg 10). Autos reported more upbeat 1Q16 results than other sectors, thanks in part to GAC (2238.HK). Chinese banks and telecom operators reported flattish earnings, while non-bank financials and materials saw material y-o-y declines. In terms of earnings forecasts, they trended down in April 2016, albeit at a slower rate than 1Q16 (pg 9). HSI and HSCEI constituents saw 0.7-0.9% cuts to 2016-2017 estimates. Best revisions in April among index stocks have come from autos, FAI, and utilities. On the other hand, commodities, insurance, and Chinese telecom companies saw the worst revisions (pg 13-17).

Sell in May and go away? Game of Thrones spoiler alert: We do not expect HK equities will be resurrected like Jon Snow in the near term. Current valuations are still cheap, but they are already off trough levels where bottom fishing appetite was noticeably stronger. Confidence for China’s recovery remains shaky, as macro stabilization seems only possible if China reverts to a fixed asset investment model. Meanwhile, a potential June Fed rate hike and the June 23 UK referendum are overhangs. A potential Fed rate hike also dampens CNY outlook. Index futures are at large discounts in part due to the ex-dividend factor, which has dragged May market performance in the past (pg 2).

Continue to favour four themes in 2Q. We continue to recommend four investment themes for 2Q. We like fixed asset investment related plays as they benefit from latest macro trends. We also like companies that benefit from an A-share recovery, as we expect Shenzhen-HK connect to be announced in June-July. We also prefer laggard plays and SOE reform beneficiaries. Based on these four themes, we like China brokers, China banks, environmental, and railway and construction sectors. Our top picks largely come from these sectors, or they fit into our investment themes on a stock level (pg 22).

HSI: 21,067 ANALYST Alexander LEE CFA, +852 2971 1930 [email protected]

Ian CHUI [email protected] Performance of key indices

A s o fInd ic es 4 /29 1 w eek 30 day Y T D 2015A siaHSI 21,067 (1.9) 1.3 (3.9) (7.2) HSCEI 8,939 (2.0) (0.4) (7.5) (19.4) HSCCI 3,749 (2.9) 0.2 (7.5) (6.8) Shanghai Comp. 2,938 (0.7) (2.1) (17.0) 9.4 Shenzhen Comp. 1,874 0.3 (1.7) (18.8) 63.2 CSI300 3,157 (0.6) (1.9) (15.4) 5.6 NIKKEI 225 16,666 (5.2) (1.3) (12.4) 9.1 KOSPI 1,994 (1.1) (0.4) 1.7 2.4 Taiex 8,378 (1.8) (4.1) 0.5 (10.4) STI 2,839 (3.5) (1.2) (1.5) (14.3) KLCI 1,673 (2.6) (2.6) (1.2) (3.9) SET 1,405 (0.4) (0.4) 9.1 (14.0) J CI 4,839 (1.5) 0.5 5.3 (12.1) Sensex 25,607 (0.9) 1.1 (2.0) (5.0) O t hersDow J ones 17,774 (1.3) 0.3 2.0 (2.2) S&P 500 2,065 (1.3) 0.1 1.0 (0.7) Nasdaq 4,775 (2.7) (1.9) (4.6) 5.7 F TSE 100 6,242 (1.1) 0.6 (0.0) (4.9) DAX 30 10,039 (3.2) (0.1) (6.6) 9.6

% c hange

Source: Bloomberg Finance L.P., DBS Vickers

DBSV Top Ten Buy List

Closing T g t

T ic k er p ric e PBV PER y ield RO E Pric e(HK $ ) (X ) (X ) (% ) (% ) (HK $ )

Anhui Conch 914.HK 20.55 1.1 12.5 2.4 9.6 24.00CGN Power 1816.HK 2.49 1.5 12.1 2.5 13.1 3.40China Ev erbright Int'l 257.HK 8.72 2.0 15.7 2.6 13.7 10.20China Ev erbright Ltd 165.HK 15.40 0.9 4.4 24.5 17.0 23.84CH. Railway Constructio 1186.HK 9.92 0.9 8.7 1.7 11.0 11.60China CITIC Bank 998.HK 4.88 0.6 4.8 5.3 12.7 6.78China Hongqiao 1378.HK 5.69 0.8 7.1 3.0 12.2 6.50CK Property 1113.HK 53.25 0.7 10.8 3.0 7.0 57.00Haitong Securities * 6837.HK 12.90 1.0 9.5 3.1 12.1 n.a.Nexteer Automotiv e 1316.HK 8.18 2.5 10.5 1.9 26.9 9.40

F Y 16F

* consensus estimates Source: Thomson Reuters, DBS Vickers Based on closing prices on 29 April, 2016

DBS Group Research . Equity 3 May 2016

China / Hong Kong Market Focus

Monthly market pulse Refer to important disclosures at the end of this report

Market Focus

Monthly market wrap

Page 2

Monthly performance of Hang Seng Index since 2005

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2005 (3.6) 3.5 (4.8) 2.9 (0.3) 2.4 4.8 0.2 3.5 (6.8) 3.8 (0.4)

2006 5.9 1.1 (0.7) 5.4 (4.8) 2.6 4.3 2.5 0.9 4.5 3.5 5.3

2007 0.7 (2.3) 0.8 2.6 1.6 5.5 6.5 3.5 13.2 15.5 (8.6) (2.9)

2008 (15.7) 3.7 (6.1) 12.7 (4.8) (9.9) 2.9 (6.5) (15.3) (22.5) (0.6) 3.6

2009 (7.7) (3.5) 6.0 14.3 17.1 1.1 11.9 (4.1) 6.2 3.8 0.3 0.2

2010 (8.0) 2.4 3.1 (0.6) (6.4) 1.8 4.5 (2.4) 8.9 3.3 (0.4) 0.1

2011 1.8 (0.5) 0.8 0.8 (0.2) (5.4) 0.2 (8.5) (14.3) 12.9 (9.4) 2.5

2012 10.6 6.3 (5.2) 2.6 (11.7) 4.4 1.8 (1.6) 7.0 3.9 1.8 2.8

2013 4.7 (3.0) (3.1) 2.0 (1.5) (7.1) 5.2 (0.7) 5.2 1.5 2.9 (2.4)

2014 (5.5) 3.6 (3.0) (0.1) 4.3 0.5 6.8 (0.1) (7.3) 4.6 (0.0) (1.6)

2015 3.8 1.3 0.3 13.0 (2.5) (4.3) (6.2) (12.0) (3.8) 8.6 (2.8) (0.4)

2016 (10.2) (2.9) 8.7 1.4 Source: Bloomberg Finance L.P., DBS Vickers

Market Focus

Monthly market wrap

Page 3

Global listed HK ETF flows and HSI performance

Offshore listed A-share ETF flows and SHCOMP perf.

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

(10)

(5)

-

5

10

15

20

25

Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16

HK and H-shr ETF flows (LHS)

HSI monthly perf. (RHS)

(%)(HK$ bn)

-30.0 -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0

(40)

(30)

(20)

(10)

-

10

20


Offshore A-shr ETF flows (LHS)

SHCOMP monthly perf. (RHS)(%)(HK$ bn)

Sources: Bloomberg Finance L.P., DBS Vickers

Global listed HK and H-share ETF flows and HSI

18,000

20,000

22,000

24,000

26,000

28,000

30,000

(1,500)

(500)

500

1,500

2,500

3,500


HK and H-share ETF flows HSI (RHS)(HK$ m)


Market Focus

Monthly market wrap

Page 4

Offshore A-share ETF flows and SHCOMP index

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

(4,000)

(3,000)

(2,000)

(1,000)

-

1,000

2,000

3,000

4,000


A-share ETF flows SHCOMP (RHS)(Rmb m)


Northbound stock connect daily quota usage

Southbound stock connect daily quota usage

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16

(% of daily quota of Rmb 13bn)

-20%

0%

20%

40%

60%

80%

100%

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16

(% of daily quota of Rmb 10.5bn)


*Daily quota usage = (Daily quota – daily quota balance)/(daily quota)

Market Focus

Monthly market wrap

Page 5

US 10yr treasury yield

HK$

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

08 09 10 11 12 13 14 15 16

(%)

7.747.757.767.777.787.797.807.817.827.837.84

Jan/14 Jul/14 Jan/15 Jul/15 Jan/16

Hang Seng utilities index vs. HSI

HSI troughs correspond with outperformance by utilities

0.4

0.6

0.8

1.0

1.2

1.4

05 06 07 08 09 10 11 12 13 14 15 16

HSU vs. HSI(1/1/'03 = 1.0)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

05 06 07 08 09 10 11 12 13 14 15 16

HSI

Short selling activity and HSI

Short selling activity and HSI (2007-2009)

18000

20000

22000

24000

26000

28000

30000

6%

8%

10%

12%

14%

16%

18%


SST as % of turnover HSI (RHS)

1000012000140001600018000200002200024000260002800030000

3%

5%

7%

9%

11%

13%

15%

17%

Jan/07 Jul/07 Jan/08 Jul/08 Jan/09 Jul/09

SST as % of turnover HSI (RHS)(%)

Sources: Bloomberg Finance L.P, DBS Vickers

Market Focus

Monthly market wrap

Page 6

HSI 1 year forward PE bands – 5yr mean and standard deviations

8,000

13,000

18,000

23,000

28,000

05 06 07 08 09 10 11 12 13 14 15 16 17

HSI 5 yr mean of 1 yr forward P/E +1 std -1 std +2 std -2 std

13.2x

11.9x

10.5x

9.2x

7.9x


HSCEI 1 year forward PE bands – 5yr mean and standard deviations

-2,000 4,000 6,000 8,000

10,000 12,000 14,000 16,000 18,000 20,000

05 06 07 08 09 10 11 12 13 14 15 16 17

HSCEI 5 yr mean of 1 yr forward P/E +1 std -1 std +2 std -2 std

6.0x

10.2x

9.1x8.1x7.1x


CSI 300 1 year forward PE bands – 5yr mean and standard deviations

-

1,000

2,000

3,000

4,000

5,000

6,000

05 06 07 08 09 10 11 12 13 14 15 16 17

CSI300 5 yr mean of 1 yr forward P/E +1 std -1 std +2 std -2 std

16.9x

14.6x

12.2x

9.9x

7.5x


Market Focus

Monthly market wrap

Page 7

Hang Seng Index trailing price to book

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

HSI 1yr trailing P/B +2 stdev 5 yr mean -2 stdev(x)

