monday 21 february 2011 morning expressoimg.jrjimg.cn/2011/02/20110222142829589.pdf · economist:...

UBS Investment Research

Morning Expresso - Asia

Monday 21 February 2011 . .

Global Equity Research

Asia

Equity Strategy

Regions & Sectors

21 February 2011

www.ubs.com/investmentresearch

Herman ChanProduct Manager

[email protected]+852-2971 7253

Alex ChangProduct Manager

[email protected]+852-2971 8599

Bill SohnProduct Manager

[email protected]+852 2971 6139

Morning Expresso

This report has been prepared by UBS Securities Asia Limited ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 18. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

ab

Asian Equities Research Team

mailto:[email protected]



Morning Expresso - Asia 21 February 2011

UBS 2

Morning Meeting Agenda Asia Equity Strategy

Strategist: Niall MacLeod Tel: +852-2971 6186

Cutting Taiwan, Korea; Raising Thailand to overweight, Indonesia to neutral The 'exporter trade' likely to be behind us The combination of what we expect to be peaking leading indicators in the coming months allied with

reasonably firm relative valuations leaves little left in the tank in our view for what was essentially a ‘macro’ trade that started last November: the ‘exporter trade’ looks to be largely behind us.

Cutting Korea and Taiwan to Underweight Cyclicals in general and Taiwan and Korea have tended to struggle in relative terms after leading indicators peaked - whilst the absolute valuations are not yet ‘expensive’, relative to the rest of Asia the PB is back to near peak levels since 2003. As such we cut the markets to underweight.

Raising Indonesia to Neutral Bond yields have moved higher with inflation fears. While not at levels we earlier expected, recent forex gains, if they persist, have the capacity to reignite the ‘carry trade’ on bonds. Given the correlation with equities, the correction in equities and more attractive valuations, we take the market from underweight to neutral.

Thailand to Overweight; Malaysia to Neutral We take Thailand overweight – we have few macro fears here, earnings and valuations look attractive, and weakness due largely to foreign selling looks unwarranted relative to macro issues. Politics, as always, remains an issue, but we are willing to take the political risk premium.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 21 February 2011

Weekly Weight Watcher

Economist: Larry Hatheway Tel: +44-20-7568 4053

Assessing risk Nervous anticipation Investors are getting more nervous about a pause or correction in global equity markets. For some, the reason is the

uninterrupted gains in developed equity markets since last August, which they fear cannot continue. For others, jitters center on fundamental concerns about sovereign risk, inflation, or policy responses that don’t seem to be reflected in current market prices.

Bucking the trend Should investors worry about what happens to returns once long ‘winning streaks’ are broken? The data suggest such fears might be overdone. A more legitimate worry is whether the incoming economic data can continue to provide positive surprises, a factor which has been important in boosting equity markets over the past half year. Investors must also keep a close eye on sovereign risk, inflation, and central bank policy responses.

Unchanged allocations Still, we don’t see the immediate catalyst to reduce equity overweight positions. Moreover, the fundamental underpinnings for global equity markets—strong growth, rising profits, modest valuations, and the lack of compelling investment alternatives—are likely to drive continued out-performance. Accordingly, we retain our existing recommended portfolio. We prefer overweight allocations to global equities, cyclical commodities, real estate, and higher-yielding credit in our model portfolio, offset by underweight recommendations to nominal and inflation-linked government bonds as well as to cash.

Notes:


US Economic Perspectives

Economist: Maury N. Harris Tel: +1-212-713 2472

An Object (Economy) in Motion How much longer can we wait? The Administration’s budget reminds us that the debate around spending, taxes, and the government’s debt burden

is just beginning. Longer-term, we see serious challenges ahead that will require tough decisions. Shorter-term, the debate will take precedence and center on the need for a new continuing resolution and the debt ceiling. The former allows government spending to occur, while the second allows the US Treasury to borrow the money to spend. Because of the increased importance of foreign buyers to the US Treasury market, we think a contentious debate could prove more disruptive to markets than has been the case historically.

Weather—Cold or not in January? Data depressed by January storms—such as payrolls—should reverse in February. But growth measures that are typically sensitive to temperatures probably will not.

The past week: momentum Momentum in manufacturing and consumer spending growth continues into Q1. Inflation in consumer, producer, and import prices has picked up slightly and the acceleration, even if exaggerated, appears to reflect genuine price pressures. The recent pace of core CPI suggests modest upward risks to our 1.4% forecast for this year.

The week ahead Highlights should be consumer sentiment measures, home sales, and durable goods orders. We expect mixed data, with modest declines in consumer confidence, home sales, and prices but an increase in durable goods orders. Revisions to Q4 real GDP growth are likely offsetting, with a small cut to consumer spending growth offset by a larger contribution from net exports. Jobless claims also merit attention. We expect a downtrend to resume as the weather improves.

Notes:


http://research.ibb.ubs.com/doc/400174049




UBS 3

European Weekly Economic Focus

Economist: Stephane Deo Tel: +44-20-7568 8924

Eurozone Q4 GDP: No reason to revise down 2011/12 forecasts Fourth-quarter 2010 GDP growth in the euro area came in somewhat weaker than expected this week, at 0.3% QoQ, versus 0.4% expected by both

UBS and consensus. All major eurozone countries which have reported their Q4 data so far came in below expectations, with Germany and Italy reporting only a small miss (0.1pp), whereas France was more disappointing (0.3pp below consensus). Q4 is an important datapoint because it sets the level from which the sequential 2011/12 profile starts. Despite the major miss, we do not believe our 2011/12 numbers need to be adjusted, although for some countries the need for revision may be stronger than for others. In this article, we explain what happened to growth in the euro area at the end of last year, what it means for our forecasts, and why we think it is premature to revise our numbers down at this stage.

Next week in Europe Leading indicators will take centre stage in Europe next week. The advance estimates of the eurozone February PMI will be released on Monday. We expect both the manufacturing and services PMIs to remain strong, with only very little change expected compared to last month. Even in Germany and France, the PMIs should remain strong, in our view; the data is due on Monday. Germany’s all-important IFO survey for February is also due on Monday; we expect the survey on business climate and current assessment to firm up slightly from last month. The forward-looking expectations survey is also likely to strengthen, albeit marginally. In the UK, the minutes of the MPC’s 10 February meeting will be released on Wednesday. Markets will keenly watch the vote split at this meeting. The vote is likely to show at least one other member joining Andrew Sentance and Martin Weale for a rate hike. And if that is not the case, the commentary will likely suggest that many members were close to voting to raise interest rates. In other words, the minutes are likely to sound hawkish. The ONS will release the second print of the Q4 GDP figures on Friday. We do not expect any change from the first estimates. Public finances data for January is also due next week, on Tuesday.

Notes:


UBS Global I/O: Technology Hardware

Technology Hardware & Equipment Analyst: Gareth Jenkins Tel: +44-20-7567 3950

Mobile World Congress 2011 feedback Input: over 50 meetings in 3 days It was an interesting MWC with discussion points centring on 1. The concern/opportunity around Nokia-MSFT 2.

The launch of several interesting new tablets/phones 3. The resurrection of an industry innovator (Bell Labs) and 4. The trends in mobile data and emerging technologies such as NFC.

Operators more upbeat echoed by infrastructure vendors In general, operators were more upbeat than last year, seeing improved revenue trends from mobile data; increasing handset competition giving value transfer back to the operators; and capex largely in check despite data traffic growth. Echoing this shift, infrastructure equipment vendors were somewhat more optimistic, enjoying late cycle recovery in their end-markets with competition fairly stable.

The line is further blurring within Mobile Computing We were most impressed by Samsung’s Galaxy S2 and HTC’s multiple iterations and cleverly-branded Facebook phones. We see both vendors, alongside Apple as the likely beneficiaries of Nokia’s transition. We were unimpressed by Honeycomb tablets, although conscious the OS is not finalised. We reiterate our 55m unit tablet PC forecast ‘11E and see little challenge to Apple. On the other hand, the PC industry is not discouraged and could push tablet PC prices down, whilst contemplating ARM-based Windows 8 PCs in 2H12.

