0803 monthly market wrap - dbs bank · market focus monthly market wrap page 2 etf flows etf fund...

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sa- AH

Back to old normal valuations

ETF flows, currency trends, and short activity suggests cautious market environment

Low valuations and a pickup in 2016 earnings growth helps longer term H-share outlook

Favor Hong Kong banks, and low P/BV China sectors such as China property and China banks

Catch-22 for A-shares. Worst than anticipated A-share contagion effect on H-shares dragged Hong Kong equities in July. Unfortunately we do not foresee a quick turnaround for A-shares since they are stuck in a catch-22 situation. A-shares will likely fall without policy support. But further support enlarges overhang from eventual policy exit, and hurts foreign investor sentiment and MSCI inclusion probability. We expect A-shares to only be range bound for the rest of the year.

Cautious sentiment for Hong Kong. ETF flows (pg 2), HKD trend, and short selling activity (pg 4) point to a cautious market environment at the start of August. We expect Hong Kong equities will revert to their old valuation ranges on a lack of positive catalysts. This means 7.0-8.6x forward PE for the HSCEI (pg 5). Fortunately, the PE bands are upward sloping as 2016 earnings growth should be quicker than 2015. This is driven by improvements for China banks, China telecom, oil, and gaming (pg 7-8), partly from a low base in 2015. But the market may take these forecasts with a grain of salt in the near term, given continued downward revisions (pg 6), potential CNY depreciation after IMF SDR review, and weak confidence for China’s macro outlook after the A-share collapse.

Cutting index targets to old trading ranges. We are lowering our year end HSI and HSCEI targets to 25,800 and 12,400 to account for a sharp confidence hit on China. These targets imply 11.4x and 8.2x 2016 PE, and assume mild HSI and HSCEI 2016 EPS forecast cuts. We expect H-shares to be dragged by A-share sentiment in the near term. But we expect foreign funds to return to H-shares earlier than A-shares in part due to much more attractive valuations.

Gaming and Hong Kong sectors outperformed. Gaming, Hong Kong sectors, and defensive sectors outperformed in July (pg 12). In the near term, we continue to like Hong Kong banks. We also like low P/BV sectors with favourable developments such as China property (can capture pent up liquidity as A-shares cool) and China banks (new business and mixed ownership reforms). We recommend to add beta near trough market valuation levels.

HSI: 24,636 ANALYST Alexander LEE CFA, +852 2971 1930 [email protected]

Performance of key indices

A s ofIndices 7-31 1 week 1 month YTD 2014A siaHSI 24,636 (2.0) (6.1) 4.4 1.3 HSCEI 11,132 (4.7) (14.2) (7.1) 10.8 HSCCI 4,421 (3.2) (9.3) 1.6 (4.5) Shanghai Comp. 3,664 (10.0) (14.3) 13.3 52.9 Shenzhen Comp. 2,111 (9.1) (14.3) 49.1 33.8 CSI300 3,817 (8.6) (14.7) 8.0 51.7 NIKKEI 225 20,585 0.2 1.7 18.0 7.1 KOSPI 2,030 (0.8) (2.1) 6.0 (4.8) Taiex 8,665 (1.2) (7.1) (6.9) 8.1 STI 3,203 (4.5) (3.5) (4.8) 6.2 KLCI 1,723 0.1 1.0 (2.2) (5.7) SET 1,440 0.1 (4.3) (3.8) 15.3 JCI 4,803 (1.1) (2.2) (8.1) 22.3 Sensex 28,115 0.0 1.2 2.2 29.9 OthersDow Jones 17,690 0.7 0.4 (0.7) 7.5 S&P 500 2,104 1.2 2.0 2.2 11.4 Nasdaq 5,128 0.8 2.8 8.3 13.4 FTSE 100 6,696 1.8 2.7 2.0 (2.7) DAX 30 11,309 (0.3) 3.3 15.3 2.7

% change

Source: Bloomberg Finance L.P., DBS Vickers

DBSV Top Ten Buy List

Closing Tgt

T icker price PBV PER y ield ROE Price(HK$) (X ) (X ) (%) (%) (HK$)

China Citic Bank 998.HK 5.53 0.6 4.6 6.8 13.7 8.31CMB 3968.HK 20.05 0.9 5.7 5.3 17.5 26.82CR Land 1109.HK 21.75 1.1 11.0 2.4 10.3 31.30Dah Sing F in.* 440.HK 50.65 0.8 9.2 2.8 8.7 n.a.Far East Horizon 3360.HK 7.23 0.9 7.1 3.5 13.7 7.92Nexteer Auto 1316.HK 7.35 2.2 9.2 2.2 26.7 9.30Sinopharm Group 1099.HK 29.80 2.0 14.7 1.8 14.0 43.60Tencent 700.HK 144.70 7.8 25.1 0.5 31.4 184.00Wasion Group 3393.HK 10.24 1.7 10.4 3.4 17.4 14.00Yestar Intl. 2393.HK 3.07 3.9 18.5 2.7 22.4 4.27* consensus estimates

F Y16F

Source: Bloomberg Finance L.P., DBS Vickers Based on closing prices on 31 July, 2015

DBS Group Research . Equity 3 August 2015

China / Hong Kong Market Focus

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

Market Focus

Monthly market wrap

ETF flows

ETF fund flows are weak. We track 39 global ETFs that invest in H-shares and Hong Kong stocks, and another 62 global ETFs that invest in A-shares. The 39 H-share and HK ETFs still saw

net fund inflows during July, but the amount shrunk to HK$0.8bn compared to June’s HK$6.7bn. Meanwhile, the A-share ETFs continued to see outflows of Rmb7.6bn. This increased from June’s Rmb4.6bn outflow.

Global listed HK ETF flows and HSI performance

Offshore listed A-share ETF flows and SHCOMP perf.

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

(10)

(5)

-

5

10

15

20

25

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

HK and H-shr ETF flows (LHS)

HSI monthly perf. (RHS)

(%)(HK$ bn)

-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

20,000

21,000

22,000

23,000

24,000

25,000

26,000

27,000

28,000

29,000

30,000

(1,000)

(500)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Jan/14 Apr/14 Jul/14 Oct/14 Jan/15 Apr/15 Jul/15 Oct/15

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


Market Focus

Monthly market wrap

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

Jan/14 Apr/14 Jul/14 Oct/14 Jan/15 Apr/15 Jul/15 Oct/15

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


Northbound stock connect daily quota usage

Southbound stock connect daily quota usage

-120%-100%-80%-60%-40%-20%

0%20%40%60%80%

Oct-14 Jan-15 Apr-15 Jul-15

(% of daily quota of Rmb 13bn)

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

Oct-14 Jan-15 Apr-15 Jul-15

(% of daily quota of Rmb 10.5bn)


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

Market Focus

Monthly market wrap

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

(%)

7.740

7.745

7.750

7.755

7.760

7.765

7.770

7.775

7.780


Sources: Bloomberg Finance L.P, DBS Vickers

Short selling activity and HSI

Short selling activity and HSI (2007-2009)

2000021000220002300024000250002600027000280002900030000

6%

8%

10%

12%

14%

16%

18%

Jan/14 Apr/14 Jul/14 Oct/14 Jan/15 Apr/15 Jul/15

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)(%)


Market Focus

Monthly market wrap

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

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

08 09 10 11 12 13 14 15 16

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

12.4x

11.4x

10.4x

9.4x

8.4x


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

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

08 09 10 11 12 13 14 15 16

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

11.4x

10.0x

8.6x

7.1x

5.7x


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

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

17.5x

15.0x

12.5x

10.0x

7.6x


Market Focus

Monthly market wrap

Earnings forecasts and revisions

H-shares continued to see downward earnings revisions. Consensus forecasts for HSCEI members fell 0.3% for 2015F and 0.7% for 2016 forecasts. HSI members’ earnings cuts were milder at 0.1% and 0.3% respectively for 2015 and 2016.