1.10 1.10 0.94


HSCEI trailing price to book

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

HSCEI 1yr trailing P/B +2 stdev 5 yr mean -2 stdev(x)

0.86 1.050


Market Focus

Monthly market wrap

Page 8

HSI targets

15,000

17,000

19,000

21,000

23,000

25,000

27,000

29,000

10 11 12 13 14 15 16

HSI 3M target 12M target

22,515

21,008

Tgt PE =10.7x

Tgt PE =11.2x


HSCEI targets

7,200

8,200

9,200

10,200

11,200

12,200

13,200

14,200

15,200

10 11 12 13 14 15 16

HSCEI 3M target 12M target

10,271

9,305

Tgt PE =7.9x

Tgt PE =7.3x


Market Focus

Monthly market wrap

Page 9

Earnings forecasts and revisions

Overall earnings forecasts continued to trend down in April 2016, albeit at a slower rate than in 1Q16. HSI constituents saw negative earnings revisions of 0.7%-0.9% for 2016-2017 forecasts. HSCEI constituents saw negative earnings revisions of 0.6%-0.8% for 2016-2017 forecasts. For the HSI, the new market forecasts imply flat earnings growth in 2016 and 10.3% earnings growth in 2017. For the HSCEI, the new market forecasts imply 6% earnings decline in 2016 and 9.0% earnings growth in 2017.

Best revisions in 1Q:

- China auto companies such as GAC Group and BYD.

- Beneficiaries of stronger FAI growth including China Commmunications Construction, China Railway Group, and Anhui Conch .

- Utilities such as CLP Holdings and CGN Power.

Worst revisions in 1Q:

- Coal companies China Coal and China Shenhua

- Oil related companies CNOOC, and China Oilfield Services.

- China insurance companies China Life Insurance, CPIC

- China telecom companies China Telecom and China Unicom

- Consumer related companies Tsingtao Brewery and Belle

- Hong Kong Banks such as BEA and HSBC

Revision trends for HSI consensus earnings

Revision trends for HSCEI consensus earnings

1,800

1,900

2,000

2,100

2,200

2,300

2,400

2,500

2,600

2,700


2015 2016 2017

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900


2015 2016 2017


Market Focus

Monthly market wrap

Page 10

Notable 1Q16 results

Company Ticker Profit Vs. Notesgrowth forecast

Autos Guangzhou Auto 2238 264% Above Revenue rose 88%YoY on strong sales of self ow ned brandGreat Wall Motor 2333 -6% Slight +ve ~8% revenue grow th, but margins eroded due to SUV competitionBYD 1211 603% Slight +ve Revenue increase of 33%, w ith margin increase

Consumer Tsingtao 168 2.5% In line Volume decline. Gross margin expansion on low er raw mat costs.and F&B China Modern Dairy 1117 -72% In line Subsidiary Modern Farming results. Margin decline on ASP decline.

Midea 000333 16.9% In line Revenue declined due to destocking, but margins improved.

Financials Citic Bank 998 2.5% In line Strong PPOP offset credit costs; NPL ratio declined q-o-qBank of China 3988 1.7% Slight +ve Flat NPL ratio and low er NPL formationBank of Chongqing 1963 10.0% In line Improving NIM and asset expansion drove NII grow thPing An Bank 000001 8.0% In line PPOP of 44%; NIM expanded y-o-y; NPL ratio rose 11bps q-o-qCQRCB 3618 8.0% +8% Strong fee grow th; NPL ratio fell 3bps q-o-qICBC 1398 0.6% In line NPL and NPL formation increased but <90d overdue declinedABC 1288 1.1% In line PPOP decline, NIM more sensitive to rate cuts than peersBoCom 3328 0.5% In line NPL ratio low er than peers but overdue loan ratio higherFar East Horizon 3360 10% In line Total assets expanded 5% q-o-q. NPA ratio w as stable q-o-q.Haitong Sec 6837 -57% Not rated Brokerage fees fell 35% YoY on sluggish stock marketCitic Securities 6030 -57% Not rated Brokerage fees fell 35% YoY on sluggish stock marketPing An Insurance 2318 3.5% Not rated 1Q premiums up 28.2% y-o-y; offset by claims and inv incomeCh. Life Insurance 2628 -57% Not rated 1Q premiums up 30.7% y-o-y; offset by claims and inv income

FAI and Ch. Comm Constr. 1800 18% In line Pre-tax grow th of 13%. Net gearing high at 100%.materials CR Cement 1313 -99% In line Slight volume grow th, but large decline in GP due to cement price.

Anhui Conch 914 -33% In line 15% volume grow th, but GP fell due to cement price.China Hongqiao 1378 -24% In line Subsidiary results. Volume cushioned ASP drop.China Railw ay Grp 390 10% In line Flat top line and gross profit; helped by low er interest rates.CRCC 1186 12% In line Flat top line; low er interest rates. New contracts grew 16%.

TMT China Mobile 941 0.5% Above 5% revenue grow th; ARPU dropped q-o-q.China Telecom 728 1.4% In line Tow er leasing fee increase hurt EBITDA.TCL Comm 2618 -95% In line Revenue dropped 17%; operating deleverage hurt margins.ZTE 763 16% Below Revenue only increased 4%; slight margin contraction.Yangtze Opt. Fibre 6869 2% In line Revenue grew 18% w ith margin expansion. Offset by forex loss.

Others Sinopharm 1099 14% In line 13.5% revenue grow th, ~4ppts higher than industry grow th.PetroChina 857 loss Not rated Rmb13.8bn loss vs. Rmb6.15bn profit in 1Q15.

Source: HKEX, Bloomberg Finance L.P., DBS Vickers

Market Focus

Monthly market wrap

Page 11

Consensus forecasts for HSI members

HSI 2015 2016 2017 2016 2017China banks BoCom HK3328 1.11 1.03 1.06 -6.9% 2.5%

BOC HK3988 0.69 0.68 0.69 -1.7% 2.1%ICBC HK1398 0.95 0.91 0.93 -4.5% 2.8%CCB HK939 1.12 1.07 1.11 -4.3% 3.1%

HK banks BEA HK23 1.95 1.86 1.99 -4.7% 6.9%BOCHK HK2388 2.53 3.01 2.68 18.9% -11.1%Hang Seng Bank HK11 14.22 9.09 9.89 -36.1% 8.8%HSBC HK5 5.04 4.89 5.12 -2.9% 4.6%HKEX HK388 6.70 5.52 6.11 -17.7% 10.8%

Insurance China Life HK2628 1.51 1.36 1.66 -9.8% 22.1%Ping An HK2318 3.68 3.46 3.79 -5.9% 9.4%AIA HK1299 1.71 2.30 2.77 35.0% 20.4%

Telcos China Mobile HK941 6.54 6.53 7.06 -0.2% 8.1%China Unicom HK762 0.54 0.43 0.53 -21.2% 24.8%

Oil PetroChina HK857 0.23 0.04 0.32 -81.7% 646.5%CNOOC HK883 0.56 0.01 0.69 -97.8% 5666.7%

Coal China Shenhua HK1088 1.09 1.00 1.17 -9.0% 17.4%China Coal HK1898 0.75 0.75 0.84 -0.3% 11.5%

Gas Kunlun Energy HK135 0.02 0.49 0.62 2776.5% 26.6%Towngas HK3 0.63 0.65 0.68 2.8% 4.6%

Power CLP HK2 6.20 4.71 4.86 -24.1% 3.2%China Res Power HK836 2.10 2.38 2.23 13.4% -6.3%Power Assets HK6 3.62 3.70 3.72 2.2% 0.4%

HK property MTRC HK66 2.22 1.56 1.71 -29.7% 9.2%SHKP HK16 11.09 8.25 7.98 -25.6% -3.3%Henderson Land HK12 6.46 3.08 3.12 -52.4% 1.6%New World Development HK17 2.17 0.80 0.76 -63.3% -4.6%Hang Lung Properties HK101 1.13 1.12 1.13 -1.1% 1.0%Sino Land HK83 1.55 0.86 0.83 -44.3% -3.4%

China property COLI HK688 3.61 3.37 3.80 -6.8% 12.8%China Resources Land HK1109 2.59 2.44 2.78 -5.7% 13.7%

Conglomerates China Resources HK291 (1.65) 0.43 0.60 -126.3% 39.2%Citic Pacific HK267 1.58 1.61 1.74 1.6% 8.5%China Merchants HK144 1.55 1.74 1.88 12.3% 8.2%Swire Pacific A HK19 8.93 6.37 6.67 -28.7% 4.7%Wharf HK4 5.29 4.03 4.11 -23.8% 2.0%

Gaming Galaxy HK27 0.98 1.27 1.31 30.1% 2.8%Sands China HK1928 1.40 1.34 1.51 -4.5% 13.0%

Tech Lenovo HK992 0.60 0.16 0.70 -73.9% 348.4%Tencent HK700 3.82 5.22 6.71 36.6% 28.5%

Transport Cathay Pacific HK293 1.53 1.59 1.64 4.5% 2.8%Cosco Pacific HK1199 1.00 0.81 0.82 -19.7% 1.1%

Commerce Li & Fung HK494 0.39 0.34 0.35 -13.2% 2.7%Consumer Hengan HK1044 3.31 3.63 3.86 9.7% 6.2%