Output: Most/least preferred Our most preferred stocks are: Apple, Catcher, HTC, Laird, Qualcomm, Samsung, Spirent and TPK. Least preferred: Nokia, FIH, Gemalto and Mediatek.

Notes:


Asia Tech Strategy

Technology Analyst: Nicolas Gaudois Tel: +82-2-3702 8801

Life after Nokia’s strategy shift Remaining cautious near term on Asia Tech; affirm O/W Wireless We make several changes to our portfolio to reflect how the Asia OEMs and

supply chain could be influenced by Nokia’s change of smartphone’s strategy, and after our meetings at the Mobile World Congress. We keep a positive bias towards Wireless, LCD and Memory. However, we also continue to call for a near term correction in Asia Tech as valuation (15.1x ‘11E PE) still not fully compelling despite recent underperformance (-1.5% relative to Asia MSCI over past 2 weeks).

Samsung and HTC to benefit from Nokia’s transition phase This year’s MWC (feedback for Asia cos in this report) focused a lot on assessing the aftermaths of Nokia’s move to Microsoft OS. This will be a difficult transition phase, with competitors offering compelling alternatives. We came back most impressed by Samsung’s Galaxy S2 and HTC’s multiple iterations and cleverly-branded Facebook phones. We see both vendors, alongside Apple as the likely main beneficiaries from Nokia’s transition phase.

We add HTC to Most Pref and FIH to Least Pref list We add back HTC to our Most Preferred list post the stock’s in-line performance since December, despite improving fundamentals (strong and differentiated products line up; disruption at a key competitor). We also re-instate FIH in Least Preferred as exposure to Nokia (c. 49% of revenues) will likely prove problematic.

Most and Least Preferred Most Preferred include Catcher, Lenovo, LGD, Realtek, Samsung and now HTC; Least Preferred: ASMPT, HCL, LGI, Mediatek, Quanta and now FIH.

Notes:






UBS 4

GCL Poly Rating: Buy Target: HK$4.50 Price: HK$3.77 RIC: 3800.HK Prior: Unchanged Prior: Unchanged Mkt Cap: HK$58.3bn BBG: 3800 HK

Electric Components & Equipment Analyst: Lu Yeung Tel: +852-6081 0223

New expansion plan implies strong orders GCL Poly expands 2011 capacity to 6.5GW from 3.5GW GCL announced new expansion plan to increase its wafer capacity to 6.5GW by end of

2011 compared to our estimate of 5GW. This reinforces our recent checks with customers that order pipeline in 2011 could exceed 4.5GW. The company will report FY2010 results on March 17 and we expect upbeat 1H11 commentary.

Positive implications from YGE’s upbeat 2011 outlook Yingli (YGE) kicked off the earnings season with an impressive 4Q result and its upbeat 2011 outlook of shipments +60% YoY has positive implications for GCL’s major customers TSL, STP, CSIQ and JASO that are set to report in the next few weeks. YGE expects flattish poly prices in 1H11 and moderate decline in 2H11.

Poly ramp appears 2H-loaded; 1H could see minor supply constrains Capacity ramp appears 2H-loaded as GCL expects 2011 poly capacity to reach no less than 25K MT from 21K MT currently and reaching 65K MT by middle of 2012. While actual annualized production has already exceeded 24K MT out of current 21K nameplate capacity, GCL could see some poly minor constrains in 2Q11 if demand far exceeds expectations.

Valuation not demanding at under 8x ’11E; Reiterate PT of HK$4.5 With improving subsidy outlook in Italy, Germany and California, we look for upside in our bullish 2011 demand forecast of 19GW which supports a resilient poly pricing scenario. Valuation looks undemanding at 8x ’11E given GCL’s leading position amid China’s polysilicon industry consolidation and a cost structure challenging global players. Our PT is based on VCAM.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of HK$3.77 on 18 Feb 2011 23:38 HKT

YingLi Green Energy Rating: Buy Target: US$16.00 Price: US$12.84 RIC: YGE.N Prior: Unchanged Prior: US$15.00 Mkt Cap: US$1.91bn BBG: YGE US

Electric Components & Equipment Analyst: Lu Yeung Tel: +852-6081 0223

Strong 4Q beat; Raise PT to $16 Upbeat 2011 outlook but 1H appears capacity constrained YGE's upbeat 1H11 outlook reinforces our above Street 2011 demand of 19GW. YGE

has secured 1.4GW firm orders with 1.7GW of shipment guidance in 2011, and only expects minimal ASP erosion. However, it appears the company is relatively capacity-constrained in 1H11 until new 600MW facility is fully operational in 3Q11. We raise our PT to $16.

Panda ahead but Fine-Si lags; Higher interests offset OpEx savings We are encouraged that the high conversion efficiency products Panda is ramping on track but in-house silicon appears slightly behind with production cost currently at c$60/kg. However, management is confident of reducing module non-silicon cost by a few cents from the current level of $0.74/W and improve its blended silicon cost starting in 2H11. YGE also expects Opex remain at c.10% of sales (from 11% in '10) but interest expense could surge from capex increases.

Strong 4Q beat on lower opex, higher shipment/ASP Incl. 1x non-cash CB charge of $7m, Yingli reported Q410 GAAP EPS of $0.54 (CNY3.55), exceeding UBSe of $0.37 (CNY2.46) and consensus of $0.44 on robust shipment growth of 21% QoQ to about 348MW, ASP increased to $1.74/W from below 1.70/W in 3Q10. GM of 32.9% (vs. UBSe of 31.2% and guidance of 30-31%) down slightly from 33.3% in 3Q10 but Op margin improved to 23.2% from 22.4% in the previous quarter.

Reiterate Buy; Raise PT to $16 We are raising our FY11E EPS by 5.6% and our VCAM-based PT to $16 based on new 2011 guidance. We see accelerated ramp of Panda and its potential pricing premium could provide upside to the current estimates.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of US$12.84 on 18 Feb 2011 23:38 HKT

Asiainfo-Linkage Rating: Buy Target: US$33.00 Price: US$20.90 RIC: ASIA.O Prior: Unchanged Prior: Unchanged Mkt Cap: US$1.56bn BBG: ASIA US

Communications Technology Analyst: Jinjin Wang, CFA Tel: +852-2971 8579

High conviction rate on solid 2011 growth We expect telco IT capex to grow 10-15% YoY in 2011 We expect domestic IT capex by telcos to recover to 10-15% YoY growth in 2011, mainly

driven by telcos changing focus from network expansion to improving service quality. The industry is underinvested in China, with IT spending as a percentage of telco service revenue lagging far behind the global average. We expect telco capex on Business Operation Support Systems (BOSS) to grow at a 13.6% CAGR during 2011-13.

IT systems will become telcos’ core competence in long run We believe that in the long run IT systems will play a key role in telco operations as communication service becomes incrementally commoditised. IT systems will help telcos differentiate themselves amid fierce competition as they try to optimise customer experiences, enhance customer satisfaction, and lower churn rate.

High conviction rate to deliver the 2011 growth target According to Asiainfo-Linkage management, its revenue guidance was calculated by a bottom-up method after reviewing the current project pipelines and extensive account-by-account discussions on potential projects, and we therefore consider it highly reliable. Management thinks the new Unicom contracts in six northern provinces could contribute 25% of incremental revenue in 2011. The company’s outstanding corporate governance further supports our confidence that the company will deliver the financial targets.

Valuation: attractive, reiterate Buy rating We reiterate our Buy rating and US$33.00 price target. Our price target is 57% above the current level. In our view, the valuation is attractive at only 0.65x PEG. We derive our price target from a DCF-based methodology and explicitly forecast long-term valuation drivers using UBS’s VCAM tool, assuming a 10.6% WACC.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of US$20.90 on 17 Feb 2011 23:38 HKT





UBS 5

SMIC Rating: Sell Target: HK$0.55 Price: HK$0.70 RIC: 0981.HK Prior: Unchanged Prior: Unchanged Mkt Cap: HK$15.6bn BBG: 981 HK

Semiconductors Analyst: Jonah Cheng Tel: +8862 8722 7340

Profitability is not easy to sustain Q410 result – largely inline SMIC’s Q410 result was inline with our expectation except for a one-off item of US$28.5mn gain from recovery of bad

debt. Excluding the one-off item, OP is US$12.8mn, staying positive after its turnaround in the previous quarter, and is largely inline with UBS-e of US$12.4mn. Q410 revenue of US$412mn was up 0.4% QoQ and 23.6% YoY, also inline with guidance and our estimates.

