Investment Daily

10 December 2019

Major Market Indicators

9 Dec 6 Dec 5 Dec Market Overview

Mkt. Turn.(mn) 65,000 76,800 66,900 Hong Kong stock range trade in the near term; Focus on Stock Advances 847 995 931 individual sector Stock Declines 829 659 703 US White House economic adviser Kudlow said that progress has been made in the China-US talks and that the US ’s November non-farm payrolls data was strong. HSI 26,495 26,498 26,217 However, China ’s foreign exchange reserves and export data released in last weekend Change -4 +281 +154 were less than expected. Hong Kong stocks opened slightly higher on Monday, and HSI Turn.($bn) 21.23 29.86 22.10 traded in a narrow range. The fell 3 points to 26,494 points, and the HSCEI 10,408 10,407 10,322 H-Share Index rose less than 1 points to 10,408 points. The market turnover was Change 0 +85 +58 HK$65 billion. The third round of China's pharmaceutical procurement will be HSCEI Turn.($bn) 19.38 21.91 18.13 launched within half a month at the earliest. Pharmaceutical stocks were under pressure, CSPC Pharma (1093) fell 5.1%, making it the worst blue chip. Ahead of a series major events including Dec. 15 deadline for 15% import tariff on HSI Technical Indicators US$156 billion Chinese goods, the Federal Reserve and Europe Central Bank interest 10-days MA 26,522 rate meeting, investors turned cautious on Monday. Besides, China latest economic 50-days MA 26,647 data showed that export decline, also has negative impact toward the US stock market. 250-days MA 27,459 US stock fell on Monday, with the three major stock index fell 0.3-0.4% respectively. 14-days RSI 21.23 On the other hand, after gaining 7.3% gain last week, oil price experienced profit Primary resistance 26,600 taking pressure, retreated 0.3% to US$59.0 per barrel. Primary support 26,000 China US trade talks continued to dominate the Hong Kong stock market. Although the sentiment remained good, investors turned sideline ahead of the 15 Dec tariff HS CEI Technical Indicators deadline. Hong Kong stock is expected to range trade in the near term, Hang Seng 10-days MA 10,421 Index resistance remained at 50 Day SMA. Investors are expected to switch to 50-days MA 10,492 individual sectors. Of which, mainland property, 5G and Alibaba will still be market 250-days MA 10,715 short term focus. 14-days RSI 19.38 Primary resistance 10,500 Technical Analysis Primary support 10,200 The HSI traded in a narrow range on Monday with trading volume dropped to$ 65 billion and the index was also bounded by around 26,600 points at which there were HSI Futures serval moving average. Meanwhile, the RSI and the HSI Volatility Index hover at current level with MACD stayed in the negative territory, implying the investors were 9 Dec 6 Dec 5 Dec hesitated in investing in the market, and the index is expected to sluggish at current Nov 26,516 26,503 26,246 level. Hang Seng Index's first support is 26,000 points, the second support is 25,500 Volume 121,072 128,090 118,623 points, on the other hand, the first resistance is 26,600 points, and the second resistance Open interests 121,925 126,482 123,957 is 27,000 points. Dec 26,580 26,565 26,299 Volume 1,105 1,851 939 HSI Chart Open interests 2,959 2,781 2,004

HSCEI Futures

9 Dec 6 Dec 5 Dec

Nov 10,415 10,408 10,318 Volume 63,113 62,758 58,314 Open interests 235,736 244,581 241,276 Dec 10,438 10,433 10,346 Sources ：Google Volume 10,276 1,912 448 Open interests 14,041 4,172 2,562

Investment Daily Daily Focus

Oil Sector: National Pipeline Company Setup

 China announced on Monday the establishment of a national oil and gas pipeline (386)Info company in a move intended to boost competition. It is expected that the estimated value of the pipeline company is between Rmb300 billion and Rmb500 billion. The Closed price 4.4 natural gas pipeline network assets of the three major oil companies, PetroChina (857), Sinopec (386) and CNOOC (883), will be merged into the national pipeline Expected P/E (X) 8-9 network company to build a "one network in the country". It is reported that Dividend yield (%) 7 SASAC, PetroChina, Sinopec and CNOOC respectively hold 40%, 30%, 20% and 10% of the shares. 52 week high 6.5

 The main responsibility of the national oil and gas pipeline company is to be 52 week low 4.32 responsible for the investment and construction of national oil and gas trunk 14RSI 40 pipelines and some gas storage peak-shaving facilities, as well as the pipeline transportation of crude oil, refined oil and natural gas. The State Pipe Network Company will not participate in upstream resources and downstream markets.

 Vice Premier Han of the State Council stated that it is necessary to promote the formation of an oil and gas market system with multi-channel supply of upstream oil and gas resources, efficient centralized collection and transmission of intermediate pipeline networks, and full competition in the downstream gas sales market. It will encourage and guide local pipeline networks to integrate into the national pipeline network in a market-oriented manner.

 However, although the national oil and gas pipeline company has been established, there is no specific timetable for the equity and capital injection ratio, corporate governance structure, and asset injection plans for this company. It will be the upcoming priority for this pipeline company. This also has a significant impact on the valuation and profit of these listed oil companies.