Companies with positive revisions:

- Companies with commodity costs – Air China and Huaneng Power

- Chinese brokers still enjoyed positive revisions in July

- Others include SHKP and Sinopharm

Companies with negative revisions:

- Cement companies Anhui Conch and CNBM

- Companies with revenues linked to commodity prices – China oilfield services, Jiangxi Copper

- Auto companies Greatwall and Dongfeng

- HKEX

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


2014 2015 2016

1,200

1,300

1,400

1,500

1,600

1,700

1,800


2014 2015 2016


Market Focus

Monthly market wrap

Consensus forecasts for HSI members

HSI 2014 2015 2016 2015 2016China banks BoCom HK3328 1.12 1.10 1.12 -2.2% 2.2%

BOC HK3988 0.77 0.75 0.79 -2.9% 5.2%ICBC HK1398 0.98 0.98 1.03 0.2% 4.6%CCB HK939 1.15 1.17 1.22 1.4% 4.7%

HK banks BEA HK23 2.72 2.54 2.71 -6.5% 6.5%BOCHK HK2388 2.32 2.58 2.84 11.1% 10.2%Hang Seng Bank HK11 7.91 9.86 10.16 24.7% 3.0%HSBC HK5 5.35 6.51 6.81 21.7% 4.5%HKEX HK388 4.44 7.68 8.79 72.9% 14.5%

Insurance China Life HK2628 1.43 2.00 2.29 39.9% 14.4%Ping An HK2318 3.10 3.63 3.99 17.2% 9.9%AIA HK1299 2.25 2.48 2.72 10.2% 9.6%

Telcos China Mobile HK941 6.77 6.70 7.14 -1.0% 6.6%China Unicom HK762 0.68 0.70 0.79 2.9% 13.4%

Oil PetroChina HK857 0.74 0.40 0.63 -45.5% 55.8%Sinopec HK386 0.50 0.37 0.56 -27.0% 53.2%CNOOC HK883 1.70 0.65 1.11 -61.8% 70.8%

Coal China Shenhua HK1088 2.45 1.78 1.88 -27.6% 6.0%China Coal HK1898 1.54 1.79 2.11 16.0% 18.1%

Gas Kunlun Energy HK135 0.70 0.62 0.74 -11.9% 19.6%Towngas HK3 0.61 0.67 0.72 9.8% 7.6%

Power CLP HK2 4.44 4.27 4.48 -3.8% 4.9%China Res Power HK836 1.94 2.57 2.63 32.6% 2.1%Power Assets HK6 7.88 3.93 3.94 -50.1% 0.2%

HK property MTR HK66 2.13 1.77 1.75 -16.7% -1.5%Cheung Kong HK1 20.65 8.06 9.53 -61.0% 18.2%SHK Land HK16 8.53 7.47 8.63 -12.4% 15.5%Henderson Land HK12 5.11 3.04 3.13 -40.5% 2.8%New World Dev elopment HK17 1.37 0.80 0.85 -41.7% 6.8%Hang Lung Property HK101 2.29 1.41 1.37 -38.6% -2.8%Sino Land HK83 1.01 0.86 0.91 -15.1% 5.8%

China property COLI HK688 3.39 3.20 3.63 -5.7% 13.7%China Resources Land HK1109 1.94 2.14 2.49 10.1% 16.8%

Conglomerates China Resources HK291 (0.07) 0.22 0.41 -411.4% 89.9%Citic Pacific HK267 1.60 2.15 2.30 34.5% 7.0%China Merchants HK144 1.59 1.84 2.05 16.0% 11.1%Swire HK19 7.36 7.13 7.77 -3.2% 9.0%Wharf HK4 3.46 3.91 4.34 13.1% 11.0%

Gaming Galaxy HK27 2.44 1.71 1.91 -29.9% 11.4%Sands China HK1928 2.45 1.62 1.67 -34.0% 3.1%

Tech Lenov o HK992 0.60 0.64 0.75 7.3% 16.3%Tencent HK700 3.25 4.17 5.44 28.4% 30.4%

Transport Cathay Pacific HK293 0.80 1.78 2.00 122.4% 12.5%Cosco Pacific HK1199 0.78 0.89 0.95 13.6% 7.7%

Commerce Li & F ung HK494 0.41 0.42 0.49 3.2% 15.1%Consumer Hengan HK1044 3.19 3.72 4.27 16.6% 14.8%

Belle Int'l HK1880 0.67 0.72 0.74 7.5% 3.1%Want Want HK151 0.36 0.41 0.46 14.2% 10.9%Tingy i HK322 0.56 0.67 0.76 19.1% 14.2%

EPS (HK $ ) EPS g row t h


Market Focus

Monthly market wrap

Consensus forecasts for HSCEI members

2014 2015 2016 2015 2016

Banks BOC HK3988 0.77 0.75 0.79 -2.9% 5.2%

BoCom HK3328 1.12 1.10 1.12 -2.2% 2.2%

CCB HK939 1.15 1.17 1.22 1.4% 4.7%

CMB HK3968 2.79 3.04 3.37 8.9% 11.1%

ICBC HK1398 0.98 0.98 1.03 0.2% 4.6%

ABC HK1288 0.69 0.71 0.74 2.5% 5.0%

Citic Bank HK998 1.10 1.10 1.18 0.4% 6.7%

Minsheng HK1988 1.65 1.67 1.79 0.9% 7.2%

Insurance China Life HK2628 1.43 2.00 2.29 39.9% 14.4%

PICC Group HK1339 0.39 0.45 0.48 14.6% 7.6%

CPIC HK2601 1.54 2.11 2.35 37.3% 11.3%

PICC P&C HK2328 1.34 1.47 1.54 9.7% 5.0%

Ping An HK2318 3.10 3.63 3.99 17.2% 9.9%

Brokers and AM Citic Securities HK6030 1.30 1.92 2.16 47.6% 12.6%

Haitong HK6837 1.01 1.63 1.71 60.9% 5.2%

China CINDA HK1359 0.42 0.53 0.64 26.7% 19.9%

Telcos China Telecom HK728 0.28 0.31 0.34 10.4% 11.0%

Oil and serv ices PetroChina HK857 0.74 0.40 0.63 -45.5% 55.8%

Sinopec HK386 0.50 0.37 0.56 -27.0% 53.2%

China Oilfield HK2883 1.98 0.90 1.10 -54.8% 22.6%

China property Dalian Wanda HK3699 4.88 5.24 6.62 7.4% 26.4%

China V anke HK2202 1.80 2.07 2.42 15.2% 16.7%

Power Huaneng Power HK902 0.96 1.18 1.16 22.7% -1.9%

China Longyuan HK916 0.40 0.57 0.67 43.3% 16.2%

CGN Power HK1816 0.21 0.18 0.21 -16.7% 19.4%

Construction and China Railway HK390 0.61 0.68 0.76 11.5% 12.1%

machinery China Comm Cons HK1800 1.08 1.18 1.33 9.2% 12.8%

Cement Anhui Conch HK914 2.61 2.42 2.64 -7.4% 9.0%

CNBM HK3323 1.38 1.13 1.21 -18.0% 6.8%

Coal China Coal HK1898 0.08 (0.03) 0.02 -135.9% -185.7%

China Shenhua HK1088 2.45 1.78 1.88 -27.6% 6.0%

Autos BYD HK1211 0.23 0.97 1.21 322.6% 24.5%

GAC Group HK2238 0.62 0.71 0.87 14.0% 22.5%

Dongfeng Motors HK489 1.88 1.82 1.99 -3.2% 9.1%

Greatwall Motor HK2333 3.32 4.25 5.04 28.1% 18.6%

Others Tsingdao HK168 1.85 1.95 2.14 5.5% 9.8%

Sinopharm HK1099 1.40 1.65 1.99 17.7% 20.9%

Air China HK753 0.39 0.84 0.91 116.2% 8.4%

J iangxi Copper HK358 1.06 0.77 0.91 -27.3% 17.9%

EPS (HK $) EPS grow t h


Market Focus

Monthly market wrap

Best EPS revisions among index stocks in 3Q in HKD terms

Consensus earnings revisions for Air China (753.HK) Consensus earnings revisions for Sinopharm (1099.HK)