Belle Int'l HK1880 0.72 0.57 0.56 -21.2% -2.3%Want Want HK151 0.32 0.35 0.36 9.7% 0.9%Tingyi HK322 0.35 0.39 0.45 9.5% 16.2%

EPS (HK$) EPS growth


Market Focus

Monthly market wrap

Page 12

Consensus forecasts for HSCEI members

2015 2016 2017 2015-16 2016-17

Banks BOC HK3988 0.69 0.68 0.69 -2.2% 2.5%

BoCom HK3328 1.11 1.03 1.06 -7.1% 2.3%

CCB HK939 1.12 1.07 1.11 -4.7% 3.5%

CMB HK3968 2.83 2.83 3.05 0.3% 7.6%

ICBC HK1398 0.95 0.90 0.93 -4.8% 3.1%

ABC HK1288 0.68 0.65 0.67 -5.0% 3.1%

Citic Bank HK998 1.09 1.03 1.07 -5.4% 3.8%

Minsheng HK1988 1.60 1.52 1.59 -5.2% 4.9%

Insurance China Life HK2628 1.51 1.37 1.66 -9.0% 21.3%

PICC Group HK1339 0.57 0.43 0.47 -24.1% 8.8%

CPIC HK2601 2.42 2.01 2.21 -16.9% 9.8%

PICC P&C HK2328 1.82 1.57 1.70 -13.8% 8.4%

Ping An HK2318 3.68 3.46 3.79 -5.9% 9.4%

Brokers and AM Citic Securities HK6030 2.11 1.65 1.98 -21.7% 20.0%

Haitong HK6837 1.83 1.34 1.54 -26.8% 15.0%

China CINDA HK1359 0.48 0.52 0.60 7.2% 17.1%

Telcos China Telecom HK728 0.31 0.29 0.32 -7.3% 12.9%

Oil and serv ices PetroChina HK857 0.23 0.04 0.32 -81.7% 644.2%

China Oilfield HK2883 0.28 0.19 0.37 -32.3% 90.6%

China property Dalian Wanda HK3699 8.17 5.38 6.19 -34.2% 15.0%

China Vanke HK2202 2.02 2.25 2.64 11.2% 17.4%

Power Huaneng Power HK902 1.16 0.99 0.90 -14.4% -9.0%

China Longyuan HK916 0.44 0.53 0.62 20.3% 17.1%

CGN Power HK1816 0.18 0.19 0.22 7.3% 13.0%

Construction and China Railway HK390 0.65 0.68 0.74 3.7% 8.8%

machinery China Comm Cons HK1800 1.18 1.29 1.45 9.1% 12.5%

Cement Anhui Conch HK914 1.75 1.64 1.85 -6.2% 12.6%

CNBM HK3323 0.23 0.30 0.33 25.8% 12.9%

Coal China Coal HK1898 (0.31) (0.29) (0.17) -7.0% -41.5%

China Shenhua HK1088 1.09 1.00 1.17 -9.0% 17.4%

Autos BYD HK1211 1.38 1.52 1.90 9.9% 25.3%

GAC Group HK2238 0.80 1.04 1.17 29.1% 13.3%

Dongfeng Motors HK489 1.65 1.75 1.84 5.9% 5.0%

Greatwall Motor HK2333 1.09 1.06 1.10 -2.3% 3.7%

Others Tsingdao HK168 1.56 1.37 1.43 -12.6% 4.5%

Sinopharm HK1099 1.68 1.89 2.21 12.6% 16.8%

Air China HK753 0.71 1.01 1.00 42.1% -0.8%

J iangxi Copper HK358 0.25 0.39 0.50 56.0% 29.4%

EPS (HK$) EPS growth


Market Focus

Monthly market wrap

Page 13

Best EPS revisions among index stocks in 2Q in HKD terms

Consensus earnings revisions for GAC (2238.HK) Consensus earnings revisions for Air China (753.HK)

0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20


FY16 FY17(HK$)

0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10


FY16 FY17(HK$)

Consensus EPS revisions for CR Beer (291.HK) Consensus EPS revisions for BOCHK (2388.HK)

0.40

0.45

0.50

0.55

0.60

0.65


FY16 FY17(HK$)

2.60

2.70

2.80

2.90

3.00

3.10

3.20

3.30

3.40


FY16 FY17(HK$)

Consensus earnings revisions for BYD (1211.HK) Consensus EPS revisions for Ch Comm Const (1800.HK)

0.80

1.00

1.20

1.40

1.60

1.80

2.00


FY16 FY17(HK$)

1.10

1.20

1.30

1.40

1.50

1.60

1.70


FY16 FY17(HK$)


Market Focus

Monthly market wrap

Page 14

Consensus earnings revisions - PICC (2328.HK) Consensus earnings revisions for Anhui Conch (914.HK)

0.40 0.41 0.42 0.43 0.44 0.45 0.46 0.47 0.48 0.49 0.50


FY16 FY17(HK$)

1.50

1.70

1.90

2.10

2.30

2.50

2.70

2.90


FY16 FY17(HK$)

Consensus earnings revisions for Ch Railway Grp (390.HK) Consensus earnings revisions for CLP (2.HK)

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90


FY16 FY17(HK$)

4.40 4.45 4.50 4.55 4.60 4.65 4.70 4.75 4.80 4.85 4.90


FY16 FY17(HK$)

Consensus earnings revisions for CGN Power (1816.HK)

0.18

0.19

0.20

0.21

0.22

0.23

0.24

0.25

0.26


FY16 FY17(HK$)


Market Focus

Monthly market wrap

Page 15

Worst EPS revisions among index stocks in 2Q in HKD terms

Consensus earnings revisions for China Coal (1898.HK) Consensus earnings revisions for CNOOC (883.HK)

(0.40)

(0.30)

(0.20)

(0.10)

-

0.10

0.20


FY16 FY17(HK$)

(0.50)

-

0.50

1.00

1.50

2.00


FY16 FY17(HK$)

Consensus revisions for China Life Insurance (2628.HK) Consensus revisions for China Unicom (762.HK)

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60


FY16 FY17(HK$)

0.40

0.50

0.60

0.70

0.80

0.90

1.00


FY16 FY17(HK$)

Consensus earnings revisions for Lenovo (992.HK) Consensus revisions for China Oilfield Service (2883.HK)

-

0.20

0.40

0.60

0.80

1.00

1.20


FY16 FY17(HK$)

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40


FY16 FY17(HK$)


Market Focus

Monthly market wrap

Page 16

Consensus earnings revisions for COSCO Pacific (1199.HK) Consensus revisions for China Shenhua (1088.HK)

0.75

0.80

0.85

0.90

0.95

1.00


FY16 FY17(HK$)

0.80

1.00

1.20

1.40

1.60

1.80

2.00

2.20


FY16 FY17(HK$)

Consensus earnings revisions for PetroChina (857.HK) Consensus earnings revision for Tsingtao (168.HK)

-

0.20

0.40

0.60

0.80

1.00

1.20


FY16 FY17(HK$)

1.10

1.30

1.50

1.70

1.90

2.10

2.30

2.50


FY16 FY17(HK$)

Consensus earnings revisions for Belle (1880.HK)

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85


FY16 FY17(HK$)


Market Focus

Monthly market wrap

Page 17

Consensus earnings revisions for HSBC (5.HK) Consensus revisions for Huaneng Power (902.HK)

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0


FY16 FY17(HK$)

0.80

0.90

1.00

1.10

1.20

1.30

1.40


FY16 FY17(HK$)

Consensus earnings revisions for CPIC (2601.HK) Consensus revisions for CITIC Securities (6030.HK)

1.90 2.00 2.10 2.20 2.30 2.40 2.50 2.60 2.70 2.80 2.90


FY16 FY17(HK$)

1.20

1.40

1.60

1.80

2.00

2.20

2.40


FY16 FY17(HK$)

Consensus revisions for China Telecom (728.HK) Consensus revisions for Bank of East Asia (23.HK)

0.25

0.27

0.29

0.31

0.33

0.35

0.37

0.39


FY16 FY17(HK$)

1.80

2.00

2.20

2.40

2.60

2.80

3.00

3.20


FY16 FY17(HK$)


Market Focus

Monthly market wrap

Page 18

1 month sector share price performance

-10%

-5%

0%

5%

10%

15%

20%

Pow

er -

Chi

na

Gam

ing

Alt

erna

tive

ene

rgy

Har

dwar

e &

equ

ip

Brok

ers-

Ch

ina

Tele

com

-C

hin

a

Wat

er, e

nvir

onm

enta

l

Phar

mac

euti

cals

Gas

Insu

ran

ce

Pow

er, i

nfr

a &

uti

litie

s

Ind

ust

rial

Tran

spo

rt (p

orts

)

Tran

spor

t (to

ll ro

ads)

Prop

ertie

s -C

hin

a

Ban

ks -

Chi

na

HSC

EI

Aut

os a

nd p

arts

Tele

com

-H

K

Ban

ks -

HK

Con

sum

er (h

ouse

hold

)

Con

glo

mer

ates

-H

K

HSI

Co

nsum

er (r

etai

lers

)

Con

sum

er (a

ppa

rel)

REI

T

Tran

spor

t (ai

rlin

es)

Soft

war

e &

IT

serv

ices

Prop

erti

es -

HK

Con

sum

er (l

uxu

ries

)

Cem

ent

Food

and

bev

erag

es

Rai

l & c

onst

ruct

ion

Co

nsu

mer

(sp

orts

wea

r)

Con

sum

er (p

erso

nal

)

Tran

spor

t (sh

ippi

ng)

Stee

l & a

lum

iniu

m Oil

Coa

l

Ban

ks -

Glo

bal

Source: Thomson Reuters, DBS Vickers

YTD sector share price performance

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Insu

ran

ce

Wat

er, e

nvi

ron

men

tal

Tran

spo

rt (s

hip

pin

g)