Q111 outlook – likely to be in red again SMIC guided its Q111 revenue to drop by 6-9% QoQ, weaker than UMC and TSMC’s momentum. SMIC expects Q111 utilization rate to drop QoQ due to seasonal slowdown and customer product transition to 65nm node. On the profitability side, SMIC is likely to post an operating loss in Q111 given the guided gross margin of 18-20% (lower than our expectation of 23.5%), and opex of US$82mn to US$86mn.

Funding 2011 capex spending could be a problem We believe SMIC may face problems funding its US$1bn 2011 capex plan given the current cash level on hand and depreciation cost. We think it will be challenging for SMIC to generate internal funding under current profitability, yet any external funding measurement, either right issue or borrowing, would potentially drag down SMIC’s share price.

Valuation: maintain Sell We have a Sell rating on SMIC with price target of HK$0.55, based on a 1-year forward P/BV target. Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of HK$0.70 on 18 Feb 2011 23:38 EST

Singapore Market Strategy

Strategist: Min Lan Tan, CFA Tel: +65-6495 5904

Changing policies and stock picks Budget for the common man With the General Election likely upcoming, incentives are not surprisingly focused mainly on households (Table 1).

Average households will receive benefits equal to about 5% of annual income with the ratio going up to 15% for poorer households. Cost rises further For businesses, higher foreign worker levy and CPF contribution is an added drag on companies with high labour dependencies.

Wages as % of total costs are above 30% for SATS, SingPress, SMRT, SingPost and ComfortDelgro (Table 2). Changing policies We believe the Government is 'on the curve' in managing the trade-off between inflation and growth. Ex cars and housing, CPI is

rising but not high. The FX-centred framework likely means (1) more S$ appreciation, (2) low short term rates, (3) no let-up in property measures and (4) steeper yield curve (Chart 1 to 4)

Stocks picks The budget reinforces our view that growth is robust and consumers are well placed, supported by the job market and policies (strong S$, low rates, household friendly budget). We would avoid low margin exporters, retailers, residential developers and consumer staples with high wage component as EPS forecasts risk could be rising. Recent selloffs have created attractive entry prices for stocks we like. Top picks are Banks (OCBC, DBS), Office & Hotel (Keppel Land, OUE, CDL Hospitality Trust), Gaming (Genting Singapore), Industrial & Commodities (Keppel Corp, Sembcorp Industries, Indofood Agri, Noble). (Table 3 & 4)

Notes:


Asian Economic Comment

Economist: Edward Teather Tel: +65-6495 5965

Singapore: Election budget An election budget – SGD 6.6bn for households Singapore’s government presented the FY 2011 budget to parliament on Friday 18 February. The

budget was clearly aimed at garnering popular support ahead of the looming election, but probably does not offer significant fiscal stimulus to the aggregate economy. Households received some SGD 6.6bn (2% of GDP) of benefits split into a 3.2bn ‘grow and share’ package this year, an income tax rate cut next year and 3.4bn for ‘longer term social investments’. The timing for payouts from the ‘grow and share’ package has led to speculation of a May election (Table 1).

A neutral budget espite the fiscal support to households, the overall budgetary impact on the economy appears close to neutral. Sizable investment returns from overseas assets mean the overall budget balance is a poor guide to the fiscal stance. Instead the primary balance (revenue less spending) and basic balance (primary balance less selected transfers to the economy) are better guides to the fiscal impulse. These balances are projected to rise modestly as government income outstrips expenditure and transfers (Charts 1 and 2). Because a slight rise in these fiscal balances might be expected given positive revenue sensitivity to the healthy real GDP growth of 4-6% forecast by the government, we judge the budget’s impact on the economy to be close to neutral in 2011.

Good for households, higher costs for businesses As might be expected given the neutral stance overall, the positives for households implied less positives for businesses. Most noteworthy, outside the budget framework, corporate contributions to employees’ CPF accounts were increased 0.5ppts to 16% on top of the 0.5ppt contribution already scheduled. Additionally, levies on foreign workers were increased again. The latter move and increased incentives for productivity enhancing investments are consistent with the government’s effort to slow the rise in the share of foreign workers in the labour force. We expect tighter labour market conditions to be a side effect of this policy.

Implications for growth and the currency This budget is a positive for consumer spending, but more neutral for the whole economy. We leave our real GDP forecast of 4% growth in 2011 unchanged.

In the budget speech, Finance Minister Tharman explicitly made reference to the offsets the budget provided to the rising cost of living, but also said that the primary effort of retarding inflation lies with MAS currency policy. The government did allow stronger than expected growth to feed through to significantly stronger revenues in 2010, acting as a brake on growth, but there were not explicit measures to restrain inflation in the 2011 budget.

Notes:






UBS 6

Key Call: OCBC Rating: Buy Target: S$11.30 Price: S$9.41 RIC: OCBC.SI Prior: Unchanged Prior: Unchanged Mkt Cap: S$31.4bn BBG: OCBC SP

Banks, Ex-S&L Analyst: Jaj Singh Tel: +65 6495 5906

Q4: core business remains strong Down 11% QoQ but we are not too concerned OCBC reported net profit of S$505m, down 11% QoQ. This is due to one-off expenses plus a 58%

decline in life insurance profits. The latter was because the steeper yield curve in December impacted the valuation of its fixed income portfolio. We are not too concerned about this as it is often a volatile number and does not impact our FY11 forecast as its underlying business remains strong. We remain sanguine on this stock as it is attractively priced and its wealth management franchise should help it achieve a stronger and more profitable profile.

Strong momentum in core business Loan growth was impressive with 23% growth YoY and 5% QoQ. It was broad-based and in Singapore it took market share. Equally impressive was its deposit base, which grew 6% QoQ, with strong support from cheaper deposits (CASA). Its NIM was only down 2bp QoQ to 1.96% and we think it is close to bottoming out.

Capacity to grow Despite a loan-to-deposit ratio of 85.1%, we believe the bank has the capacity to keep lending aggressively as it is equally adapt at growing its deposit base. Its balance sheet, asset quality, coverage ratio and capital position are all supportive of a bank on a growth trajectory.

Valuation: Buy (UBS Key Call) with a price target of S$11.30 We use the Gordon Growth model to derive our price target with key assumptions being an ROE of 13% and COE of 8.1%.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of S$9.41 on 18 Feb 2011 21:35 EST

Global Logistic Rating: Buy Target: S$2.71 Price: S$1.90 RIC: GLPL.SI Prior: Unchanged Prior: Unchanged Mkt Cap: S$8.56bn BBG: GLP SP

Real Estate Analyst: Michael Lim Tel: +65-6495 5902

Leasing velocity accelerates Signed 136K sqm of new and expansion leases in January 2011 Global Logistic Properties (GLP) announced it had signed in January 136k sqm of

new and expansion leases in China, 32% higher than the 103k monthly average leased area achieved for 9MFY11. The above-trend demand is driven by increased outsourcing by consumption-related and logistic companies. We believe this update is part of management’s intent to provide greater operational visibility to investors, as it is released shortly after Q3FY11 results (14 Feb). We think the frequency of news flow is likely to increase and could be positive for the stock.

Signups with new and existing customers In FY10, GLP leased c1m sqm with 50% taken by existing customers and the remainder by new signups. Importantly, this demonstrates GLP’s ability to deepen existing relationships, as well as build new ones. Notable January signings include new customer CR Vanguard’s pre-lease agreement for a 12k sqm build-to-suit project in Zhongshan. Joyo-Amazon, which has a relationship with GLP since 2006, is signing an expansion agreement in GLP Park Souzhou. DHL, Toshiba Logistics, Delta, GAC-FIAT, Toll Warehousing, and Unipart also signed leases.