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00


FY15 FY16(HK$)

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20


FY15 FY16(HK$)

Consensus revisions for Huaneng Power (902.HK) Consensus earnings revisions for SHKP (16.HK)

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

1.30


FY15 FY16(HK$)

7.0

7.2

7.4

7.6

7.8

8.0

8.2

8.4

8.6

8.8

9.0


FY15 FY16(HK$)

Consensus revisions for Haitong Sec (6837.HK) Consensus earnings revisions for Citic Sec (6030.HK)

0.60

0.80

1.00

1.20

1.40

1.60

1.80


FY15 FY16(HK$)

0.80

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2.40


FY15 FY16(HK$)


Market Focus

Monthly market wrap

Worst EPS revisions among index stocks in 3Q in HKD terms

Consensus earnings revisions for Lenovo (992.HK) Consensus earnings revisions for HKEX (388.HK)

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90


FY15 FY16(HK$)

5.00

5.50

6.00

6.50

7.00

7.50

8.00

8.50

9.00

9.50


FY15 FY16(HK$)

Consensus earnings revisions for Greatwall (2333.HK) Consensus earnings revisions for Dongfeng (489.HK)

4.00

4.20

4.40

4.60

4.80

5.00

5.20

5.40

5.60

5.80

6.00


FY15 FY16(HK$)

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

2.30

2.40

2.50


FY15 FY16(HK$)

Consensus earnings revisions for Anhui Conch (914.HK) Consensus earnings revisions for CNBM (3323.HK)

2.00

2.20

2.40

2.60

2.80

3.00

3.20

3.40

3.60

3.80


FY15 FY16(HK$)

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00


FY15 FY16(HK$)


Market Focus

Monthly market wrap

Consensus revisions for China Oilfield Services (2883.HK) Consensus earnings revisions for ICBC (1398.HK)

0.50

1.00

1.50

2.00

2.50

3.00


FY15 FY16(HK$)

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25


FY15 FY16(HK$)

Consensus revisions for Jiangxi Copper (358.HK) Consensus earnings revisions for Power Assets (6.HK)

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30


FY15 FY16(HK$)

3.00

3.50

4.00

4.50

5.00

5.50


FY15 FY16(HK$)

Consensus revisions for Li & Fung (494.HK) Consensus revisions for Galaxy Entertainment (27.HK)

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0


FY15 FY16(HK$)

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5


FY15 FY16(HK$)


Market Focus

Monthly market wrap

1 month sector share price performance

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Brok

ers-

Chi

naSt

eel &

alu

min

ium

Coa

lSo

ftw

are

& IT

serv

ices

Con

sum

er (h

ouse

hold

)A

utos

and

par

tsRa

il & c

onst

ruct

ion

Insu

ranc

eA

ltern

ativ

e en

ergy

Tran

spor

t (po

rts)

Wat

er, e

nviro

nmen

tal

HSC

EIBa

nks -

Chi

naC

onsu

mer

(ret

aile

rs)

Con

sum

er (p

erso

nal)

Oil

Pow

er -

Chi

naPh

arm

aceu

tical

sFo

od a

nd b

ever

ages

Tran

spor

t (to

ll roa

ds)

Har

dwar

e &

equ

ipPr

oper

ties -

Chi

naC

onsu

mer

(lux

urie

s)C

emen

tTr

ansp

ort (

airli

nes)

Tran

spor

t (sh

ippi

ng)

HSI

Indu

stria

lC

onsu

mer

(app

arel

)Te

leco

m -

Chi

naBa

nks -

Glo

bal

Prop

ertie

s -H

KBa

nks -

HK

Con

glom

erat

es -

HK

REIT

Pow

er, i

nfra

& u

tiliti

esG

asC

onsu

mer

(spo

rtsw

ear)

Tele

com

-H

KG

amin

g

Source: Thomson Reuters, DBS Vickers

YTD sector share price performance

‐30%‐20%‐10%0%10%20%30%40%50%60%70%

Brokers‐China

Coal

Consumer (luxuries)

Steel &

aluminium

Gam

ing

Insurance

Power ‐China

Consumer (retailers)

Hardware & equip Oil

Autos and parts

HSCEI

Transport (shipping)

Pharmaceuticals

Food and beverages

Consumer (apparel)

Banks ‐China

Banks ‐Global

Power, infra & utilities

Alternative energy

Conglomerates ‐HK

Properties ‐H

KConsumer (personal)

Water, environmental

Industrial

Rail &

construction

Telecom ‐China

HSI

Transport (ports)

Transport (toll roads)

REIT

Gas

Telecom ‐HK

Consumer (household)

Properties ‐China

Banks ‐HK

Consumer (sportsw

ear)

Cement

Software & IT services

Transport (airlines)

Source: Thomson Reuters, DBS Vickers

Market Focus

Monthly market wrap

Moving average and RSI for HSI

Moving average and RSI for HSCEI

20,000

21,000

22,000

23,000

24,000

25,000

26,000

27,000

28,000

29,000

30,000


HSI 50d avg 100d avg 250d avg

20

50

80

14d RSI

9,000

10,000

11,000

12,000

13,000

14,000

15,000


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

Macro and currency

Summary of macro data released during July

Data for J une 2015 A ctual Surv ey + /- f rom Prior

A v g forecast period

Official PMI 50.2 50.4 (0.2) 50.2

Caixin PMI 49.4 49.6 (0.2) 49.2

Trade surplus (US$ bn) 46.5 56.7 (10.2) 59.5

Exports (yoy %) 2.1 1.2 0.9 (2.8)

Imports (yoy %) (6.7) (16.2) 9.5 (18.1)

M2 growth (yoy %) 11.8 11.0 0.8 10.8

New loans (Rmb bn) 1,279 1,050 229.1 901

Total financing (Rmb bn) 1,860 1,400 460.0 1,220

CPI (%) 1.4 1.3 0.1 1.2

PPI (%) (4.8) (4.6) (0.2) (4.6)

Retail sales (yoy %) 10.6 10.2 0.4 10.1

Ind. Prod. (yoy %) 6.8 6.0 0.8 6.1

Urban FAI YTD (yoy %) 11.4 11.2 0.2 11.4

2Q Real GDP (yoy %) 7.0 6.8 0.2 7.0

Official PMI (July ) 50.0 50.1 (0.1) 50.2

Source: CEIC, DBS Vickers

CNY

CNH

6.00

6.05

6.10

6.15

6.20

6.25

6.30


6.00

6.05

6.10

6.15

6.20

6.25

6.30

6.35

6.40


CNY / EUR

JPY / CNY

6.0

6.5

7.0

7.5

8.0

8.5

9.0

12 13 14 15

(CNY/EUR)

10.0

12.0

14.0

16.0

18.0

20.0

22.0

10 11 12 13 14 15

(JPY/CNY)