Pow

er -

Ch

ina

Pro

per

ties

-C

hin

a

Co

nsu

mer

(ret

aile

rs)

Co

nsu

mer

(ho

use

ho

ld)

Tran

spo

rt (p

ort

s)

Ban

ks -

Glo

bal

Au

tos

and

par

ts

Co

nsu

mer

(ap

par

el)

Foo

d a

nd

bev

erag

es

Tran

spo

rt (a

irlin

es)

Ban

ks -

Ch

ina

HSC

EI

Phar

mac

euti

cals

Har

dw

are

& e

qu

ip

Gas

Co

nsu

mer

(sp

ort

swea

r)

Bro

kers

-Ch

ina

Alt

ern

ativ

e en

erg

y

Soft

war

e &

IT

serv

ices HSI

Co

al

Co

ng

lom

erat

es -

HK

Tran

spo

rt (t

oll

road

s)

Ind

ust

rial

Co

nsu

mer

(lu

xuri

es)

Ban

ks -

HK

Rai

l & c

on

stru

ctio

n

Pro

per

ties

-H

K

Tele

com

-C

hin

a

Cem

ent

Pow

er, i

nfr

a &

uti

litie

s

Gam

ing

REI

T

Co

nsu

mer

(per

son

al)

Tele

com

-H

K

Stee

l & a

lum

iniu

m Oil

Source: Thomson Reuters, DBS Vickers

Market Focus

Monthly market wrap

Page 19

Moving average and RSI for HSI

Moving average and RSI for HSCEI

18,000

20,000

22,000

24,000

26,000

28,000

30,000


HSI 50d avg 100d avg 250d avg

20

50

80

14d RSI

7,200

8,200

9,200

10,200

11,200

12,200

13,200

14,200


HSCEI 50d avg 100d avg 250d avg

20

50

80

14d RSI

Moving average and RSI for CSI 300

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500


CSI 50d avg 100d avg 250d avg

20

50

80

14d RSI


Market Focus

Monthly market wrap

Page 20

2016F ROE vs. 2015F P/B

China banks

Insurance

China property

Environmental

Railway and construction

Apparel and footwear

China auto and parts

China IPPs

China materials

China telecom carriers HK banks

HK property

HK telecom

Pharma & Health

Textiles

China coal

China F&B

Oil

Retailers

Chinese brokers

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0

(201

5P/

B x)

(2016F ROE %)

Source: DBS Vickers

Market Focus

Monthly market wrap

Page 21

Sector recommendations Sector Weight ing Rat ionale

China banks Overweight Trough valuations and under-owned; prefer JSBs with sufficient capital

China non-bank financials Overweight SZ-HK connect can be catalyst; capital market growth is part of reform

Environmental Overweight Sector is more attractive after de-rating since mid-2015

Railway and construction Overweight Lower borrowing rates, domestic fiscal spending, and overseas contracts

Apparel and footwear Neutral Prefer sportswear companies; avoid companies with large HK exposure

China airlines Neutral Hurt by CNY depreciation but oil price declines can offset

China appliances Neutral Outlook to improve on back of expected rebound in property sales

China auto and parts Neutral Tax cuts can help sales; inventory situation has improved

China IPPs Neutral Helped by lower coal prices; prefer operators with more alternative exposure

China materials Neutral Disappointing ASP; possible rebound if property FAI can recover

China property Neutral Tightening begins for Tier 1 cities; Supply issues for smaller cities

China retailers Neutral Prefer players with strong O2O initiatives or defense against e-commerce

China telecom carriers Neutral VAT reform will no longer drag earnings in 2016; potential restructuring

China telecom equipment Neutral 4G network capex to slow; operator restructuring can be a risk

Gaming Neutral Worst seems to be over for y-o-y trend, but recovery seems slow

Hong Kong banks Neutral USD interest rate normalization is positive; HK economic outlook is negative

Hong Kong property Neutral HK retail, political pressure, and USD interest rates are key risks

Hong Kong telecom Neutral Stable operations and decent y ields are attractive in volatile market

IT, software, & e-commerce Neutral Strong top line and earnings growth; large caps were resilient during decline

Oil Neutral Oil price recovery likely a 2017 or 2018 event

Pharmaceutical + healthcare Neutral Positive long term drivers; valuations are pricey for fast growth segments

Textiles Neutral US order headwinds and near peak valuation limit near term upside

China coal Underweight Decline of energy intensive sectors; promotion of renewable energy

China F&B Underweight Sales disappointment and potential El Nino driven cost inflation; prefer dairy

HK REITs Underweight HK retail and USD interest rate normalization are key risks

HK retailers Underweight Structural change with mainland tourists; negative wealth effect for locals

Source: DBS Vickers

Market Focus

Monthly market wrap

Page 22

DBSV HK top ten BUYs

Closing DBSV TgtT icker price rat ing Price F Y15A F Y16F F Y15A F Y16F F Y15A F Y16F F Y15A F Y16F

Top pick s (HK$) (HK$) (X) (X ) (%) (%) (X) (X ) (%) (%)Anhui Conch 914.HK 20.55 BUY 24.00 12.1 12.5 11.1 9.6 1.3 1.1 2.5 2.4

CGN Power 1816.HK 2.49 BUY 3.40 14.3 12.1 11.4 13.1 1.7 1.5 2.0 2.5

China Everbright Int'l 257.HK 8.72 BUY 10.20 18.8 15.7 12.5 13.7 2.3 2.0 2.1 2.6

China Everbright Ltd 165.HK 15.40 BUY 23.84 5.1 4.4 13.8 17.0 0.7 0.9 4.9 24.5

CH. Railway Construction 1186.HK 9.92 BUY 11.60 8.8 8.7 11.9 11.0 0.9 0.9 1.7 1.7

China CITIC Bank 998.HK 4.88 BUY 6.78 4.7 4.8 14.3 12.7 0.6 0.6 5.1 5.3

China Hongqiao 1378.HK 5.69 BUY 6.50 8.2 7.1 10.8 12.2 0.8 0.8 2.6 3.0CK Property 1113.HK 53.25 BUY 57.00 13.2 10.8 8.7 7.0 0.8 0.7 2.6 3.0

Haitong Securities * 6837.HK 12.90 NR n.a. 7.3 9.5 11.1 12.1 1.2 1.0 4.2 3.1

Nexteer Automotive 1316.HK 8.18 BUY 9.40 12.8 10.5 27.2 26.9 3.2 2.5 1.6 1.9

Simple av erage 10.5 9.6 13.3 13.5 1.3 1.2 2.9 5.0

Div y ieldPBVPER ROE

*consensus estimates

Source: DBS Vickers

DBSV top picks – simple average

DBSV top picks – relative performance vs. HSI

70

80

90

100

110

120

130

140

150

160


DBSV top picks HSI

(28 Feb 2014 = 100)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0


DBSV top pick relative performance vs. HSI

(28 Feb 2014 = 0)

(%)


Our top ten list:

Anhui Conch (914.HK)

- Fixed asset investment targets in five year plan are still respectable; FAI has been bright spot in YTD macro figures.

- Clinker prices increased twice in March 2016 in East China.

- One of the more efficient cement makers; still generated ROE of 11% in a down cycle during 2015.

CGN Power (1816.HK)

- China targets to increase its nuclear power capacity by several times from FY15’s 29GW by 2030. This is aimed to substitute for polluting thermal plants.

- FY15 earnings were above estimates; we expect FY15-17 EPS CAGR to be a healthy 14% driven by capacity expansion.

- Valuations have come off substantially since 2015, and are attractive for China’s largest nuclear power producer. An A-share market recovery can also make CGN Power attractive by widening the valuation gap against A-share nuclear peers.

Market Focus

Monthly market wrap

Page 23

China Everbright International (257.HK)

- Further increase in capital expenditures in FY16 with current order backlog amounting to >Rmb19bn

- Operating data continues to be robust in FY16: 27% growth in WTE operational capacity, >25% growth in treated waste water volume, doubling in operational capacity for hazardous solid waste.

- More attractive valuation with <16x FY16 PE

China Everbright Ltd (165.HK)

- A-share IPO resumption to help private equity business exit projects.

- Parent’s consolidation of China Everbright Securities and Everbright Bank stakes held by CEL can resume as regulators unwind A-share supportive measures which prohibited large stake changes. Restructuring should narrow CEL’s discount to NAV.

- A-share market recovery to enhance CEL’s NAV from stakes in Everbright Securities and Everbright Bank.

China Railway Construction (1186.HK)

- Chinese policy makers are helping infrastructure funding by lowering borrowing costs and project capital requirements, and this will help domestic demand.

- Decline in borrowing costs to help high gearing companies like CRCC.

- Company can win overseas contracts as part of China’s “one belt one road” strategy.

China Citic Bank (998.HK)

- Capital and dividend overhang can be lifted with expected private placement in 1Q16; dividend payment can resume after capital issue.

- Forward P/B of around 0.6x is the lowest in the sector, despite encouraging NPL formation trends compared to peers.

- Cooperation with internet companies, employee stock ownership plan, and spin-off of subsidiaries are potential catalysts.

China Hongqiao Group (1378.HK)

- YTD aluminium prices beat expectations and we believe recovery can be sustained by supportive liquidity conditions.

- Global ex-China AI market to remain in supply deficit by 1.5mt, and the global supply shock of Chinese export dumping should be at its tail end.

- The company’s rights issue in Feb 2016 strengthened Hongqiao’s balance sheet.

Market Focus

Monthly market wrap

Page 24

Cheung Kong Property (1113.HK)

- The stock’s >40% discount to NAV should have priced in residential and retail market risk; more clarity on NAV change can help re-rate to smaller discount to NAV.

- Balance sheet is strong with only a small net debt position; well positioned for new acquisitions.