Entry level compelling at 1.1x price-to-book Valuations are compelling at 1.1x P/B and at levels we believe do not factor in GLP’s rapid growth potential in China and premium for market leadership.

Valuation: Reiterate Buy Our price target is based on 1x our sum-of-the-parts RNAV estimates. Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of S$1.90 on 17 Feb 2011 23:38 SGT

Apollo Tyres Rating: Buy Target: Rs78.00 Price: Rs58.25 RIC: APLO.BO Prior: Not Rated Prior: Not Rated Mkt Cap: Rs29.4bn BBG: APTY IB

Tires Analyst: Ajay Nandanwar Tel: +91-22-6155 6079

Multiple growth drivers We initiate coverage with a Buy rating and a Rs78.00 price target Apollo Tyres is India’s leading tyre manufacturer with the highest truck tyre

market share. We believe the company will extend its industry leadership through the expansion of its radial tyre plant in Chennai. We expect its low cost structure to support future ROE and that demand for radial truck tyres will drive EPS growth. Apollo Tyres is trading at historical low multiples on what we believe are very conservative earnings assumptions.

Concerns about impact of rubber prices and overcapacity overdone The market remains concerned about the impact of high rubber prices on tyre industry profitability. However, Apollo Tyres has maintained its contribution margin and reported 23% QoQ EBITDA growth in Q3 FY11. Additionally, our analysis of capacity addition suggests there will be supply constraints in the next three to four years.

Well positioned to benefit from a robust market environment We believe Apollo Tyres is well positioned to benefit from favourable industry trends, such as the increasing penetration of radial tyres in India’s truck sector and growth in demand for passenger vehicle and commercial vehicle tyres. The company may also benefit from the launch of Dunlop-brand tyres in more African countries and the export of Apollo-branded tyres to Europe, although we have not factored this into our estimates.

Valuation: multiples-based sum of the parts We derive our price target from a sum of the parts. We value the company’s India business at 4.5x the average of FY12-13E (September 2012E) EV/EBITDA and its international business at 5.5x. At our price target, Apollo Tyres would trade at 8.7x September 2012E PE, in line with its historical PE multiple.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of Rs58.25 on 17 Feb 2011 22:31 SGT





UBS 7

Thailand Market Strategy

Analyst: Nattanee Tanprasert Tel: +662-613 5752

My Thai XVII: Picking Thai telecom stocks Risk/reward remains favourable for AIS and DTAC Advanced Info Services (AIS) and Total Access (DTAC) have underperformed the SET by 50%

and 14%, respectively, over the past 12 months against the better-than-expected results and dividend paid. While regulatory uncertainty may lower investor appetite, we think the current risk/reward equation remains favourable. We believe current prices present an attractive buying opportunity in AIS (Buy rating, Bt112.0 price target) and we view DTAC (Buy rating, Bt50.0 price target) as an attractive longer-term play.

Data revenue growth to be the key highlight in 2011 Last year, DTAC and AIS doubled their data revenue, which helped support their solid results. While the voice business should be stable, we believe data usage continues to be the key revenue driver this year with more aggressive plans from operators to provide 3G services on their existing spectrum to capture the rising demand.

AIS’s share price looks attractive with yield protection While AIS’s fundamentals remain generally strong, its share price fell nearly 10% from last December given concerns over the concession amendment, which we think should have no impact on earnings and its 9-10% yield for the next few years. We think the current share price looks attractive and the dividend of Bt3.92/share (ex-date on 4 April) already represents a 5% cash return within the next two months.

We favour DTAC for a mixed bag of price catalysts Over the mid- to long term, we think DTAC has more positive catalysts on the share price including possible higher dividend, more 3G services rolling out, and better-than-expected cost savings. Although its earnings momentum should be under pressure in 2011-12 from higher regulatory expenses, we believe this is priced in.

Notes:


First FHC Rating: Sell Target: NT$20.50 Price: NT$23.05 RIC: 2892.TW Prior: Unchanged Prior: NT$16.60 Mkt Cap: NT$149bn BBG: 2892 TT

Banks, Ex-S&L Analyst: Pandora Lee Tel: +8862-8722 7351

Capital weakness remains a concern Reported ROE is not ‘true’ ROE; it is inflated by low capital ratio Given end-2010 tier 1 CAR of 7.0% (down 44bp YoY) vs. the 8.8% norm, in a call

to release 2011 guidance, management indicated NT$20bn capital shortfall if domestic growth, China expansion and Basel III are taken into account. That said, ‘true’ 2011E ROE (based on consensus earnings) should be 7.3% rather than 8.7% if calculated on adequate capital base. We estimate First Financial Holding is trading at 1.4x post recapitalisation 2011E P/BV; the stock seems fully valued to us.

Provisioning sufficiency remains at the borderline Given an NPL ratio of 0.84% and coverage ratio of 112.6%, management indicated full compliance to Article 34. Nevertheless, based on the 50-55% loss ratio (guided by management), loan-loss reserve represents only 48-53bp of loans vs. 50bp minimum requirement.

2011 guidance seems a bit ‘blue sky’ to us Management guided for double-digit loan growth on top of 2010’s 14% (sector average 7%), driven by SME loans (up 28% in 2010), 10-15bp NIM expansion (taking into account the potential rate hike), another 20% fee income growth, and gross provisions of 40bp average loans (even lower than 2010’s 46bp).

Valuation: simple growth model We raise our EPS forecast from NT$1.06/1.16/1.16 to NT$1.34/1.29/1.38 for 2011/12/13, mainly to reflect the 50bp rate hike (12.5bp/quarter, translating into NIM expansion of 10bp), higher-than-expected loan growth, and lower net provisions. Our new price target of NT$20.5 (from NT$16.6) is based on 1.2x 2011E P/BV given our ROE forecast of 8.1% vs. CoE of 7.2%.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of NT$23.05 on 17 Feb 2011 23:38 HKT

Korea Exchange Bank Rating: Neutral Target: Won10,000 Price: Won9,090 RIC: 004940.KS Prior: Unchanged Prior: Won11,000 Mkt Cap: Won5,862bn BBG: 004940 KS

Banks, Ex-S&L Analyst: Scott Lee Tel: +82-2-3702 8809

We see no basis for upside KEB’s share price has started deviating from fundamentals Korea Exchange Bank’s (KEB) share price looks attractive at only 0.6x 2011E P/BV

(versus 1% ROA and 12% ROE) following a nearly 40% pullback since the M&A announcement by Hana. We are, however, unable to find any basis to upgrade KEB to Buy, since we think KEB shares no longer trade on fundamentals. We expect the share price to remain volatile, led by short-term trading activity. We lower our price target 9% to Won10,000, implying 10% upside potential, and maintain our Neutral rating.

Shinhan takeover of Chohung should provide insights In our view, the reality is that Hana’s management will control KEB while having fiduciary duties to Hana shareholders. As a result, we think large dividends might be difficult. We lower our estimate for the payout ratio by 20ppt to 20%. Also, KEB’s earnings will likely get deferred until Hana buys up minority stakes. Lastly, post the M&A restructuring (a spin-off of KEB Card and a merger with Hana-SK Card) will likely be more favorable for Hana shareholders. As such, the movement in Chohung’s share price following Shinhan’s takeover should offer insights.

Scenarios for higher upside appear unrealistic to us A breakup of the Hana-Lone Star deal could enable KEB’s share price to trade at above book value, but we believe it is unlikely since both have signed a binding contract and Hana has completed its funding. Also, it is hard to imagine that Hana will pay a large premium to buy minority stakes even though state-owned Bank of Korea and National Pension Fund are among the minority shareholders; by paying a premium Hana would violate its fiduciary duties.

Valuation: maintain our Neutral rating on KEB Our PT of Won10,000 is based on a ~45% discount to our fair value estimate of Won18,000 (which is based on 12% ROE, 10% COE and 3% growth) to reflect a lack of catalysts in the foreseeable future.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of Won9,090 on 17 Feb 2011 23:38 SGT





UBS 8

Asian Economic Comment

Economist: Philip Wyatt Tel: +852-2971 8135

Vietnam: The 200bp Rate Hike Policy rate hike Step one: devalue c.9%, step two: hike policy rates 200bps. The refinancing rate (used in open market operations) was hiked 2%.