Market Focus

Monthly market wrap

H-share to A-share price gaps

H-sh A -sh H-sh DoD H-sh A -sh H-sh DoDName T icker Exchange v s. A - sh % Name T icker Exchange v s. A - sh %LUOYANG GLASS-H 1108 Shanghai -82% 1% PETROCHINA-H 857 Shanghai -44% 2%

SINOPEC OILF IE-H 1033 Shanghai -79% 1% ZOOMLION HEAVY-H 1157 Shenzhen -44% -1%

SHANDONG MOLON-H 568 Shenzhen -75% -1% DONGJ IANG ENV-H 895 Shenzhen -44% 1%

CMOC-H 3993 Shanghai -74% 0% J INGWEI TEXTIL-H 350 Shenzhen -43% 2%

GUANGZHOU AUTO-H 2238 Shanghai -74% 0% BAIYUNSHAN PH-H 874 Shanghai -43% -2%

CHONGQING IRON-H 1053 Shanghai -73% 0% ANHUI EXPRESS-H 995 Shanghai -43% 4%

CHINA SHIPPING-H 2866 Shanghai -73% 0% CIMC-H 2039 Shenzhen -43% -1%

NANJ ING PANDA-H 553 Shanghai -72% 0% SHENZHEN EXPRE-H 548 Shanghai -42% 2%

SHANGHAI ELECT-H 2727 Shanghai -71% 1% CITIC BANK-H 998 Shanghai -42% 2%

BEIJ ING NORTH-H 588 Shanghai -71% -1% GREAT WALL MOT-H 2333 Shanghai -38% -2%

METALLURGICAL-H 1618 Shanghai -70% 0% GF SECURITIES-H 1776 Shenzhen -35% -1%

NORTHEAST ELEC-H 42 Shenzhen -70% -2% HAITONG SECURI-H 6837 Shanghai -35% 0%

CHINA COSCO HO-H 1919 Shanghai -69% 0% ZTE-H 763 Shenzhen -31% -1%

SINOPEC SHANG-H 338 Shanghai -68% 1% CHINA SHENHUA-H 1088 Shanghai -30% 0%

J INGCHENG MAC-H 187 Shanghai -67% 3% XINJ IANG GOLD-H 2208 Shenzhen -29% -1%

SHANDONG XINHU-H 719 Shenzhen -67% -3% FOSUN PHARMA-H 2196 Shanghai -29% -1%

FIRST TRACTOR-H 38 Shanghai -67% 0% HUANENG POWER-H 902 Shanghai -28% 0%

YANZHOU COAL-H 1171 Shanghai -66% 0% SHANGHAI PHARM-H 2607 Shanghai -28% -1%

MAANSHAN IRON-H 323 Shanghai -66% 0% CEB BANK-H 6818 Shanghai -24% 2%

ALUMINUM CORP-H 2600 Shanghai -65% -1% BANK OF CHINA-H 3988 Shanghai -24% 2%

DALIAN PORT PD-H 2880 Shanghai -65% 0% MINSHENG BANK-H 1988 Shanghai -23% 0%

CSSC OFFSHORE -H 317 Shanghai -63% 0% HUADIAN POWER-H 1071 Shanghai -22% 2%

SHANDONG CHEN-H 1812 Shenzhen -63% 1% SINOPEC CORP-H 386 Shanghai -21% 2%

TIANJ IN CAP-H 1065 Shanghai -62% 0% BANKCOMM-H 3328 Shanghai -20% 0%

ZHENGZHOU COAL-H 564 Shanghai -62% 0% CHINA LIFE-H 2628 Shanghai -19% -2%

CHINA COAL ENE-H 1898 Shanghai -62% 0% ABC-H 1288 Shanghai -19% 0%

CHINA OILF IELD-H 2883 Shanghai -62% -1% CITIC SEC-H 6030 Shanghai -18% 1%

CHINA SHIPPING D 1138 Shanghai -61% -1% CCB-H 939 Shanghai -16% 0%

CHINA RAIL GR-H 390 Shanghai -60% -2% ICBC-H 1398 Shanghai -11% -1%

WEICHAI POWER-H 2338 Shenzhen -58% 2% TSINGTAO BREW-H 168 Shanghai -11% 0%

ZIJ IN MINING-H 2899 Shanghai -58% 0% CM BANK-H 3968 Shanghai -7% -1%

DATANG INTL PO-H 991 Shanghai -58% 0% FUYAO GLASS IN-H 3606 Shanghai 0% -2%

SICHUAN EXP-H 107 Shanghai -57% 2% J IANGSU EXPRES-H 177 Shanghai 0% 0%

HISENSE KELON -H 921 Shenzhen -56% -1% ANHUI CONCH-H 914 Shanghai 3% -2%

LIVZON PHARM-H 1513 Shenzhen -53% 0% CHINA VANKE-H 2202 Shenzhen 4% 0%

BBMG CORP-H 2009 Shanghai -53% -3% CHINA PACIF IC-H 2601 Shanghai 4% 1%

CHINA EAST AIR-H 670 Shanghai -52% 4% PING AN-H 2318 Shanghai 7% 3%

CHINA RAIL CN-H 1186 Shanghai -51% -2%

BYD CO LTD-H 1211 Shenzhen -51% -4%

DONGFANG ELECT-H 1072 Shanghai -50% 1%

CRRC CORP LTD -H 1766 Shanghai -49% -1%

CHINA SOUTHERN-H 1055 Shanghai -47% 4%

GUANGSHEN RAIL-H 525 Shanghai -47% -2%

AIR CHINA LTD-H 753 Shanghai -47% 4%

J IANGXI COPPER-H 358 Shanghai -46% -1%

ANGANG STEEL-H 347 Shenzhen -45% -1%

CHINA COM CONS-H 1800 Shanghai -45% -1%


Market Focus

Monthly market wrap

Summary of sector views

Sector Weight ing Rat ionale

China banks Overweight LGFV loan-bond swap, mixed ownership, and new businesses are positives

Hong Kong banks Overweight A rare sector that can benefit from USD interest rate normalisation

Environmental Overweight Prefer smaller caps with better valuations and growth potential

Internet and e-commerce Overweight E-commerce continues to gain share of retail sales and serv ices

Pharmaceutical + healthcare Overweight Wealth and aging population are drivers; prefer serv ices and equipment

Apparel and footwear Neutral Prefer non-HK centric companies like Belle

China airlines Neutral Earnings upgrades thanks to falling oil price; large H-share discount

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

China auto and parts Neutral Slow car sales balances cheaper commodity input costs

China coal Neutral Documentary "Under the Dome" is scary ; structurally unattractive

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

China non-bank financials Neutral We look to rev isit this sector when SZ-HK stock connect kicks off

China property Neutral Expecting sales recovery due to rate cut, HPR and mortgage policies

China retailers Neutral Positive wealth effect helps counter anti-graft and e-competition drags

China telecom carriers Neutral VAT reform will still impact 2015 earnings

China telecom equipment Neutral 4G network capex to slow slightly in 2015 and more significantly in 2016

Gaming Neutral Worst seems to be over for y-o-y gaming revenue declines

Hong Kong telecom Neutral Industry consolidation should help pricing in the future

Oil Neutral Potential downside risk from strong USD if Greece exits

Railway and construction Neutral Positive outlook, but valuations are less attractive after run up

Textiles Neutral Stable outlook for 2015 offset by near peak valuations

China F&B Underweight High valuations cap upside, particularly with earnings downgrades

China materials Underweight Mismatch between share price gain and decelerating domestic FAI

Hong Kong property Underweight US interest rate cycle and HK political pressure are key risks

HK REITs Underweight Rising risk appetite and US$ interest rate normalization are key risks

HK retailers Underweight Unfavorable structural change in mainland tourist spending behavior