- Large hotel portfolio is a risk, but office segment should be strong given limited new supply in Central.

Haitong Securities (6837.HK)

- Order is returning to the A-share market as supportive measures are unwinding.

- Lower interest rates and wealth management product yields to usher savings towards equity markets. Shenzhen-HK connect and potential MSCI inclusion can be a catalyst.

- Haitong Sec should be more resilient than smaller brokers against gradual entrance of Chinese banks into the retail brokerage space.

Nexteer (1316.HK)

- Order backlog of US$11bn to support earnings growth. Electric power steering (EPS) products make up 76% of order book compared to 65% before.

- EPS products should remain in demand due to better fuel efficiency than hydraulic systems.

- Diversified global client base; China orders are fast growing thanks to SUVs and MPVs, but contributes 22% of total revenue.

Market Focus

Monthly market wrap

Page 25

Hang Seng Index and select news

17,500

19,500

21,500

23,500

25,500

27,500

29,500

Jul/15 Oct/15 Jan/16 Apr/16 Jul/16 Oct/16 Jan/17

13-16

1-2

3‐89-11

12

17-19

41

42

29-32

25-28 33-40

43,44

45-49

21,22

2023, 24

50-52 5354-56

# Da te

1 7/1/20152 7/3/20153 7/6/20154 7/7/20155 7/9/20156 7/10/20157 7/13/20158 7/14/20159 7/15/2015

10 7/27/201511 8/4/201512 8/11/201513 8/12/201514 8/24/201515 8/25/201516 8/31/201517 9/2/201518 9/3/201519 9/4/201520 9/7/201521 9/17/201522 9/23/201523 9/29/201524 9/30/201525 10/1/201526 10/19/201527 10/23/201528 10/28/201529 10/29/201530 11/6/201531 11/12/201532 11/13/201533 11/19/2015

CSRC announced a 30% transaction fee cut; flexibility given to margin callsCSRC said it will reduce IPOs; China Securities Finance capital boost from 24 to 100bnNSF reportedly asked outsourced fund managers to not sell equities

Ne ws or da ta point

China Ramps Up Policy Response, CSF increase buying of stocks, PBOC promised liquiditySASAC forbids SOE's to sell public shares, will monitor SOE equity holdings daily366 companies (40% of listed companies) apply to resume trading of their A-sharesChina clamps down on off-market leveraged stock tradingCSF subscribes Rmb80bn to mutual fundsCSRC Probes Violations in Margin Trading Via Non-Brokers Caixin PMI dropped to 47.8 in JulyLargest Rmb devaluation since US$ peg removal, Rmb reference rate down 1.9%PBOC intervened to prop up Rmb China will allow pension funds to invest up to 30% of assets in equitiesPBOC cuts interest rate by 25bps and RRR by 50bpsNational People's Congress voted to remove China's loan-to-deposit cap Brokers allocate additional investments into CSFC account to support stocks CFFEX steps up measures to tackle speculation in stock index future trading China to introduce circuit-breaker for stock market China to cut dividend taxes for long-term shareholdersFederal Reserve keeps policy interest rate unchanged China Caixin-Markit PMI 47.0, a 6.5 year low Janet Yellen Expects Interest Rate Increase This Year PBOC Cuts Mortgage Down payment Requirement to 25% from 30%Purchase tax on small cars (<1.6L capacity) will be halved to 5% until end of 2016China's 6.9% 3Q GDP slightly beat estimate of 6.8%PBOC announced benchmark rate and RRR cuts after markets closedFed keeps interest rate unchanged5th plenum outlines new growth initiatives; one child policy canceledBetter than expected US non-farm payrolls boosted Dec Fed rate hike expectationsChina new loans and TSF figures disappointOver the weekend, CBRC announced A-share IPOs will resumePBOC to cut overnight and 7-day SLF rates to 2.75% and 3.25%

Brokers temporarily suspended lending stocks to clients for short selling


Market Focus

Monthly market wrap

Page 26

Index and select news (con’t)

34 11/20/201535 11/24/201536 11/26/201537 11/27/201538 11/30/201539 12/1/201540 12/4/201541 12/16/201542 1/7/201643 1/27/201644 2/5/201645 2/15/201646 2/18/201647 2/19/201648 2/26/201649 2/29/201650 3/14/201651 3/16/201652 3/17/201653 3/30/201654 4/19/201655 4/21/201656 4/27/2016

CSRC bans derivatives funding for stock trades IMF approved RMB in SDR with weighting 10.92% Official China Manufacturing PMI weakened to 49.6China announced circuit-breaking system will start on Jan 1, 2016

CSRC restarts IPOs for 10 approved companies

US Fed chair Janet Yellen urges caution in raising ratesHSBC mulls share buyback upon meeting CAR requirements

US Fed raise target rate to 0.25% from 0%China End-Dec. FX Reserves US$3.33tn, missing estimate of US$3.42tn US Federal Reserve keeps rates steady at 0.25% to 0.5%China end-2015 FX reserves down 13% yoyShenzhen HK stock connect delayed

CSRC eases net stock purchase requirement for brokersCSRC announced investigations in China's largest brokerage firms

Fed minutes show FOMC reluctant to raise ratesPBOC announces it will conduct OMO every dayChina reveals 10 detailed SOE reform pilotPBOC announce 50bps RRR cut for all financial institutions

CSRC says SZ HK stock connect feasible in 2H2016 US Federal Reserve keeps rates unchanged at 0.25% to 0.5%

Moody's cut HK sovereign credit outlook to negative

News of SZ-HK link may start in July US Federal Reserve keeps rates unchanged at 0.25% to 0.5%


Market Focus

Monthly market wrap

Page 27

CSI300 Index and select news

2,500

3,000

3,500

4,000

4,500

5,000

Jul/15 Oct/15 Jan/16 Apr/16 Jul/16 Oct/16 Jan/17

1

2-4

6-9

5

12,13

1421-23

10,1124-26

15

27-31

32-33

16-20

34

40,41

35,36

45-47

37

48,4942-44

39

38

50-52

53-56 57-59

# Da te

1 7/1/20152 7/3/2015

3 7/6/20154 7/7/2015

5 7/8/20156 7/9/2015

7 7/14/2015

8 7/15/20159 7/17/2015

10 7/27/2015

11 8/3/2015

12 8/10/2015

13 8/11/2015

14 8/24/201515 8/25/201516 8/28/2015

17 9/2/2015

18 9/4/201519 9/7/2015

20 9/14/201521 9/23/201522 9/30/201523 10/1/201524 10/19/201525 10/23/2015

Purchase tax on small cars (<1.6L capacity) will be halved to 5% until end of 2016China's 6.9% 3Q GDP slightly beat estimate of 6.8%

China unveils details of SOE reform

Largest Rmb devaluation since US$ peg removal, Rmb reference rate down 1.9%

CSRC says IPO freeze necessary but market rescue operations to be short term

CSRC stabilization measures: regulate margin financing, info system, algo trading

China will allow pension funds to invest up to 30% of assets in equitiesPBOC cuts interest rate by 25bps and RRR by 50bps

CSRC required 50 brokerage firms to provide rescue funds to CSFC

China to cut dividend taxes for long-term shareholders

CSRC said it will reduce IPOs; CSF capital boost from 24 to 100bn


PBOC announced benchmark rate and RRR cuts after markets closed

CSRC announced a 30% transaction fee cut; flexibility given to margin calls

CSFC invests another Rmb80bn in mutual funds

NSF reportedly asked outsourced fund managers to not sell equities

Over 1400 A-shares suspended trading, a rise from 460 a week ago

Brokers and futures brokerages stop short selling; NSSF ordered not to sellCIRC raised equity limits for insurers; CSRC encourages buying and not selling

Roughly half of suspended shares resume trading; 777 A-shares remain suspended

CSFC said to have up to Rmb2tn on tap; SSE loosens margin rules

China Caixin-Markit PMI 47.0, a 6.5 year low

CSRC Probes Violations in Margin Trading Via Non-Brokers

Brokers allocate additional investments into CSFC account to support stocks China to introduce circuit-breaker for stock market

PBOC Cuts Mortgage Down payment Requirement to 25% from 30%


Market Focus

Monthly market wrap

Page 28

Index and select news (con’t)

# Da te26 10/29/201527 11/13/2015

28 11/16/201529 11/20/201530 11/24/201531 11/26/201532 11/27/2015

33 11/30/2015

34 12/3/201535 12/10/201536 12/11/201537 12/21/201538 1/1/201639 1/4/201640 1/7/201641 1/12/201642 1/29/2016

43 2/2/2016

44 2/5/201645 2/18/201646 2/22/2016

47 2/24/201648 2/26/201649 2/29/2016

50 3/4/201651 3/7/2016

52 3/9/2016

53 3/15/201654 3/21/201655 3/23/201656 3/29/201657 4/14/2016

58 4/18/201659 4/21/2016

Strong M2 growth at 13.7% and new RMB loans rebounded to RMB709bn in Nov

China steps up intervention in CNH , O/N CNH HIBOR spikes to 66.8%

China to replace business tax with VAT in MayChina reveals 10 detailed SOE reform pilot

PBOC announce 50bps RRR cut for all FI

Shanghai, Shenzhen, Nanjing unveil property market cooling measures

Liu Shiyu Replaces Xiaogang as Head of CSRC

China end-2015 FX reserves down 13% yoyPBOC announces it will conduct OMO every day

China Mar-16 loans to property up 22%

China scraps IPO upfront paymentsCSI300 trading suspended after falling 7% and triggering circuit breaker

PBOC Made Largest Cash Injection in Three Years

CSRC suspends circuit breaker after it was triggered the 2nd time in a week

PBOC cut downpayment requirement on mortgages to historical low (20%)

5th plenum outlines new growth initiatives; one child policy canceled

Over the weekend, CBRC announced A-share IPOs will resumeSSE and SZSE raise guarantee deposit ratio to 100% for margin financing

Fund companies are required to report off-exchange financing

China concludes central economic work conference: focus on overcapacity cut and

China Mar-16 GDP up 6.7% YoY, in line

VAT reforms announced to start on May 1, 2016. Fixed asset tax deductible

China end Feb FX reserve fall US$28.6bn to US$3.20tn vs. consensus of US$3.19tnNPC and CPPCC meetingCSF to restart lending to brokers

IMF approved RMB in SDR with weighting 10.92%

CSRC bans derivatives funding for stock trades


CSRC announced investigations in China's largest brokerage firmsCSRC eases net stock purchase requirement for brokersCSRC restarts IPOs for 10 approved companies

PBOC stops RQDII new quota application.