 However, owing to highly competitive environment in the downstream business, Sinopec and PetroChina is trading at 35-50% discount to book value. Although the details of restructure has not been disclosed, it is likely that it will unlock the value of these two companies. On the other hand, the latest OPEC meeting further lower oil production volume. Although oil price upside is limited given over-supply, but the production cut could still help to stabilize oil price.

 Relative speaking, PetroChina and Sinopec would have higher impact from the set up of new pipeline company while PetroChina will experience most impact as it have very sizable pipeline business. However, our preference is still on Sinopec, given its attractive valuation of 8-9x prospective P/E, and 7% dividend yield. We rate buy, target price is HK$5.00..

Analyst: Samuel Chua, CFA

http://www.kgieworld.com 10 December 2019 2

Investment Daily

Shanghai /Shenzhen -Hong Kong Stock Connect Statistics SH Connect SZ Connect Combined Southbound Balance (RMB bn) 48.89 50.42 81.64 Balance as % of Quota Amount 94.0 97.0 97.2 Top 10 Most Actively Traded Stocks(SH-HK Connect Southbound) Stock Name Stock code Buy Trades (HKD) Sell Trades (HKD) Turnover (HKD) 700 419,583,480 85,313,260 504,896,740 CCB 939 365,272,370 36,896,680 402,169,050 SUNAC 1918 247,214,850 147,193,350 394,408,200 SUNNY OPTICAL 2382 235,591,660 118,028,330 353,619,990 -W 1810 217,837,122 54,008,718 271,845,840 941 225,093,525 9,190,150 234,283,675 AIA 1299 26,197,400 194,239,740 220,437,140 SMIC 981 98,359,090 70,477,100 168,836,190 CITIC BANK 998 38,718,500 104,071,920 142,790,420 AUTO 175 55,575,680 82,679,620 138,255,300 Sources: HKEx Top 10 Most Actively Traded Stocks(SZ-HK Connect Southbound) Stock Name Stock code Buy Trades (HKD) Sell Trades (HKD) Turnover (HKD) SUNAC 1918 187,318,900 70,329,300 257,648,200 TENCENT 700 127,282,640 102,053,740 229,336,380 SINO BIOPHARM 1177 58,376,340 131,412,520 189,788,860 -W 3690 58,662,230 110,846,280 169,508,510 CSPC PHARMA 1093 69,514,720 81,362,760 150,877,480 SUNNY OPTICAL 2382 100,508,630 27,347,070 127,855,700 GENSCRIPT BIO 1548 84,337,500 29,171,300 113,508,800 GEELY AUTO 175 58,347,600 41,241,480 99,589,080 SMIC 981 59,266,450 28,014,520 87,280,970 XIAOMI-W 1810 50,422,354 25,236,552 75,658,906 Sources: HKEx Other Statistics

Ten Most Actively Traded Stocks Stock Name Code Change Closed Price Turnover(Million) TENCENT 700 0.18% 336.20 3308.4 BABA-SW 9988 -0.46% 196.60 1684.0 CCB 939 0.16% 6.30 1478.7 XIAOMI-W 1810 -0.21% 9.32 1380.1 MEITUAN-W 3690 -0.29% 103.30 1191.5 SUNAC 1918 4.26% 42.80 1167.1 AIA 1299 -0.45% 77.60 1046.6 CSPC PHARMA 1093 -5.13% 17.02 969.9 PING AN 2318 -0.33% 89.50 923.8 CHINA MOBILE 941 1.18% 60.00 912.9

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Investment Daily Ten Short Sell Stocks

Stock Name Code Short Sell Turnover Short Sell Ratio TRACKER FUND 02800.HK 1.25B 2.17B 57.49% BABA-SW 09988.HK 777.73M 1.68B 46.18% TENCENT 00700.HK 579.94M 3.31B 17.53% CCB 00939.HK 477.02M 1.48B 32.26% CAM CSI300 03188.HK 301.91M 536.43M 56.28% ICBC 01398.HK 299.53M 756.92M 39.57% CSOP A50 ETF 02822.HK 225.57M 363.98M 61.97% PING AN 02318.HK 217.20M 923.84M 23.51% SUNNY OPTICAL 02382.HK 201.26M 803.36M 25.05% AAC TECH 02018.HK 168.34M 676.36M 24.89% Source: AAStocks Economic Calendars

Date Country Event Survey Prior Mon China Nov. New Yuan Loans CNY (announce on 9-15 Dec) 1,200.0b 661.3b Nov. Aggregate Financing CNY (announce on 9-15 Dec) 1,500.0b 618.9b Tue China Nov. CPI YoY 4.2% 3.8% Nov. PPI YoY -1.4% -1.6% Wed US Nov. CPI YoY 2.0% 1.8% China Nov. Foreign Direct Investment YoY (announce on 11-18 Dec) 7.4% FOMC Monetary Meeting (Announce in early morning on 12 Thu US 1.50%-1.75% 1.50%-1.75% Dec in HKT) Nov. PPI Final Demand YoY 1.3% 1.1% Initial Jobless Claim (Till Dec 7) Continuing Jobless Claim (Till Nov 30) UK UK General Election Euro Zone ECB Monetary Policy Meeting Oct. Industrial Production YoY -1.7% Fri US Nov. Retail Sales Advance MoM 0.4% 0.3% Deadline for US to decide whether impose additional tariffs on Sun US & China Chinese goods

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