Source: DBS Vickers

Market Focus

Monthly market wrap

DBSV HK top ten BUYs

EPS

Closing DBSV Tgt CA GRT icker price rat ing Price F Y15F F Y16F 14-16 F Y15F F Y16F F Y15F F Y16F F Y15F F Y16F

Top pick s (HK$) (HK$) (X ) (X ) (%) (%) (%) (X) (X ) (%) (%)China Citic Bank 998.HK 5.53 B BUY 8.31 5.0 4.6 4.6 14.6 13.7 0.7 0.6 6.0 6.8

CMB 3968.HK 20.05 B BUY 26.82 6.4 5.7 12.8 18.3 17.5 1.1 0.9 4.7 5.3

CR Land 1109.HK 21.75 B BUY 31.30 12.3 11.0 (11.6) 10.7 10.3 1.2 1.1 2.2 2.4

Dah Sing F in.* 440.HK 50.65 NR NR n.a. 9.7 9.2 2.1 8.5 8.7 0.8 0.8 2.6 2.8

Far East Horizon 3360.HK 7.23 B BUY 7.92 7.7 7.1 6.6 14.1 13.7 1.0 0.9 3.0 3.5

Nexteer Auto 1316.HK 7.35 B BUY 9.30 11.4 9.2 26.5 27.0 26.7 2.8 2.2 1.8 2.2

Sinopharm Group 1099.HK 29.80 B BUY 43.60 17.9 14.7 19.4 12.8 14.0 2.2 2.0 1.5 1.8Tencent 700.HK 144.70 B BUY 184.00 32.3 25.1 32.1 31.8 31.4 10.2 7.8 0.4 0.5

Wasion Group 3393.HK 10.24 B BUY 14.00 12.4 10.4 24.1 17.1 17.4 1.9 1.7 2.9 3.4

Yestar Intl. 2393.HK 3.07 B BUY 4.27 27.9 18.5 56.5 23.6 22.4 4.5 3.9 1.7 2.7

Simple av erage 15.3 12.3 18.7 18.2 18.0 2.8 2.4 2.3 2.7

* consensus estimates

Div y ieldPBVPER ROE

Source: DBS Vickers

DBSV top picks – simple average

DBSV top picks – market cap weighted

90

100

110

120

130

140

150

160


DBSV top picks HSI

(28 Feb 2014 = 100)

90

100

110

120

130

140

150

160

170

180


DBSV top picks - market cap weighted HSI

(28 Feb 2014 = 100)


Market Focus

Monthly market wrap

DBSV universe comparison table

St ockcode 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 urers & dealers

1114 Brilliance China 6,663 10.28 15.30 49 H 7.1 6.3 1.8 1.3 29.31728 China ZhengTong 1,180 4.14 5.50 33 B 6.8 5.6 0.8 2.9 12.31828 Dah Chong Hong 813 3.44 4.95 44 B 6.8 5.7 0.6 4.4 9.6

489 Dongfeng Motor Group 9,923 8.93 15.70 76 B 4.5 3.9 0.7 2.5 17.4175 Geely Automobile 3,701 3.26 3.70 13 H 9.3 8.2 1.2 1.6 13.4

2333 Great Wall Motor 10,065 25.65 48.10 88 H 5.7 4.7 1.5 6.1 28.9601633 Great Wall Motor-A @@@ 12,596 32.10 49.65 55 H 9.1 7.5 2.3 4.9 28.5

2238 Guangzhou Automobile 5,154 6.21 8.30 34 B 7.0 6.0 0.8 4.3 12.3425 Minth Group 2,195 15.38 19.10 24 B 10.6 9.2 1.5 3.8 14.6

1316 Nexteer Automotiv e Group 2,368 7.35 9.30 27 B 11.4 9.2 2.8 1.8 27.01148 Xinchen China Power Hldgs 407 2.45 4.40 80 B 6.8 4.8 0.9 0.0 14.0

881 ZhongSheng 1,307 4.72 6.70 42 B 6.3 4.7 0.7 3.2 11.0Bank ing and F inance (Ch ina- A ) @ @ @

601288 Agricultural Bank of China-A 161,480 3.41 4.04 18 H 6.2 6.0 1.0 5.4 16.7601988 Bank of China-A 214,287 4.52 5.11 13 H 7.7 7.4 1.1 5.1 15.0601328 Bank of Comm-A 81,323 6.80 8.16 20 B 7.6 7.5 1.0 3.4 13.4601998 China CITIC Bank-A 60,051 7.97 7.26 -9 S 9.1 8.6 1.2 2.9 14.6601939 China Construction Bank-A 242,780 6.03 7.39 23 H 6.6 6.4 1.1 3.8 17.3600036 China Merchants Bank-A 68,963 16.98 23.42 38 B 6.9 6.2 1.2 4.4 18.3600016 China Minsheng Bank-A 53,174 9.05 10.64 18 FV 6.6 6.1 1.1 2.3 17.9601398 ICBC-A 274,927 4.79 6.37 33 B 6.0 5.9 1.0 5.5 17.4

Bank ing and F inance (Ch ina)1288 Agricultural Bank of China 146,611 3.50 4.63 32 H 5.0 4.8 0.8 6.6 16.73988 Bank of China 160,982 4.24 5.86 38 B 5.7 5.4 0.8 5.7 15.03328 Bank of Communications 65,320 6.82 9.34 37 B 6.1 5.8 0.8 5.2 13.4

998 China CITIC Bank 33,369 5.53 8.31 50 B 5.0 4.6 0.7 6.0 14.6939 China Construction Bank 204,105 6.33 8.47 34 B 5.5 5.2 0.9 6.0 17.3605 China F inancial Serv ices 314 0.63 0.92 46 B 6.4 5.7 0.8 3.9 12.5

3968 China Merchants Bank 65,215 20.05 26.82 34 B 6.4 5.7 1.1 4.7 18.31988 China Minsheng Bank 41,079 8.73 12.19 40 H 5.0 4.6 0.8 3.0 17.93618 Chongqing Rural Bank 6,657 5.55 7.50 35 B 5.4 5.0 0.9 5.0 17.11398 ICBC 245,458 5.34 7.30 37 B 5.3 5.1 0.9 6.2 17.4

Bank ing and F inance (HK )2388 Bank of China HK 42,612 31.25 26.40 -16 B 12.4 11.3 1.7 3.2 14.6

23 Bank of East Asia 10,595 31.40 33.50 7 H 10.8 10.2 1.0 3.8 9.6165 China Everbright Ltd 4,086 18.80 26.89 43 B 5.0 1.9 0.9 23.9 18.0

2356 Dah Sing Banking Group 2,969 16.42 14.90 -9 B 10.8 10.0 1.1 2.3 10.43360 Far East Horizon 3,684 7.23 7.92 10 B 7.7 7.1 1.0 3.0 14.1

11 Hang Seng Bank (1) 39,180 158.90 143.80 -10 B 15.2 16.6 2.4 3.7 16.65 HSBC Holdings 175,669 69.70 93.70 34 B 9.5 9.4 0.8 6.0 9.4

Cement 914 Anhui Conch Cement 16,471 24.10 32.80 36 B 9.5 8.5 1.3 3.3 15.1

600585 Anhui Conch Cement-A @@@ 12,473 18.25 26.27 44 H 9.0 8.0 1.3 4.4 15.13323 China Nat'l Bldg Mat 4,087 5.87 5.00 -15 FV 5.9 6.1 0.5 2.5 9.11313 China Resources Cement 3,404 4.04 4.79 19 H 7.4 7.0 0.8 2.8 12.1