The more symbolic base rate was left unchanged, but tight money should push up market yields. Clearly balance of payments pressures remain negative. Recall that Vietnam is still an overheated economy where local residents hold expectations of local inflation which are still well into double digits. We believe this hike is designed to stabilise inflation and exchange rate expectations. It says: we are prepared to tighten money to defend the external value of the currency. The structure of local rates is headed higher for a while. Watch for an accompanying drop in credit growth alongside slower real GDP.

Forward policy momentum but high commodity prices Key is to recognise that high oil/food prices or not, compared with other Asian economies Vietnam has greater need to properly control its demand. Otherwise it could inherit an even higher long term inflation rate. It is hard to be confident that this is the last policy hike due to rising global commodity prices and low official FX reserves. But the good news is policy momentum is moving in the right direction. We believe that as things stand we could be in for a period of credit austerity in H1 which in turn should set up the economy for much more stable, single-digit inflation trends further ahead. Watch for the turning point (delayed or otherwise) in regional food trends.

Embryonic signs of stabilisation So far local inflation expectations as measured by gold price differential remain high but show early signs of stability. This must continue. Exchange rate expectations also have to stabilise after the steep devaluation. The trade gap gives important information about balance of payments pressures too. Higher oil prices may delay the trade improvement in the immediate quarter ahead. Looking ahead, a narrower trade gap is an important precursor to any prospective relaxation in policy rates.

Notes:


Asia Earnings Watch

Product Manager: Alex Chang Tel: +852-2971 8599

Asian earnings—week of 21 February Asia Earnings Watch—weekly preview of reporting season Our report highlights UBS versus consensus estimates across our coverage of 700

companies in 10 Asian markets. We preview earnings, and highlight high conviction ideas and beats or misses that we think could surprise the market or influence share prices.

Wilmar Q410 profit likely to disappoint Willmar will announce results on 23 February and we expect earnings to be below consensus estimates due to rising soybean oil prices. Guidance for Q111 and an update on trading positions and raw material costs will likely also be a key focus of the results announcement.

Results in the coming two weeks—our conviction views We expect CP All (22 February), Shanda (28 February), Central Pattana (2 March), and Mandarin Oriental (3 March) to beat consensus profit forecasts, but Straits Asia Resources (24 February) and ITM (25 February) to miss. We list our high conviction Beats and Misses ideas on page 2.

Notes:


Macro Keys

Economist: Reinhard Cluse Tel: +44-20-7568 6722

Oil: game-changer for food prices Inflation – not least stemming from higher food prices – has become a serious concern for many emerging markets investors. So, what’s the risk in

emerging EMEA? In our view, Chart 1, below, highlights a number of simple, but powerful, arguments. 1. The weight of food in the CPI baskets of several EMEA countries is very high, particularly in Turkey, Russia, Ukraine, Kazakhstan (CIS-3) and

Egypt, where the food share ranges from 27-53%. The share of food is lower in Central Europe, Israel and South Africa, but still higher than in the euro zone. Clearly, rising food prices matter a lot in emerging EMEA.

2. As regards the structure of food in the CPI baskets, the relative weight of processed food is 2-3 times higher than that of unprocessed food. Therefore, as long as food price increases remain largely confined to unprocessed food (e.g. wheat, fruit and vegetables) the impact is often temporary and not too grave. The real damage occurs when prices of processed food start to rise.

Energy costs have a crucial impact on processed food prices 3. What is the main cost factor of processed food prices? At first sight, one might suspect that this must be unprocessed food – but this is not the case.

The single most important cost factor of processed food is energy, followed by wages. Just consider the frozen pizza that you might pick up from the supermarket freezer. While the input cost of wheat, tomatoes, peppers, mushrooms (or however you like it) is certainly relevant, what matters a lot more as a cost factor is the energy (and wages) paid for pre-baking the pizza, packaging it, shipping it to the supermarket, and keeping it cold there.

This is highly relevant for our assessment of the inflation risk in emerging EMEA. Until a few months ago, when rising food prices seemed more confined to unprocessed food, we thought that the inflation impact would be limited in extent and time.

Notes:






UBS 9

Commodities focus

Mining & Metals Analyst: Julien Garran Tel: +44-20-7568 3540

Will aluminium get a power boost? Power constrains China aluminium Many investors are asking whether China’s policy of raising power pricing, and constraining energy intensive

industry will lead to a structural recovery in the aluminium market. Rising power prices in South Africa may also cause shutdowns. Gaining intensity Aluminium is also gaining market share from copper in transmission wire, and from steel in autos. And in the short term, we are now

seeing the first signs of an emerging restocking cycle in the developed world. Positive short term dynamics UBS has highlighted the improved short term dynamics in aluminium for a number of months (see UBS Global I/O:

Commodity Price Review Cost Push, 13 Dec 2010). But we continue to believe that it will take a major rise in the cost of capital to bring about a structural improvement in supply discipline.

But no end to restarts and new capacity In the meantime we believe that the existence of cheap captive power will promote excess new supply – and we highlight >1mtpy of restarts/recomissioned expansions announced in the past six weeks, and we also highlight the deteriorating economics of aluminium inventory finance. We retain our strong preference for alumina exposure over aluminium.

Notes:


Commodity Themes in Action

Basic Resources Analyst: Peter Hickson Tel: +852 29717564

Key commodity thoughts for Fri 18 Feb Inflation the big worry – most cited reason to be nervous commodities Rising inflation in the EM and government reluctance to address it due to

the ‘climate of revolt’ worries commodities; while food in CPI of Turkey, Russia, Ukraine, Kazakhstan and Egypt range from 27-53%, it is processed food, 2-3x raw food impact, rising with energy and wages that is the issue. (UBS R Cluse)

Margin squeezes in steel – China profit margin <3% in 2010 China (c40% of world steel production) profit crimped by raw materials, imported iron ore up 60% to US$127/t; but 2011 is getting tougher - BHP Feb iron ore contract (Feb cif $175/t vs spot prices $193/t) and we expect similar inducements in BHP's monthly coking coal contract offer that will sustain higher prices in 2011.

Real shortages remain – supply constraints drive prices Qld coking coal disruption could be 20-25mt (BHP implied); Indonesian tin output lowered to 60-70kt in 2011 due flooding, 2011 global deficit to 10% of supply; cotton price >US$2/lb on lower Australian output estimates; China to reduce rare earth mines from 123 to < 10 and to cut processing plants from 73 to 20.

But are buyers striking? – China not buying copper Shanghai copper premia falling, SHFE price discount widens, inventories rise, all signs that suggest China is not buying at current prices; what corn price will kill US ethanol offtake (despite govt subsidies)? But gold faced similar questions but the buyers adjusted with 2010 demand at decade highs of 3.8kt in 2010 due to jewellery buying up 17% to 2.1kt despite gold prices up 26% in 2010.

Notes:


Asia Tech

Technology Analyst: Nicolas Gaudois Tel: +82-2-3702 8801

Alpha Preferences Adding HTC to our Most Preferred List We add back HTC to our Most Preferred list post the stock’s in-line performance since December, despite

improving fundamentals (strong and differentiated products line up; disruption at a key competitor). At MWC we saw the most aggressive product launch (5 new handsets and 1 new tablet) in the history of the company and we think it could give the company more chance to benefit from Nokia’s potential share loss. UBS analyst Gareth Jenkins cut Nokia smartphone forecasts for 2011 by 7%. We have a Buy rating and NT$1,150 price target on HTC. We think many investors are too concerned about the threat from latecomers but HTC continues to lead ahead.

Adding FIH to our Least Preferred List We also re-instate FIH in Least Preferred. On the back of Nokia’s recent announcement; we expect Nokia’s supply chain to be seriously disrupted. As Nokia being one of the biggest & most important customer for FIH, at c. 49% of revenues for ‘10E, will prove problematic for the company.