China Securities Finance Cut at Least 30 Co. Stakes in 4Q

China Mar-16 exports up 11.5% YoY, beat consensus

SAFE says China may adopt Tobin tax to curb short term FX speculation


Market Focus

Monthly market wrap

Page 29

DBSV universe comparison table

St oc kcode St ock name

M k tCap

(US$m)

SharePric e

(HK $ )

T argetPric e

(HK $)upside

(% ) RemdPE (x )

15FPE (x )

16FPB (x )

15FY ld (% )

15FRO E (% )

15FA ut o manuf ac t u rers & dealers

1114 Brilliance China 4,993 7.69 9.10 18 B 9.3 8.3 1.6 1.4 17.81728 China ZhengTong 906 3.18 3.60 13 B 9.5 7.1 0.7 3.1 9.21828 Dah Chong Hong 760 3.22 3.70 15 B 10.3 8.6 0.7 3.9 7.4

489 Dongfeng Motor Group 9,463 8.52 12.70 49 B 5.3 4.7 0.7 2.8 14.5175 Geely Automobile 4,391 3.87 3.60 -7 H 12.6 9.8 1.5 1.0 14.0

2333 Great Wall Motor 6,918 5.88 6.70 14 H 5.6 5.3 1.2 5.5 20.6601633 Great Wall Motor-A @@@ 9,965 8.47 8.90 5 H 9.6 9.1 2.0 3.8 20.6

2238 Guangzhou Automobile 7,490 9.03 10.60 17 B 11.6 9.2 1.3 2.6 12.7601238 Guangzhou Automobile-A @@@ 18,580 22.40 19.00 -15 FV 34.2 27.3 3.7 0.9 12.7

425 Minth Group 2,906 20.30 18.10 -11 B 14.8 12.3 2.0 2.7 15.71316 Nexteer Automotive Group 2,634 8.18 9.40 15 B 12.8 10.5 3.2 1.6 26.91148 Xinchen China Power Hldgs 202 1.22 1.60 31 B 5.9 5.3 0.5 0.0 8.9

881 ZhongSheng 1,104 3.99 4.20 5 B 15.4 10.1 0.6 1.3 6.1Bank ing and F inance (Ch ina- A ) @ @ @

601288 Agricultural Bank of China-A 141,624 3.12 3.47 11 H 5.6 5.6 0.9 5.4 15.3601988 Bank of China-A 152,236 3.35 4.06 21 B 5.9 5.9 0.8 6.1 13.1601328 Bank of Comm-A 61,674 5.38 6.76 26 H 6.1 6.0 0.8 3.8 12.3601998 China CITIC Bank-A 44,341 5.87 6.05 3 H 6.7 6.7 0.9 3.5 12.7601939 China Construction Bank-A 181,002 4.69 6.50 39 H 5.1 5.2 0.8 4.4 15.3600036 China Merchants Bank-A 69,102 17.75 21.51 21 B 7.6 7.2 1.2 4.0 16.1600016 China Minsheng Bank-A 52,379 9.30 8.87 -5 H 6.9 6.7 1.1 2.1 15.4601398 ICBC-A 234,372 4.26 5.55 30 B 5.5 5.5 0.9 5.5 15.4

Bank ing and F inance (Ch ina)1288 Agricultural Bank of China 117,644 2.81 3.82 36 B 4.2 4.3 0.7 7.3 15.33988 Bank of China 120,292 3.17 4.55 44 B 4.7 4.8 0.6 6.6 13.13328 Bank of Communications 47,001 4.91 7.44 52 B 4.6 4.7 0.6 6.8 12.3

998 China CITIC Bank 30,782 4.88 6.78 39 B 4.7 4.8 0.6 5.1 12.7939 China Construction Bank 160,811 4.99 7.15 43 B 4.5 4.7 0.7 6.7 15.3605 China F inancial Serv ices 342 0.69 0.92 33 B 7.0 6.2 0.8 3.6 12.7

3968 China Merchants Bank 55,460 17.06 23.68 39 B 6.0 5.8 1.0 5.0 16.11988 China Minsheng Bank 34,379 7.31 9.76 34 B 4.5 4.5 0.7 3.2 15.43618 Chongqing Rural Bank 4,903 4.09 5.95 45 B 4.3 4.4 0.7 5.9 14.81398 ICBC 193,412 4.21 6.11 45 B 4.5 4.6 0.7 6.8 15.4

Bank ing and F inance (HK )165 China Ev erbright Ltd 3,345 15.40 23.84 55 B 5.1 4.4 0.7 4.9 17.0

3360 Far East Horizon 3,147 6.18 7.75 25 B 7.2 7.5 0.9 3.5 12.3Cement

914 Anhui Conch Cement 14,037 20.55 24.00 17 B 12.1 12.5 1.3 2.5 9.6600585 Anhui Conch Cement-A @@@ 11,045 16.17 19.26 19 B 11.4 11.7 1.2 3.2 9.6

3323 China Nat'l Bldg Mat 2,798 4.02 2.70 -33 FV 17.8 16.4 0.3 1.1 2.11313 China Resources Cement 2,156 2.56 3.35 31 B 16.4 11.8 0.6 0.8 5.2

Chemic als2283 T K Group 225 2.11 2.80 33 B 9.3 8.2 2.9 4.7 31.7

Source: DBS Vickers

@@@ denominated in RMB

Market Focus

Monthly market wrap

Page 30

DBSV universe comparison table (con’t)

St ockc ode St oc k name

M k tCap

(US$m)

SharePric e

(HK $)

T argetPric e

(HK $)upside

(% ) RemdPE (x )

15FPE (x )

16FPB (x )

15FY ld (% )

15FRO E (% )

15FCong lomerat es- HK

4 Wharf Holdings # 16,449 42.10 44.15 5 H 11.6 10.8 0.0 4.5 3.820 Wheelock # 9,429 36.00 35.45 -2 B 6.9 7.0 0.0 3.2 5.1

F ood and Bev erages600597 Bright Dairy & F ood@@@ 2,247 11.83 14.50 23 H 38.2 28.5 3.7 1.6 12.7

506 China F oods 1,031 2.86 3.00 5 H 101.1 14.2 1.5 0.3 9.72319 China Mengniu 6,658 13.18 13.10 -1 B 18.3 17.0 2.0 1.3 11.01117 China Modern Dairy 978 1.43 1.56 9 H 7.6 7.9 0.8 0.0 9.3

322 Tingy i Holding 6,550 9.07 7.60 -16 H 25.6 21.6 2.3 2.0 10.1168 Tsingtao Brewery 5,120 29.40 27.20 -7 F V 19.4 25.3 2.0 1.6 7.8

600600 Tsingtao Brewery -A @@@ 5,059 29.05 22.80 -22 F V 22.9 29.9 2.4 1.3 7.8220 Uni-President China 4,031 7.24 7.50 4 B 31.3 27.2 2.3 0.6 8.0345 V itasoy 1,963 14.54 14.10 -3 H 40.5 30.9 7.9 1.7 24.1151 Want Want China 9,818 5.98 5.30 -11 H 18.6 17.1 5.4 2.4 29.6

Hardw are & Equ ipment552 China Comm Serv ices 3,276 3.67 4.50 23 B 9.1 8.4 0.9 3.6 9.8

600498 F iberHome Telecom 3,230 23.94 20.00 -16 F V 35.6 29.4 3.4 1.1 11.02618 TCL Communication 824 5.04 4.90 -3 H 6.0 6.2 1.6 6.7 24.61300 Trigiant Group 266 1.32 2.00 52 B 5.7 5.2 0.7 7.9 12.5

856 V ST Holdings 334 1.78 3.00 69 B 5.9 4.2 0.7 7.0 14.3763 ZTE 6,485 12.12 17.00 40 B 13.1 10.5 1.1 1.9 9.8

000063 ZTE -A @@@ 7,614 14.23 18.00 26 B 18.4 14.8 1.5 1.4 9.8Househo ld /Personal (Ch ina/HK )

1880 Belle Int'l 5,175 4.76 6.25 31 B 7.1 8.0 1.3 14.8 16.42111 Best Pacific Int'l Hldgs 606 4.60 4.90 7 B 13.7 12.1 2.7 2.9 20.86388 Coach @ ^^^ 1,020 28.50 24.47 -14 H 28.3 25.6 4.6 3.3 17.7

210 Daphne International 249 1.17 1.00 -15 H nm nm 0.4 0.0 -1.21169 Haier Electronics 4,716 13.10 17.38 33 B 11.2 10.9 2.0 0.9 17.21044 Hengan 10,929 69.80 72.00 3 H 21.2 19.7 4.9 3.0 23.7

600612 Lao Feng Xiang@@@ 2,074 42.37 42.21 0 H 20.7 18.1 4.9 2.4 25.6494 Li & F ung 5,218 4.81 11.30 135 B 8.5 7.4 2.0 8.3 25.8