691 Shanshui Cement 2,741 6.29 2.20 -65 FV 38.6 35.8 1.6 0.4 3.9Chemicals

2283 T K Group 252 2.36 3.50 48 B 9.7 8.3 2.9 4.1 33.5 Source: DBS Vickers

@@@ denominated in RMB

Market Focus

Monthly market wrap

DBSV universe comparison table (con’t)

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 (% )

15FCong lomerat es- HK

4 Wharf Holdings # 19,233 49.20 53.85 9 H 12.5 11.3 0.6 4.0 3.820 Wheelock # 10,521 40.15 42.35 5 B 8.4 7.3 0.8 3.0 4.9

F ood and Bev erages600597 Bright Dairy & F ood@@@ 2,930 18.46 19.70 7 B 32.1 25.7 4.7 1.9 15.2

506 China F oods 1,292 3.58 5.58 56 H 48.7 31.3 1.6 0.0 3.42319 China Mengniu 8,866 35.05 47.10 34 B 20.4 17.9 2.3 1.1 11.91117 China Modern Dairy 1,717 2.51 3.35 33 B 11.0 9.0 0.6 0.0 8.21068 China Yurun 541 2.30 3.80 65 H 58.3 33.3 0.3 0.0 0.4

322 Tingy i Holding 10,783 14.92 17.60 18 H 23.6 21.6 3.3 2.1 14.4168 Tsingtao Brewery 7,205 41.35 45.00 9 H 23.4 22.2 2.7 1.3 11.9

600600 Tsingtao Brewery -A @@@ 6,440 36.96 36.00 -3 F V 26.1 24.8 3.0 1.2 11.9220 Uni-President China 3,983 7.15 6.40 -10 H 38.7 32.4 2.2 0.8 5.7345 V itasoy 1,564 11.64 12.30 6 H 32.3 28.4 6.3 2.1 20.3151 Want Want China 13,600 8.03 9.80 22 B 19.6 17.8 5.6 2.8 31.0

Hardw are & Equ ipment552 China Comm Serv ices 3,135 3.51 4.20 20 B 8.3 7.7 0.8 3.6 9.8

3777 China F iber Optic Network 443 1.60 3.90 144 B 4.1 3.5 0.6 0.0 17.02342 Comba 444 1.86 3.50 88 H 6.4 5.4 0.7 3.9 12.12618 TCL Communication 979 6.03 7.40 23 H 6.5 6.5 1.6 4.5 25.81300 Trigiant Group 368 1.82 3.30 81 B 5.5 5.1 0.9 6.5 18.1

856 V ST Holdings 521 2.65 3.60 36 B 5.9 5.4 0.9 5.0 15.5303 V Tech 3,126 96.50 110.00 14 B 13.2 12.4 5.1 7.5 39.7763 ZTE 10,852 17.24 23.00 33 B 16.3 14.4 1.7 1.5 11.0

Househo ld /Personal (Ch ina/HK ) 1880 Belle Int'l 8,767 8.06 11.50 43 B 11.4 10.8 2.2 9.1 18.92111 Best Pacific Int'l Hldgs 506 3.84 4.40 15 B 12.1 10.0 2.1 2.5 18.36388 Coach @ ^^^ 980 27.50 48.10 75 H 8.4 8.3 3.0 4.7 36.7

210 Daphne International 328 1.54 1.70 10 H 17.9 10.9 0.5 1.7 2.81169 Haier Electronics 6,565 18.22 28.32 55 B 12.0 10.2 2.5 0.8 22.71044 Hengan 13,683 86.65 87.70 1 H 24.2 21.4 5.4 2.7 23.7

494 Li & F ung 6,512 6.00 11.30 88 B 10.6 9.2 2.5 6.6 24.52331 Li Ning 931 3.83 4.20 10 H 464.3 18.0 2.0 0.0 0.5

311 Luen Thai 164 1.23 2.40 95 B 4.2 3.7 0.4 7.2 9.81382 Pacific Textile 2,295 12.30 12.50 2 B 16.6 15.7 5.1 6.5 28.91913 Prada 11,765 35.65 35.45 -1 F V 23.2 24.6 3.5 2.7 15.8

531 Samson Holding 404 1.03 1.24 20 B 16.4 15.2 0.9 11.6 5.11910 Samsonite Int'l ^^ 4,600 25.30 27.18 7 B 20.9 18.7 3.3 2.3 16.51023 Sitoy Group 536 4.15 4.69 13 H 9.2 8.4 2.0 6.8 22.31836 Stella International 2,146 20.95 19.80 -5 H 15.4 13.8 2.1 4.7 14.32678 Texhong Textile Group 903 7.91 9.50 20 B 7.1 5.7 1.4 4.2 21.4

321 Texwinca 1,671 9.38 9.00 -4 B 16.8 13.9 2.1 6.0 12.8

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


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 (% )

15FIndust rials

569 China Automation 130 0.98 1.80 84 B 8.3 7.9 0.4 6.5 0.0517 Cosco International 880 4.45 4.40 -1 B 19.6 18.0 0.9 2.6 4.4

1366 J iangnan Group 956 2.00 2.65 33 B 7.3 5.4 1.3 3.4 19.6179 J ohnson Electric 2,987 26.30 27.20 3 H 14.7 13.4 1.6 2.2 11.5

2314 Lee and Man Paper 2,840 4.78 4.30 -10 H 10.9 9.8 1.2 3.2 11.22689 Nine Dragons 3,448 5.73 4.50 -21 F V 16.8 14.8 0.9 1.2 5.23393 Wasion Group 1,356 10.24 14.00 37 B 12.4 10.4 1.9 2.9 17.1

In f rast ruc t u re152 Shenzhen International 3,146 12.86 14.04 9 B 12.0 11.3 1.3 2.5 11.1

Inv est ment Serv ic es (Ch ina / HK )806 V alue Partners Group 2,153 9.04 14.70 63 B 11.4 11.3 3.4 5.2 33.6

M ed ia 752 Pico F ar East 360 2.29 2.98 30 B 10.0 8.9 1.6 5.3 16.6511 TV B 2,316 41.00 42.23 3 F V 12.0 11.6 2.1 6.2 17.4

Pharmac eut ic al & Healt h Care2877 China Shineway 1,056 9.90 11.00 11 H 9.2 8.9 1.2 4.4 14.1

570 China Traditional Chinese Med 3,234 5.85 11.30 93 B 24.8 14.4 1.9 0.0 10.01681 Consun Pharmaceutical 743 5.76 6.80 18 B 17.1 13.6 2.8 0.6 17.5

000999 CR Sanjiu Medical & Pharm@@ 4,766 30.23 36.20 20 B 24.8 22.1 3.9 1.4 16.7853 Microport Scientific 597 3.25 2.55 -22 F V n.a. 77.6 1.9 0.0 -7.5

1066 Shandong Weigao 3,002 5.20 6.50 25 H 16.9 15.0 1.8 1.8 10.81099 Sinopharm Group 10,635 29.80 43.60 46 B 17.9 14.7 2.2 1.5 12.8

300026 Tianjin Chase Sun Pharm@@@ 2,635 17.95 21.40 19 H 29.5 23.9 3.5 0.4 15.22393 Yestar International 861 3.07 4.27 39 B 27.9 18.5 4.5 1.7 23.6

Propert ies (Ch ina) (2 )3383 Agile Property # 2,258 4.47 5.87 31 H 4.0 4.2 0.3 6.2 8.8

832 Central China # 551 1.75 3.02 73 B 3.7 2.9 0.3 8.2 13.81224 CC Land # 654 1.96 2.28 16 H 7.8 8.2 0.4 2.6 4.3

81 China Ov erseas Grand Oceans 924 3.14 6.53 108 B 3.0 2.4 0.3 1.6 17.5688 China Ov erseas # 31,094 24.45 38.96 59 B 7.8 7.3 1.0 2.6 17.2