Remaining cautious near term on Asia Tech; affirm O/W Wireless We keep a positive bias towards Wireless, LCD and Memory. However, we also continue to call for a near term correction in Asia Tech as valuation (15.1x ‘11E PE) still not fully compelling despite recent underperformance (-1.5% relative to Asia MSCI over past 2 weeks). We would advice to selectivity buy share-gainers, particularly on weakness, and avoid high multiple stocks for now.

Notes:






UBS 10

Rating & PT Changes Key Rating and Price Target Changes:

Company Name Directional Indicator/Rationale Reuters

Code Current

Share Price New Rating New PT Prior Rating Prior PT

Yingli Green Energy Holding Company

Reiterate Buy, increase PT YGE.N US$ 12.84 Buy US$ 16 Buy US$ 15

Apollo Tyres Initiate with Buy APLO.BO Rs 56.15 Buy Rs 78 Not Rated Not Rated

Korea Exchange Bank

Maintain Neutral, lower PT 004940.KS Won 9180 Neutral Won 10000 Neutral Won 11000

First Financial Holding

Retain Sell, increase PT 2892.TW NT$ 24.65 Sell NT$ 20.5 Sell NT$ 16.6

Source: UBS estimates. Priced as at market close on 18 February 2011.


UBS 11

Markets, Events and Newsflow Today’s Company Events:

Company Name Events RIC Rating PT Price Notes

Asia

Anta Sports Products FY10 Results 2020.HK Buy HK$18 HK$14.64

Parkson Retail FY10 Results 3368.HK Buy HK$18.07 HK$13.32

Champion REIT FY10 Results 2778.HK Buy HK$5.48 HK$3.87

Malayan Banking Q211 Results MBBM.KL Buy RM12.7 RM7.73

Pruksa Real Estate Q410 Results PS.BK Buy Bt24 Bt24.5

Thai Oil Q410 Results TOP.BK Buy Bt88 Bt43.75

Global

TNT FY10 Results TNT.AS Neutral €21 €21.7

Merck KGaA Q410 Results MRCG.DE Neutral €64 €69.25

Carlsberg A/S Q410 Results CARLb.CO Neutral DKr600 DKr493.4

Source: Bloomberg, UBS. Priced as at market close on 18 February 2011.


UBS 12

Macroeconomic Events: Country Indicator Time (HKT) UBS forecast Previous Consensus

Today

Hong Kong Unemployment Rate SA (Jan) 16:30 - - 4.00%

Indonesia Total Local Auto Sales (Jan) - - - -

Indonesia Total Motorcycle Sales (Jan) - - - -

Philippines Budget Deficit/Surplus (Jan) - - - -

Taiwan Export Orders (Jan) Y-o-Y 16:00 - - 15.27%

Taiwan Current Account Balance (4Q) USD 16:20 - - 8990M

Thailand Gross Domestic Product SA (4Q) Q-o-Q 10:30 - - -0.20%

Thailand Gross Domestic Product (4Q) Y-o-Y 10:30 - - 6.70%

Thailand Annual GDP Y-o-Y 10:30 - - -2.30%

Thailand Customs Exports (Jan) Y-o-Y - - 18.80%

Thailand Customs Imports (Jan) Y-o-Y - - 11.50%

Thailand Customs Trade Balance (Jan) - - $1295M

UK Rightmove House Prices (Feb) M-o-M 08:01 - - 0.30%

UK Rightmove House Prices (Feb) Y-o-Y 08:01 - - 0.40%

UK Public Finances (Jan) PSNCR) 17:30 - - 25.5B

UK PSNB ex Interventions (Jan) 17:30 - - 16.8B

UK Public Sector Net Borrowing (Jan) 17:30 - - 15.3B

Tuesday (Feb 22)

Hong Kong CPI - Composite Index (Jan) Y-o-Y 16:30 - - 2.90%

Malaysia Foreign Reserves 17:30 - - - -

Sounth Korea External Short-Term Debt (4Q) 11:00 - - - -

US S&P/CaseShiller Home Price Ind (Dec) 22:00 - - - -

US S&P/CS 20 City MoM% SA (Dec) 22:00 - - - -

US S&P/CS Composite-20 YoY (Dec) 22:00 - - - -

US S&P/Case-Shiller US HPI (4Q) 22:00 - - 135.48

US S&P/Case-Shiller US HPI YOY% (4Q) 22:00 - - -1.51%

US Consumer Confidence (Feb) 23:00 - - - -

US Richmond Fed Manufact. Index (Feb) 23:00 - - - -

Source: Bloomberg, UBS


UBS 13

Latest Market Movements: Country/Region Market Latest Price/Last Close 1-day % Change

Asia

China Shanghai SE Composite Index 2899.79 -0.93%

China Hang Seng H-Share 12742.53 1.33%

Hong Kong Hang Seng Index 23595.24 1.26%

India Sensex 18211.52 -1.60%

Indonesia JCI 3501.5 1.95%

Korea KOSPI 2013.14 1.82%

Malaysia KLCI 1517.56 0.60%

Philippines PHS Composite 3851.24 -0.39%

Singapore Straits Times 3086.92 0.13%

Thailand SET Index 995.57 0.00%

Taiwan TSE Weighted 8843.84 1.84%

Rest of World

United States Dow Jones 12391.25 0.59%

United States S&P 500 1343.01 0.19%

United States Nasdaq 2833.95 0.08%

Europe FTSEuro First 300 1187.03 -0.01%

Japan Nikkei 225 10842.8 0.06%

Source: UBS, Reuters. Prices as at market close on 18 February 2011. Prices In Japan and Hong Kong as at 05:00 BST on 21 February 2011.

Latest FX Movements Name Currency Latest Price/Last Close 1-day % Change 1-month % Change YTD % Change

China Rmb/$ 6.57 0.00% 0.2% 0.3%

Hong Kong HKD/$ 7.78 0.00% 0.1% -0.1%

India Rs/$ 45.12 0.04% 1.2% -0.9%

Indonesia IDR/$ 8855.00 -0.17% 2.4% 2.0%

South Korea Won/$ 1112.40 -0.09% 0.8% 0.7%

Malaysia MYR/$ 3.03 0.00% 0.9% 1.6%

Philippines PHP/$ 43.38 -0.08% 2.7% 0.6%

Singapore SGD/$ 1.27 -0.03% 0.7% 0.6%

Taiwan TWD/$ 29.40 -0.07% -1.0% -0.9%

Thailand Bt/$ 30.57 0.02% 0.4% -1.8%

Japan JPY/$ 83.14 0.28% -0.7% -2.2%

Euro €/$ 0.73 0.41% 1.1% 2.4%

United Kingdom £/$ 0.62 0.10% 1.6% 4.5%

Australia AUD/$ 0.99 0.26% 2.3% -0.4%

Source: UBS, Reuters. Prices as at market close on 18 February 2011.


UBS 14

UBS Asia Key Call Live Key Call Portfolio

Company Name Reuters Code Rating PT Launch date Analyst

LG Display 034220.KS Buy Won50000 06-Dec-10 Sean Kim

ICBC 1398.HK Buy HK$7.7 01-Dec-10 Sarah Wu

Shriram Transport Finance SRTR.BO Buy Rs 950 22-Nov-10 Ajitesh Nair

OCBC OCBC.SI Buy S$ 11.3 21-Oct-10 Jaj Singh

Bangkok Bank BBL.BK Buy Bt 200 14-Sep-10 Butsakon Khoosuwan

Cheung Kong Infrastructure 1038.HK Buy HK$ 45.5 14-Sep-10 Stephen Oldfield

CNBM 3323.HK Buy HK$30.0 14-Sep-10 Mick Mi

Lanco Infratech LAIN.BO Buy Rs70 14-Sep-10 Pankaj Sharma

Sun Hung Kai P. 0016.HK Buy HK$225.9 10-Jun-10 Eric Wong

Source: UBS estimates. Priced as at market close on 18 February 2011.