2331 Li Ning 821 3.38 4.80 42 B 425.8 18.1 1.7 0.0 10.2311 Luen Thai 171 1.28 1.55 21 B 13.4 7.3 0.4 2.3 6.0

000333 Midea Group Co Ltd@@@ 21,143 32.10 35.97 12 B 10.7 9.3 2.8 3.7 27.81382 Pacific Textile 1,864 10.00 13.00 30 B 13.5 12.1 4.1 8.0 33.91913 Prada 8,675 26.30 24.67 -6 H 16.9 23.0 2.5 3.7 10.9

600690 Qingdao Haier@@@ 7,850 8.33 8.55 3 H 11.2 10.2 2.0 2.7 18.5531 Samson Holding 349 0.89 1.24 39 B 14.1 13.1 0.7 13.5 5.7

1910 Samsonite Int'l ^^ 4,554 25.05 27.65 10 H 23.0 19.9 3.3 2.0 16.11023 Sitoy Group 364 2.82 3.20 13 H 6.9 7.1 1.3 8.2 17.91836 Stella International 2,007 19.60 19.20 -2 H 16.5 15.0 2.0 4.3 13.32678 Texhong Textile Group 867 7.60 8.00 5 B 9.5 7.1 1.4 3.1 18.7

321 Texwinca 1,346 7.56 8.55 13 B 13.5 12.4 1.7 7.4 13.8

Source: DBS Vickers

# P/NAV ; '@ denominated in USD ; @@@ denominated in RMB; ^^^ Valuation based on US-listed share; ^^ Core profit and EPS

Market Focus

Monthly market wrap

Page 31


St ockc ode St oc k name

M k tCap

(US$m)

SharePric e

(HK $)

T argetPric e

(HK $)upside

(% ) RemdPE (x )

15FPE (x )

16FPB (x )

15FY ld (% )

15FRO E (% )

15FIndust rials

1 CK Hutchison # 46,265 93.00 123.00 32 B 11.3 10.7 0.0 3.1 8.0517 Cosco International 826 4.18 5.20 24 B 19.1 19.5 0.8 3.8 4.2

1366 J iangnan Group 689 1.31 2.00 53 B 5.8 5.5 0.9 4.3 15.62314 Lee and Man Paper 2,990 5.09 5.90 16 B 10.1 8.9 1.4 3.5 14.52689 Nine Dragons 3,362 5.59 6.50 16 B 15.5 16.4 1.0 1.5 5.23393 Wasion Group 566 4.32 5.00 9 H 8.5 8.1 0.9 5.6 10.8

In f rast ruc t u re152 Shenzhen International 3,109 12.70 14.36 13 B 11.9 11.2 1.3 2.5 10.9

Inv est ment Serv ic es (Ch ina / HK )806 V alue Partners Group 1,775 7.45 7.66 3 H 50.2 33.2 3.6 2.1 10.9

M ed ia 752 Pico F ar East 334 2.12 2.56 21 B 9.4 8.5 1.5 6.6 17.3511 TV B 1,637 29.00 28.00 -3 H 15.5 17.4 1.7 9.0 9.2

Pharmac eut ic al & Healt h Care2877 China Shineway 948 8.89 9.00 1 H 9.3 9.2 1.2 4.5 12.1

570 China Traditional Chinese Medicine 2,109 3.65 6.70 84 B 18.1 13.6 1.2 0.0 8.71681 Consun Pharmaceutical 485 3.81 5.20 36 B 12.5 10.9 1.9 0.0 16.4

000999 CR Sanjiu Medical & Pharm@@@ 3,258 21.55 26.40 23 B 16.9 16.7 2.8 0.7 15.5853 Microport Scientific 745 4.04 2.20 -46 F V n.a. 82.3 2.4 0.0 2.8

1498 PuraPharm Corporation 101 3.49 4.20 20 B 24.0 14.4 1.7 0.0 11.21066 Shandong Weigao 2,694 4.67 5.10 9 H 15.7 14.0 1.6 1.9 11.31099 Sinopharm Group 11,877 33.30 32.00 -4 H 20.5 17.4 2.6 1.3 14.0

600535 Tasly Pharmaceutical Group 5,876 35.21 32.00 -9 H 21.7 19.3 6.0 1.6 28.0300026 Tianjin Chase Sun Pharm@@@ 2,158 13.91 21.40 54 H 22.8 18.5 2.7 0.5 13.8

2393 Yestar International 872 3.11 4.00 29 B 34.5 24.5 4.9 1.3 18.72120 Wenzhou Kangning Hospital 395 42.00 50.00 19 B 34.1 31.2 2.7 0.7 8.3

002603 Yiling Pharmaceutical 2,679 15.38 14.20 -8 H 38.9 31.9 3.5 0.5 10.5Propert ies (Ch ina) (2 )

3383 Agile Property # 2,232 4.42 3.67 -17 H 10.4 6.5 0.0 8.8 5.6832 Central China # 469 1.49 1.52 2 B 3.8 4.6 0.0 7.9 9.4

1224 CC Land # 754 2.26 2.06 -9 H 5.2 24.9 0.0 3.9 1.581 China Overseas Grand Oceans # 730 2.48 3.00 21 B 6.6 3.5 0.0 0.0 13.6

688 China Overseas # 31,456 24.75 30.30 22 B 7.3 7.7 0.0 2.5 15.51109 China Resources Land # 17,116 19.16 27.40 43 B 7.4 8.3 0.0 3.0 13.22202 China V anke 27,660 19.44 19.60 1 H 10.5 9.0 0.0 3.3 18.6

000002 China V anke-A @@@ 34,760 24.43 19.31 -21 B 15.8 13.6 0.0 2.2 18.62007 Country Garden # 8,859 3.07 3.70 21 B 5.6 6.9 0.0 5.0 14.33333 Ev ergrande Real Estate # 10,153 5.76 6.45 12 H 9.9 8.4 0.0 5.0 13.1

fsg sp F irst Sponsor Group @@ 1 1.19 1.57 32 B 13.0 11.5 0.0 1.4 6.4817 China J inmao Holdings # 3,067 2.23 2.66 19 B 6.4 7.0 0.0 3.6 9.0813 Shimao Property # 4,816 10.76 12.39 15 B 5.1 6.3 0.0 6.4 9.5272 Shui On Land # 2,100 2.03 2.18 7 H 17.3 15.2 0.0 2.5 2.4

3377 Sino-Ocean Land # 3,390 3.50 4.40 26 H 10.1 6.3 0.0 3.6 8.0410 Soho China # 2,620 3.91 3.60 -8 H 31.6 105.4 0.0 21.3 0.4337 Greenland (Hong Kong) % # 990 2.75 4.97 81 B 15.8 7.7 0.0 0.0 10.9

Yllg sp Yanlord Land # @@ 1,774 1.22 1.35 11 B 7.6 8.5 0.0 1.2 6.2123 Yuexiu Property # 1,806 1.13 1.00 -12 H 11.6 10.9 0.0 4.2 3.6

Source: DBS Vickers

@@ denominated in SGD; # P/NAV; @@@ denominated in RMB

Market Focus

Monthly market wrap

Page 32


Stockcode Stock name

MktCap

(US$m)

SharePrice

(HK$)

TargetPrice

(HK$)upside

(%) RemdPE (x )

15FPE (x )

16FPB (x )

15FY ld (%)

15FROE (%)

15FPropert ies (HK) #

1113 CK Property 26,398 53.25 57.00 7 B 13.2 10.8 0.0 2.6 7.041 Great Eagle 2,704 31.50 24.50 -22 H 11.8 12.7 0.0 8.7 3.0

101 Hang Lung Properties 8,973 15.48 15.45 0 H 15.8 15.6 0.0 4.8 3.412 Henderson Land 20,671 48.50 52.00 7 B 14.5 16.2 0.0 3.0 3.9

HKL SP Hongkong Land @ 15,011 6.38 8.16 28 B 16.6 17.5 0.0 3.0 2.914 Hysan Development 4,639 34.35 36.15 5 B 16.0 15.6 0.0 3.8 3.4

173 K. Wah Intl 1,376 3.76 3.47 -8 B 8.1 8.0 0.0 4.5 6.0683 Kerry Properties 3,934 21.15 24.60 16 B 8.8 8.3 0.0 4.3 4.5488 Lai Sun Development 451 0.12 0.15 28 B 8.0 11.8 0.0 2.2 1.366 MTR 29,023 38.40 39.15 2 B 20.6 25.9 0.0 2.8 5.217 New World Dev 9,245 7.74 7.80 1 B 10.0 10.1 0.0 5.4 3.916 SHK Properties 36,566 98.05 115.90 18 B 14.3 12.6 0.0 3.4 4.983 Sino Land 9,712 12.22 12.54 3 B 13.9 15.0 0.0 4.1 4.2

1972 Swire Properties 15,231 20.20 26.00 29 B 16.7 17.9 0.0 3.5 3.088 Tai Cheung 473 5.94 7.51 26 B 6.6 9.5 0.0 5.1 5.5

369 Wing Tai Properties 813 4.70 5.46 16 B 5.7 15.4 0.0 3.2 1.7Railway & Const ruct ion

1800 China Comm Construction 19,513 9.36 7.10 -24 H 8.6 8.0 1.0 2.7 11.9601800 China Comm Construction-A @@@ 23,766 11.40 10.70 -6 H 12.4 11.5 1.4 2.2 11.9

1186 China Railway Construction 17,363 9.92 11.60 17 B 8.8 8.7 0.9 1.7 11.0601186 China Railway Construction-A @@@ 18,290 10.45 10.50 0 H 11.0 10.9 1.2 1.6 11.0

390 China Railway Group 18,197 6.18 7.60 23 B 10.0 9.4 1.1 1.5 11.3601390 China Railway Group-A@@@ 22,024 7.48 7.90 6 H 14.3 13.4 1.5 1.2 11.3

1766 CRRC Corp 26,626 7.57 9.25 22 B 14.4 12.8 1.5 2.1 11.5601766 CRRC Corp-A @@@ 33,238 9.45 11.15 18 H 21.3 19.0 2.2 1.7 11.5