1109 China Resources Land # 19,442 21.75 31.30 44 B 12.3 11.0 0.8 2.2 10.72202 China V anke 26,250 18.44 23.69 28 B 9.8 8.8 0.8 3.6 17.8

000002 China V anke-A @@@ 20,185 14.18 18.91 33 B 9.4 8.4 0.8 3.7 17.82007 Country Garden # 8,856 3.04 5.25 73 B 5.3 5.1 0.8 6.1 16.13333 Evergrande Real Estate # 10,361 5.13 3.81 -26 H 8.2 7.2 0.5 3.0 6.9

fsg sp F irst Sponsor Group @@ 1 1.29 1.57 22 B 14.1 12.4 0.6 1.3 5.9817 F ranshion Properties # 3,454 2.51 3.80 51 B 6.8 6.2 0.6 4.4 9.8813 Shimao Property # 6,216 13.88 25.16 81 B 5.1 4.7 0.5 6.7 15.2272 Shui On Land # 2,195 2.12 1.97 -7 H n.a. n.a. 0.4 0.4 -1.5

3377 Sino-Ocean Land # 5,165 5.32 7.06 33 B 9.1 7.2 0.6 3.6 8.4410 Soho China # 3,272 4.88 5.39 10 H 27.7 39.7 0.5 6.0 1.9337 Greenland (Hong Kong) # 1,443 4.46 8.28 86 B 20.3 6.6 0.7 0.0 7.7

Yllg sp Yanlord Land # @@ 1,374 0.97 1.49 54 B 9.7 6.7 0.5 1.4 4.6123 Yuexiu Property # 2,447 1.53 1.67 9 H 8.3 7.0 0.5 4.8 6.1

Source: DBS Vickers

@@ denominated in SGD; # P/NAV

Market Focus

Monthly market wrap


St oc kcode 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 (% )

15FPropert ies (HK )

1113 CK Property 32,157 64.60 81.10 26 B 15.0 13.7 0.7 2.7 6.841 Great Eagle # 2,315 27.00 30.50 13 H 10.7 11.0 0.4 2.7 3.110 Hang Lung Group # ^ 6,107 34.95 42.25 21 H 13.0 12.9 0.7 2.3 4.8

101 Hang Lung Properties # ^ 12,814 22.15 25.05 13 B 17.3 16.9 0.6 3.4 4.312 Henderson Land # ^ 21,825 51.20 55.25 8 B 17.9 17.1 0.7 2.1 3.9

HKL SP Hongkong Land ^ # @ 17,975 7.64 9.32 22 B 20.0 19.6 0.7 2.5 3.214 Hy san Dev elopment # 4,555 33.20 38.15 15 B 16.0 15.8 0.5 3.8 3.2

173 K. Wah Intl # 1,544 4.27 5.47 28 B 17.8 8.4 0.4 3.5 2.6683 Kerry Properties # 5,398 28.95 34.00 17 B 13.5 11.8 0.4 2.8 3.8488 Lai Sun Dev elopment # 438 0.17 0.26 56 B 14.9 16.1 0.2 1.5 1.1

66 MTR ^ # 26,060 34.55 36.20 5 H 20.0 22.8 0.9 3.0 6.117 New World Dev # 10,872 9.37 11.74 25 B 12.4 11.2 0.5 4.5 4.016 SHK Properties # ^ 44,177 119.10 150.00 26 B 17.8 13.8 0.6 2.8 4.483 Sino Land # 9,448 12.04 15.14 26 B 14.7 13.7 0.5 4.2 4.4

1972 Swire Properties # 18,824 24.95 30.20 21 B 20.0 19.7 0.7 2.6 3.588 Tai Cheung # 544 6.83 8.65 27 B 7.6 12.1 0.4 4.4 8.2

369 Wing Tai Properties # 827 4.78 6.05 27 B 16.2 20.3 0.3 2.8 1.7Railw ay & Const ruc t ion

1800 China Comm Construction 20,777 9.96 15.80 59 B 8.3 7.5 1.0 2.8 12.6601800 China Comm Construction-A @@@ 29,455 14.12 25.30 79 H 14.7 13.3 1.8 2.0 12.6

1186 China Railway Construction 17,619 10.06 17.00 69 B 8.3 7.8 0.9 1.8 12.2601186 China Railway Construction-A @@@ 27,829 15.89 26.90 69 H 16.4 15.3 1.8 1.1 12.2

390 China Railway Group 19,504 6.62 11.45 73 B 9.4 8.5 1.1 1.6 11.9601390 China Railway Group-A@@@ 37,594 12.76 22.90 79 H 22.1 20.4 2.6 0.8 12.2

1766 CRRC Corp 34,420 9.78 18.40 88 B 16.1 13.3 2.3 1.9 15.3601766 CRRC Corp-A @@@ 54,129 15.38 33.50 118 H 31.7 26.2 4.5 1.2 15.3

3311 China State Construction 6,241 12.06 14.70 22 H 11.1 9.5 2.0 2.7 20.0Real Est at e Inv est ment T rust

2778 Champion REIT 3,194 4.30 4.68 9 B nmf nmf 0.5 4.3 2.2778 F ortune REIT 2,052 8.45 9.18 9 B nmf nmf 0.7 5.5 3.7

6139 J inmao Inv estment 1,225 4.75 6.20 31 B nmf nmf 1.1 9.5 4.6808 Prosperity REIT 538 2.92 3.00 3 B nmf nmf 0.6 5.8 3.6435 Sunlight REIT 834 3.95 4.22 7 B nmf nmf 0.5 5.4 2.9823 The Link REIT 13,487 45.60 48.10 5 H nmf nmf 0.9 4.0 25.4

Rest au rant s538 Ajisen China 503 3.57 5.40 51 F V 12.0 10.5 1.2 5.0 9.9341 Cafe de Coral 2,043 27.20 28.60 5 H 26.7 23.7 4.3 2.5 15.9

Ret ailers814 Beijing J ingkelong 109 2.05 2.20 7 H 15.0 13.6 0.4 6.1 2.7653 Bonjour Holdings 207 0.47 0.55 17 H 3.0 2.9 0.1 16.9 4.1116 Chow Sang Sang 1,313 15.04 21.91 46 B 8.6 7.6 1.1 4.4 13.1330 Esprit Holdings 1,866 7.44 6.70 -10 F V n.a. 153.9 1.1 0.4 -20.6709 Giordano 796 3.93 3.80 -3 H 14.0 12.7 2.1 6.8 15.0

3308 Golden Eagle % 2,169 9.58 11.70 22 H 12.2 11.2 2.2 3.2 19.7493 Gome Elec Appliances % 2,953 1.35 1.95 44 H 13.5 12.2 1.0 3.0 7.8

3389 Hengdeli 697 1.13 1.30 15 H 8.9 8.2 0.7 3.4 7.91833 Intime Department Store 2,456 8.70 9.70 11 H 14.0 12.2 1.4 3.1 10.1

J D US J D.com ^^@ 46,157 33.37 40.40 21 B 774.9 140.0 8.0 0.0 -4.6980 Lianhua Supermarket 595 4.12 4.32 5 H 94.2 77.6 1.1 0.0 1.1

Source: DBS Vickers

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

Market Focus

Monthly market wrap


St oc kcode 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 ( c ont 'd )

1212 Lifesty le 2,617 12.62 16.00 27 B 10.0 9.6 1.7 4.7 17.9590 Luk F ook 1,656 21.80 28.00 28 B 8.0 8.3 1.5 5.0 20.0825 New World Dept Stores 378 1.74 1.93 11 H 11.0 10.8 0.4 4.6 4.1