UBS 15

Forthcomong UBS Event

ab

UBS Conference Call UBS EM Conference Call:

India and Fear

Hosted by:

Jonathan Anderson – Global Emerging Market Economist

Speaker(s): Philip Wyatt – South Asian Economist

Suresh Mahadevan – India Equities Head Sid Mathur – Asia Fixed Income Strategist

Topics of Discussion:

Indian equity and currency markets were hit hard over the past months, amidst fears of runaway inflation, a slowing economy, weakening corporate performance, governance scandals and a yawning external deficit. How afraid should we be? Is this the unravelling of the hitherto ironclad Indian story, or a nice tactical entry point back into Indian assets (or neither)? Please join senior India economist Philip Wyatt, India equities head Suresh Mahadevan and regional fixed income strategist Sid Mathur

for a lively discussion of the issues!

Date & Time: Tuesday 22nd , February 2011 09:00 New York / 14:00 London / 22:00 HK/SG

Dial-In Details (Conference ID number: 881486)

Hong Kong 800 9620 99 // Australia 1800 9889 41 China (N) 10 800 7121 463 // China (S) 10 800 1201 463

Singapore 800 1204 400 // India 000 8001 0035 51 // Korea 007981 4800 7090 USA +1 877 491 0064 // UK 0500 5510 79 // Switzerland 0800 0009 96

Instant Replay details – (Passcode: 881486)

Hong Kong Toll +852 3011 4552 // Singapore Toll +65 6622 1306 India 000 800 100 3597 // USA Toll Free 1 888 365 0240 // UK Toll Free 0800 358 1860

* Available from 1:00 am HKT 23 February to 8:00 am HKT 4 March 2011


UBS 16

Recent UBS Event

ab

Conference Call UBS EM Conference Call:

Global I/O: Technology Hardware

Topics of Discussion: A seismic shift in the handset industry occurred on Feb 11 2011 as Nokia effectively called time on its

“burning platform” mobile o/s and withdrew its support of its jointly developed MeeGo platform in favour of a full shift in its smart-phone business to Microsoft Windows Phone 7. From here we expect Nokia will go through a tough and potentially extremely disruptive period of transition both in terms of

internal reorganisation, technological development and external marketing.

Speakers: Gareth Jenkins - European Telecom Equipment Analyst

Nicolas Gaudois – Global DRAM/NAND KGIs Global Coordinator; Asia Memory/ Semiconductor Analyst

Uche Orji – Global Semiconductor Coordinator; US Semiconductor Analyst Arthur Hsieh – Asia Tech Hardware Analyst

Brent Thill - US Software Analyst

Date & Time: Monday 14th Feb – 13:30 New York// 18:30 London // Tuesday 15th Feb – 02:30 Hong

Kong

Dial-in details (Passcode: NOKIA) USA Toll Free 866-844-9413 // United Kingdom Toll Free 0800-917-6808 Switzerland Toll Free 0800-001-410 // Australia Toll Free 1-800-750-141

Hong Kong Toll 852-3001-3802 // Taiwan Toll Free 00801-137-864 // South Korea Toll Free 00798-14800-6056

Replay details (Passcode: 9987)

Hong Kong Toll 852-3018-4323 // Australia Toll 61-2- 8030-3023 Singapore Toll Free 800-120-5750

US Toll Free 1-888-566-0354 // UK Toll Free 0800-279-5194


UBS 17

Further Information Morning Expresso – Asia Welcome to the Morning Expresso, an early morning summary of the key ideas and issues presented from UBS for the day ahead. Its contents include:

- key items from UBS’ Asian Morning Meeting

- highlighted recommendation and price target changes

- today’s anticipated company, sector and macro-economic catalysts from the APAC Contextual Diary

- company and client events, conferences and conference calls from UBS

- overnight global market movements

Morning Expresso is designed to give you all that you ‘need to know’ each morning.

Data presented is accurate as at 07:00 on 21 February 2011.

Contacts & Feedback For further details concerning today’s Morning Expresso - Asia note, please visit www.ubs.com/investmentresearch or speak to your UBS contact. This note is not intended to be static and it will evolve over time. Feedback welcomed on email to [email protected] or [email protected]


UBS 18

Statement of Risk

Forecasting earnings and corporate financial behaviour is difficult because it is affected by a wide range of economic, financial, accounting and regulatory trends, as well as changes in tax policy.

Analyst Certification

Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report.


UBS 19

Required Disclosures This report has been prepared by UBS Securities Asia Limited, an affiliate of UBS AG. UBS AG, its subsidiaries, branches and affiliates are referred to herein as UBS.

For information on the ways in which UBS manages conflicts and maintains independence of its research product; historical performance information; and certain additional disclosures concerning UBS research recommendations, please visit www.ubs.com/disclosures. The figures contained in performance charts refer to the past; past performance is not a reliable indicator of future results. Additional information will be made available upon request. UBS Securities Co. Limited is licensed to conduct securities investment consultancy businesses by the China Securities Regulatory Commission.

UBS Investment Research: Global Equity Rating Allocations

UBS 12-Month Rating Rating Category Coverage1 IB Services2

Buy Buy 49% 40%Neutral Hold/Neutral 42% 35%Sell Sell 8% 21%UBS Short-Term Rating Rating Category Coverage3 IB Services4

Buy Buy less than 1% 14%Sell Sell less than 1% 0%

1:Percentage of companies under coverage globally within the 12-month rating category. 2:Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within the past 12 months. 3:Percentage of companies under coverage globally within the Short-Term rating category. 4:Percentage of companies within the Short-Term rating category for which investment banking (IB) services were provided within the past 12 months. Source: UBS. Rating allocations are as of 31 December 2010. UBS Investment Research: Global Equity Rating Definitions

UBS 12-Month Rating Definition Buy FSR is > 6% above the MRA. Neutral FSR is between -6% and 6% of the MRA. Sell FSR is > 6% below the MRA. UBS Short-Term Rating Definition

Buy Buy: Stock price expected to rise within three months from the time the rating was assigned because of a specific catalyst or event.

Sell Sell: Stock price expected to fall within three months from the time the rating was assigned because of a specific catalyst or event.


UBS 20

KEY DEFINITIONS Forecast Stock Return (FSR) is defined as expected percentage price appreciation plus gross dividend yield over the next 12 months. Market Return Assumption (MRA) is defined as the one-year local market interest rate plus 5% (a proxy for, and not a forecast of, the equity risk premium). Under Review (UR) Stocks may be flagged as UR by the analyst, indicating that the stock's price target and/or rating are subject to possible change in the near term, usually in response to an event that may affect the investment case or valuation. Short-Term Ratings reflect the expected near-term (up to three months) performance of the stock and do not reflect any change in the fundamental view or investment case. Equity Price Targets have an investment horizon of 12 months. EXCEPTIONS AND SPECIAL CASES UK and European Investment Fund ratings and definitions are: Buy: Positive on factors such as structure, management, performance record, discount; Neutral: Neutral on factors such as structure, management, performance record, discount; Sell: Negative on factors such as structure, management, performance record, discount. Core Banding Exceptions (CBE): Exceptions to the standard +/-6% bands may be granted by the Investment Review Committee (IRC). Factors considered by the IRC include the stock's volatility and the credit spread of the respective company's debt. As a result, stocks deemed to be very high or low risk may be subject to higher or lower bands as they relate to the rating. When such exceptions apply, they will be identified in the Company Disclosures table in the relevant research piece. Research analysts contributing to this report who are employed by any non-US affiliate of UBS Securities LLC are not registered/qualified as research analysts with the NASD and NYSE and therefore are not subject to the restrictions contained in the NASD and NYSE rules on communications with a subject company, public appearances, and trading securities held by a research analyst account. The name of each affiliate and analyst employed by that affiliate contributing to this report, if any, follows. UBS Securities Asia Limited: Herman Chan; Alex Chang; Bill Sohn.