3311 China State Construction 6,337 12.12 12.20 1 H 11.7 9.8 2.3 2.7 21.9Real Estate Inv estment T rust

2778 Champion REIT 3,102 4.16 4.59 10 B nmf nmf 0.5 4.8 2.4778 Fortune REIT 2,096 8.59 9.21 7 B nmf nmf 0.7 5.5 3.1

6139 J inmao Investment 1,132 4.39 4.93 12 H nmf nmf 1.1 9.9 4.8808 Prosperity REIT 561 3.02 3.12 3 B nmf nmf 0.6 5.9 2.6435 Sunlight REIT 861 4.09 4.38 7 B nmf nmf 0.5 5.4 3.4823 Link REIT 13,632 47.15 48.50 3 B nmf nmf 0.9 3.9 4.1

Restaurants341 Café de Coral 1,764 23.45 25.00 7 H 23.0 26.7 3.7 3.3 13.8

Retailers814 Beijing J ingkelong 94 1.76 1.48 -16 H 24.4 18.5 0.4 3.4 2.0653 Bonjour Holdings 141 0.32 0.33 3 FV 2.5 22.2 1.0 0.6 4.5116 Chow Sang Sang 1,099 12.60 14.01 11 B 7.5 9.4 0.9 4.9 9.7330 Esprit Holdings 1,704 6.80 6.10 -10 FV nm nm 1.1 0.0 -3.8709 Giordano 710 3.51 3.45 -2 H 12.9 12.3 2.0 7.7 16.1

3308 Golden Eagle % 1,935 8.94 8.17 -9 H 13.0 14.8 2.5 3.1 16.3493 Gome Elec Appliances % 2,895 1.00 1.26 26 H 11.7 9.7 0.8 3.4 10.2980 Lianhua Supermarket 431 2.99 2.41 -19 H n.a. n.a. 1.0 0.0 -2.2

Source: DBS Vickers

^ EPS and Net Profit exclude fair value changes on investment properties; % - Fully Diluted EPS; # P/NAV; '@ denominated in USD ; @@@ denominated in RMB

Market Focus

Monthly market wrap

Page 33


St oc kc ode St oc k name

M k tCap

(US$m)

SharePric e

(HK $)

T argetPric e

(HK $)upside

(% ) RemdPE (x )

15FPE (x )

16FPB (x )

15FY ld (% )

15FRO E (% )

15FRet ailers ( con t 'd )

1212 Lifesty le 2,657 12.86 8.72 -32 H 11.1 11.8 1.9 4.9 15.7590 Luk F ook 1,340 17.70 21.34 21 B 6.5 10.8 1.2 6.2 11.1

1438 Nirvana Asia Ltd 762 2.19 2.85 30 B 8.8 13.9 2.0 5.7 14.1178 Sa Sa 887 2.38 2.71 14 H 8.1 16.4 2.7 9.9 17.0

1700 Springland Int'l 440 1.41 1.40 -1 H 6.1 6.8 0.6 7.6 8.46808 Sun Art Retail Group 7,157 5.82 5.20 -11 H 19.1 18.4 2.3 3.3 11.9

Sof t w are & Comput er Serv ic es1310 HKBN Ltd. 1,239 9.56 12.50 31 B 92.1 27.2 6.3 2.1 22.2

268 Kingdee 956 2.53 3.90 54 B 55.2 30.8 1.9 0.0 6.0600588 Yonyou Network Tech@@@ 4,320 19.11 14.00 -27 F V 86.5 57.8 5.1 0.8 8.6

St eel, alumin ium & copper347 Angang Steel 3,432 3.68 3.33 -10 H nm nm 0.5 0.0 -4.7

000898 Angang Steel-A @@@ 3,870 4.15 2.77 -33 F V nm nm 0.7 0.0 -4.7600019 Baoshan Iron & Steel Co-A@@@ 14,159 5.57 7.14 28 B 33.2 41.4 0.8 1.5 1.9

1378 China Hongqiao Group 5,325 5.69 6.50 14 B 8.2 7.1 0.8 2.6 12.2323 Maanshan I & S 1,777 1.79 1.20 -33 F V nm nm 0.6 0.0 -25.1

600808 Maanshan I & S-A @@@ 2,740 2.76 1.70 -38 F V nm nm 1.2 0.0 -25.1486 United Co RUSAL PLC 5,288 2.70 4.06 50 B 11.4 19.1 16.0 0.0 58.9

T elecom Serv ic es (Ch ina)941 China Mobile 234,766 88.95 124.00 39 B 14.1 13.0 1.7 3.0 12.3762 China Unicom 28,275 9.16 10.40 14 B 17.5 15.9 0.8 2.2 4.9728 China Telecom 40,268 3.86 4.50 17 B 13.0 12.9 0.9 2.5 6.6

T elecom Serv ic es (HK )1883 CITIC Telecom 1,409 3.23 3.70 15 B 13.6 13.0 1.6 3.9 11.76823 HKT Trust 10,970 11.24 10.30 -8 H 21.6 22.3 2.3 4.8 10.2

215 Hutchison Telecom 1,690 2.72 2.70 -1 H 14.3 14.9 1.1 5.2 7.6315 SmarTone 1,780 12.84 12.40 -3 H 14.4 15.5 3.5 4.7 21.9

T ransport at ion - Po rt s & A irport s694 Beijing Capital Intl A irport 4,661 8.35 10.10 21 B 18.4 16.6 1.7 2.2 9.7144 China Merchants Hldgs 7,738 23.10 31.00 34 B 12.4 12.3 0.9 3.3 7.0

1199 COSCO Pacific 3,159 8.26 10.50 27 B 8.2 9.2 0.6 4.9 7.2Ut it il ies

1816 CGN Power 14,587 2.49 3.40 37 B 14.3 12.1 1.7 2.0 13.1Warehouse

925 Beijing Properties 471 0.54 0.67 24 B n.a. n.a. 0.8 0.0 -0.3600340 China F ortune Land Dev@@@ 11,486 25.18 31.60 25 B 14.0 11.2 4.9 2.1 37.8

1668 China South City 1,536 1.49 1.94 30 H 3.1 16.6 0.5 9.8 2.9200053 Shenzhen Chiwan Petroleum 741 16.43 20.39 24 B 30.2 35.1 1.8 0.3 4.9

Source: DBS Vickers

@@@ denominated in RMB

Market Focus

Monthly market wrap

Page 34


St o c kc o de St oc k name

M k tCap

(US$ m)

SharePric e

(HK $ )

T argetPric e

(HK $ )ups ide

(% ) RemdPE ( x )

15 FPE (x )

1 6FPB ( x )

15 FY ld (% )

15FRO E (% )

15FW at er In f rast ruc t u re, En v iro nment al

371 Beijing Enterprises Water % 5,218 4.65 5.90 27 B 16.4 13.1 2.5 2.0 17.7300070 Beijing Originwater@@@ 7,864 40.45 56.30 39 B 36.5 21.6 3.7 0.2 15.8

1381 Canv est Env ironment Protection 933 3.62 4.20 16 B 26.6 18.7 3.1 0.0 15.3257 China Ev erbright Intl 5,040 8.72 10.20 17 B 18.8 15.7 2.3 2.1 13.7

CEWL SP China Ev erbright Water @@ 1,237 0.64 0.69 8 B 23.4 19.0 1.4 0.5 7.01363 CT Env ironmental Group 1,848 2.27 2.75 21 B 19.3 17.7 4.2 1.2 21.26136 Kangda International 469 1.76 1.65 -6 H 8.0 7.5 0.9 0.0 11.9

SIIC SP SIIC Env ironment @@ 1,149 0.69 0.69 1 H 18.6 15.6 1.3 0.0 8.01065 Tianjin Cap Env ironmental 798 4.34 4.30 -1 H 15.7 13.0 1.2 1.9 8.8

600874 Tianjin Cap Env ironmental-A @@@ 1,483 8.06 6.50 -19 S 34.8 28.7 2.6 0.9 8.8CEL SP CITIC Env irotech @@ 1,170 1.40 1.55 11 H 38.1 25.8 1.8 0.3 6.9

Source: DBS Vickers

@@ denominated in SGD; @@@ denominated in RMB

% - Fully Diluted EPS

Market Focus

Monthly market wrap

Page 35

DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers (Hong Kong) Limited (“DBSVHK”) This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd and DBSVHK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVHK. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVHK, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making. ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 3 May 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBSVHK and its subsidiaries do not have a proprietary position in the securities recommended in this report as of 27 Apr 2016.

2. Compensation for investment banking services: DBS Bank Ltd., DBSVS, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from Beijing Properties Holdings Limited (925 HK), Nirvana Asia Limited (1438 HK) and Purapharm Corporation Limited (1498 HK) as of 31 Mar 2016. DBS Bank Ltd., DBSVS, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for Nirvana Asia Limited (1438 HK) and Purapharm Corporation Limited (1498 HK) in the past 12 months, as of 29 Feb 2016. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

China / Hong Kong Daily Focus Summary

RESTRICTIONS ON DISTRIBUTION

General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or DBS Vickers (Hong Kong) Limited (“DBSVHK”), which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSVHK is regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report is being distributed in Hong Kong by DBSVHK which is licensed and regulated by the Hong Kong Securities and Futures Commission.

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United Kingdom

This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients.

Dubai

This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United States This report was prepared by DBSVHK. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other jurisdictions

In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Vickers (Hong Kong) Limited

18th Floor Man Yee building, 68 Des Voeux Road Central, Central, Hong Kong

Tel: (852) 2820-4888, Fax: (852) 2868-1523

Documents

0503 Monthly market wrap - DBS Bank · Market Focus Monthly market wrap Page 6 HSI 1 year forward PE bands – 5yr mean and standard deviations 8,000 13,000 18,000 23,000 28,000 05