1438 Nirv ana Asia Ltd 794 2.28 3.60 58 B 14.9 12.5 2.3 2.0 15.9398 Oriental Watch 87 1.18 1.56 32 H 149.4 41.9 0.3 0.8 0.2

3368 Parkson 468 1.33 1.46 10 H 16.9 9.8 0.5 2.7 3.2178 Sa Sa 1,277 3.48 4.45 28 H 11.8 12.1 4.0 6.8 35.0

1700 Springland Int'l 828 2.63 2.78 6 H 8.2 7.6 1.0 6.1 12.46808 Sun Art Retail Group 7,259 5.90 5.90 0 F V 15.9 15.2 2.1 2.7 13.8

891 Trinity Ltd 266 1.18 1.50 27 H 12.0 9.6 0.6 6.1 5.01025 Wumart ^^ 792 4.77 5.08 6 H 15.0 14.8 1.1 0.0 7.9

Sof t w are & Comput er Serv ic es268 Kingdee 1,256 3.35 6.80 103 B 29.1 22.2 2.2 0.5 9.6700 Tencent ^^ 175,003 144.70 184.00 27 B 32.3 25.1 10.2 0.4 31.8

600588 Yony ou Network Tech@@@ 9,055 40.00 32.00 -20 F V 91.8 71.4 13.3 0.7 14.8St eel, alumin ium & copper

347 Angang Steel 3,676 3.94 7.00 78 B 25.6 20.5 0.5 1.0 1.9000898 Angang Steel-A @@@ 5,207 5.58 6.10 9 H 45.3 36.2 0.8 0.6 1.9600019 Baoshan Iron & Steel Co-A 17,637 6.65 10.50 58 B 16.2 14.8 0.9 2.7 5.8

1378 China Hongqiao Group 4,723 5.75 8.50 48 H 4.5 3.5 0.8 5.6 17.6323 Maanshan I & S 1,808 1.82 1.87 3 F V 49.8 17.2 0.5 0.7 1.0

600808 Maanshan I & S-A @@@ 4,271 4.30 2.05 -52 F V 147.1 50.8 1.4 0.3 1.0486 United Co RUSAL PLC 7,191 3.67 7.00 91 B 6.4 5.2 1.1 0.0 27.0

T elec om Serv ic es (Ch ina)941 China Mobile 268,029 101.50 120.00 18 B 15.4 14.7 1.8 2.8 12.2762 China Unicom 33,788 10.94 11.20 2 H 15.7 14.8 0.9 2.3 5.8728 China Telecom 45,300 4.34 5.60 29 B 14.5 13.1 0.9 2.2 6.6

T elec om Serv ic es (HK )1883 CITIC Telecom 1,547 3.55 3.50 -1 B 15.3 14.4 1.7 3.2 11.46823 HKT Trust 9,218 9.44 9.50 1 H 20.8 20.2 1.9 5.7 9.1

215 Hutchison Telecom 2,113 3.40 3.40 0 H 17.8 16.4 1.4 4.2 8.0315 SmarTone 2,165 15.86 16.00 1 B 21.0 19.5 4.6 3.3 23.3

T ranspo rt at ion - Po rt s & A irport s694 Beijing Capital Intl A irport 4,463 7.99 6.35 -21 B 17.0 15.6 1.5 2.3 9.1144 China Merchants Hldgs 9,458 28.35 36.60 29 B 13.8 12.8 1.0 2.7 7.6

1199 COSCO Pacific 3,839 10.12 13.00 28 B 12.4 11.5 0.8 3.2 6.5Ut it ilies

1816 CGN Power 19,988 3.41 5.06 48 B 19.4 15.9 2.1 1.5 11.5Warehouse

925 Beijing Properties+ 523 0.60 0.70 17 B n.a. n.a. 0.9 0.0 -1.4600340 China F ortune Land Dev@@@ 12,637 29.66 31.60 7 B 16.5 13.1 5.8 0.6 40.9

1668 China South City 2,363 2.29 2.96 29 B 4.7 8.5 0.7 6.1 16.6200053 Shenzhen Chiwan Petroleum 776 17.20 21.48 25 B 30.6 33.1 0.8 0.3 6.0

Source: DBS Vickers

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

% - Fully Diluted EPS; ^^Core profit and EPS

Market Focus

Monthly market wrap


St o c kc o de St oc k name

M k tCap

(US$m)

SharePric e

(HK $ )

T argetPric e

(HK $ )ups ide (% ) R emd

PE ( x )15F

PE ( x )16F

PB ( x )15F

Y ld (% )15F

RO E (% )1 5F

W at er In f rast ruc t u re, Env ironment al371 Beijing Enterprises Water % 6,508 5.79 6.60 14 B 23.0 17.4 2.8 1.3 13.1

1381 Canv est Env ironment Protection 988 3.83 5.00 31 B 29.7 17.7 3.0 0.0 10.5257 China Ev erbright Intl 6,905 11.94 14.70 23 B 24.9 19.6 2.9 1.2 12.5

CEWL SP China Ev erbright Water @@ 1,526 0.81 1.05 30 B 24.5 19.5 1.7 0.0 7.41363 CT Env ironmental Group 2,024 2.72 3.00 10 B 22.4 18.2 6.3 0.9 32.06136 Kangda International 4,525 3.01 4.00 33 B 13.8 10.6 1.6 0.0 11.9

SIIC SP SIIC Env ironment @@ 1,386 0.17 0.18 5 H 24.1 19.0 1.7 0.0 8.0967 Sound Global 7,666 7.00 10.71 53 B 11.5 9.0 1.9 0.0 18.3

1065 Tianjin Cap Env ironmental 893 4.85 4.20 -13 S 15.2 14.1 1.3 1.3 8.5600874 Tianjin Cap Env ironmental-A @@@ 1,901 10.33 7.50 -27 S 40.3 37.5 3.3 0.5 8.5

UENV SP United Env irotech @@ 1,505 1.70 2.00 18 B 26.4 19.3 2.3 0.3 12.2

Source: DBS Vickers

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

% - Fully Diluted EPS

Market Focus

Monthly market wrap

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”), a direct wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group 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 and/or DBSVH) 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. DBSVHK 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. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd 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. DBSVHK, DBS Bank Ltd and their associates, their directors, and/or employees 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 DBSVHK and/or DBSVH (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, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. ANALYST CERTIFICATION The research analyst 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 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 the date the report is published, the analyst and his / her spouse and/or relatives and/or associate who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions).

Market Focus

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COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBSVHK and its subsidiaries do not have a proprietary position in the securities recommended in this report as of the date the report is

published. 2. DBSVHK, DBSVUSA, DBS Bank Ltd and/or other affiliates beneficially own a total of 1% or more of any class of common equity securities of

Fortune REIT (778 HK) mentioned in this document as of the latest available date of the updated information. 3. Compensation for investment banking services:

DBSVHK, DBSVUSA, DBS Bank Ltd and/or other affiliates have received compensation, within the past 12 months, and within the next 3 months may receive or intends to seek compensation for investment banking services from Bank Of China (3988 HK/601988 CH), Best Pacific (2111 HK), China Merchants Holdings (144 HK), China Overseas Grand Oceans (81 HK), China Resources Land (1109 HK), China Unicom (762 HK), Far East Horizon (3360 HK), Franshion Properties (817 HK), Henderson Land (12 HK), Jinmao Investments (6139 HK), Lenovo Group (992 HK), Nirvana Asia (1438 HK), China Petroleum & Chemical (386 HK), The Link REIT (823 HK), The Wharf Holdings (4 HK), Yuexiu Property (123 HK) and First Sponsor (FSG SP) mentioned in this document.

DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager 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.

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Wong Ming Tek, Executive Director, ADBSR

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