UBS 21

Company Disclosures

Company Name Reuters 12-mo rating Short-term rating Price Price date Advanced Info Services - Foreign16b ADVAf.BK Not Rated N/A Bt83.25 17 Feb 2011

Apollo Tyres APLO.BO Buy N/A Rs56.15 18 Feb 2011 Apple Inc.6c, 7, 16b AAPL.O Buy N/A US$350.56 18 Feb 2011 Asiainfo-Linkage16b ASIA.O Buy N/A US$20.90 18 Feb 2011 ASM Pacific Technology4, 5 0522.HK Sell N/A HK$108.00 18 Feb 2011 Catcher Technology 2474.TW Buy N/A NT$122.00 18 Feb 2011 CDL Hospitality Trusts CDLT.SI Buy N/A S$2.03 18 Feb 2011 Central Pattana CPN.BK Buy N/A Bt27.25 17 Feb 2011 CP All Plc CPALL.BK Neutral N/A Bt37.25 17 Feb 2011 DBS Group Holdings Ltd.16b DBSM.SI Buy N/A S$14.60 18 Feb 2011 First Financial Holding 2892.TW Sell N/A NT$24.65 18 Feb 2011 Foxconn International Holdings Ltd.16a, 20 2038.HK Sell (CBE) N/A HK$5.58 18 Feb 2011

GCL Poly Energy5 3800.HK Buy N/A HK$3.77 18 Feb 2011 Gemalto16b GTO.PA Sell N/A €36.73 18 Feb 2011 Genting Singapore4, 16b GENS.SI Neutral N/A S$2.01 18 Feb 2011 Global Logistic Properties2, 4 GLPL.SI Buy N/A S$1.94 18 Feb 2011 Government of Indonesia1, 5 HCL Technologies HCLT.BO Sell N/A Rs457.95 18 Feb 2011 HTC Corporation20 2498.TW Buy (CBE) N/A NT$993.00 18 Feb 2011 Indo Tambangraya Megah (ITM) ITMG.JK Neutral N/A Rp47,200 18 Feb 2011 Indofood Agri Resources IFAR.SI Buy N/A S$2.46 18 Feb 2011 Keppel Corporation5, 16b KPLM.SI Buy N/A S$11.72 18 Feb 2011 Keppel Land5 KLAN.SI Buy N/A S$4.24 18 Feb 2011 Korea (Republic of) Korea Exchange Bank 004940.KS Neutral N/A Won9,180 18 Feb 2011 Laird Plc LRD.L Buy N/A 162p 18 Feb 2011 Lenovo Group Ltd2, 4, 16b 0992.HK Buy N/A HK$4.88 18 Feb 2011 LG Display16b 034220.KS Buy N/A Won36,450 18 Feb 2011 LG Innotek 011070.KS Neutral N/A Won133,500 18 Feb 2011 Malaysia Mandarin Oriental Int'l Ltd.16b MOIL.SI Buy N/A US$2.12 18 Feb 2011 MediaTek Inc. 2454.TW Sell N/A NT$343.00 18 Feb 2011 Noble Group NOBG.SI Buy N/A S$2.14 18 Feb 2011 Nokia6a, 6b, 6c, 7, 13, 16b NOK1V.HE Neutral N/A €6.70 18 Feb 2011 OCBC22 OCBC.SI Buy N/A S$9.41 18 Feb 2011 Overseas Union Enterprise5 OVES.SI Buy N/A S$3.07 18 Feb 2011 Qualcomm Inc.16b QCOM.O Buy N/A US$59.19 18 Feb 2011 Quanta 2382.TW Neutral N/A NT$57.00 18 Feb 2011 Realtek Semiconductor Corp. 2379.TW Buy N/A NT$59.20 18 Feb 2011 Samsung Electronics23a, 23b, 23c, 23d 005930.KS Buy N/A Won960,000 18 Feb 2011 SembCorp Industries Ltd SCIL.SI Buy N/A S$5.00 18 Feb 2011 SembCorp Marine SCMN.SI Buy N/A S$5.33 18 Feb 2011 Semiconductor Manufacturing Intl Corp16b 0981.HK Sell N/A HK$0.70 18 Feb 2011

Shanda Interactive Entertainment16b SNDA.O Buy N/A US$42.68 18 Feb 2011

Spirent Plc4, 5, 14, 16b SPT.L Buy N/A 156p 18 Feb 2011 Standard Chartered2, 4, 5, 14 STAN.L Neutral N/A 1,664p 18 Feb 2011 Straits Asia Resources Limited STRL.SI Buy N/A S$2.46 18 Feb 2011 Taiwan Thailand (Kingdom of) Total Access DTAC.BK Buy N/A Bt43.00 17 Feb 2011


UBS 22

Company Name Reuters 12-mo rating Short-term rating Price Price date TPK Holding 3673.TW Buy N/A NT$738.00 18 Feb 2011 Wilmar International Limited16b WLIL.SI Neutral N/A S$5.47 18 Feb 2011 Yingli Green Energy Holding Company16b YGE.N Buy N/A US$12.84 18 Feb 2011

Source: UBS. All prices as of local market close. Ratings in this table are the most current published ratings prior to this report. They may be more recent than the stock pricing date 1. UBS AG is acting as manager/co-manager, underwriter, placement or sales agent in regard to an offering of securities of

this company/entity or one of its affiliates. 2. UBS AG, its affiliates or subsidiaries has acted as manager/co-manager in the underwriting or placement of securities of

this company/entity or one of its affiliates within the past 12 months. 4. Within the past 12 months, UBS AG, its affiliates or subsidiaries has received compensation for investment banking

services from this company/entity. 5. UBS AG, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking services

from this company/entity within the next three months. 6a. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking

services are being, or have been, provided. 6b. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-investment

banking securities-related services are being, or have been, provided. 6c. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities

services are being, or have been, provided. 7. Within the past 12 months, UBS Securities LLC has received compensation for products and services other than

investment banking services from this company/entity. 13. UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of this company`s common equity

securities as of last month`s end (or the prior month`s end if this report is dated less than 10 days after the most recent month`s end).

14. UBS Limited acts as broker to this company. 16a. UBS Securities (Hong Kong) Limited is a market maker in the HK-listed securities of this company. 16b. UBS Securities LLC makes a market in the securities and/or ADRs of this company. 20. Because UBS believes this security presents significantly higher-than-normal risk, its rating is deemed Buy if the FSR

exceeds the MRA by 10% (compared with 6% under the normal rating system). 22. UBS AG, its affiliates or subsidiaries held other significant financial interests in this company/entity as of last month`s end

(or the prior month`s end if this report is dated less than 10 working days after the most recent month`s end). 23a. UBS Securities Pte. Ltd., Seoul Branch is a liquidity provider for the equity-linked warrants of this company and

beneficially owned 3,334,500 units of DAISHINSECURITIES ELW 0H48 (Samsung Electronics call warrants) as of 17 Feb 2011.

23b. UBS Securities Pte. Ltd., Seoul Branch is a liquidity provider for the equity-linked warrants of this company and beneficially owned 3,394,970 units of DAISHINSECURITIES ELW 0H50 (Samsung Electronics call warrants) as of 17 Feb 2011.

23c. UBS Securities Pte. Ltd., Seoul Branch is a liquidity provider for the equity-linked warrants of this company and beneficially owned 3,399,970 units of DAISHINSECURITIES ELW 0E55 (Samsung Electronics call warrants) as of 17 Feb 2011.

23d. UBS Securities Pte. Ltd., Seoul Branch is a liquidity provider for the equity-linked warrants of this company and beneficially owned 3,569,860 units of DAISHINSECURITIES ELW 0H49 (Samsung Electronics call warrants) as of 17 Feb 2011.

Unless otherwise indicated, please refer to the Valuation and Risk sections within the body of this report.


UBS 23

For a complete set of disclosure statements associated with the companies discussed in this report, including information on valuation and risk, please contact UBS Securities LLC, 1285 Avenue of Americas, New York, NY 10019, USA, Attention: Publishing Administration. Additional Prices: Bangkok Bank, Bt159.00 (17 Feb 2011); Cheung Kong Infrastructure, HK$37.25 (18 Feb 2011); China National Building Materials, HK$19.54 (18 Feb 2011); Industrial & Commercial Bank of China, HK$5.93 (18 Feb 2011); Lanco Infratech, Rs38.70 (18 Feb 2011); Shriram Transport Finance, Rs747.80 (18 Feb 2011); Sun Hung Kai P., HK$124.80 (18 Feb 2011); Source: UBS. All prices as of local market close.


UBS 24

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