Investment Daily

13 July 2020

Major Market Indicators

10 Jul 9 Jul 8 Jul Market Overview

Mkt. Turn.(mn) 194,600 206,800 196,200 stock market short term down side is limited, Hang Stock Advances 601 1,028 1,117 Seng Index initial resistance at 250 Day SMA Stock Declines 1,306 918 796 China's National Social Security Fund and China Integrated Circuit Industry Investment Fund HSI 25,727 26,210 26,129 plans to reduce some of its holdings in the A share market, triggered profit taking pressure in the Change -483 +81 +154 A share market. Besides, the soar of COVID 19 daily new confirmed cases in United States and Hong Kong also hurt investors confidence. Hong Kong stock market fell on Friday. The Hang HSI Turn.($bn) 49.82 54.65 56.15 HSCEI 10,542 10,782 10,748 Seng Index closed 483 points lower at 25,727 while H share index fell 241 points to 10,541. Change -241 +34 +148 Market turnover was HK$194.6bn. Mainland brokerage and insurance stocks were hard hit, of HSCEI Turn.($bn) 49.65 49.95 54.11 which, China Life (2628) fell 6.7%.Gilead said its COVID 19 treatment candidate, remdesivir, showed an improvement in clinical recovery and a 62% reduction in the risk of mortality

compared with standard care. US stock market rose last Friday. Airlines rose sharply last Friday. HSI Technical Indicators Besides, ahead of announcing quarter results in the coming week, US banking stock performed 10-days MA 25,416 well with major US banks rose 4-6% respectively. The three major US stock index rose 0.6-1.4% 50-days MA 24,406 respectively last Friday while the Dow performed the best. Besides, Netflix and Tesla share price 250-days MA 26,063 rose sharply, support the index hit new high again. On the other hand, buoyed by positive 14-days RSI 59.27 results tied to a COVID-19 treatment, crude price rose 2.4% to US$40.6 per barrel. Primary resistance 26,000 China regulatory authority alert of illegal margin financing activities, A share market finally Primary support 25,416 retreated last Friday. However, since this round of A share bull market is still at early stage, the uptrend is likely to persist after adjustment. Besides, China and Hong Kong market recorded a HS CEI Technical Indicators net fund inflow of HK$49.5bn last week, reversed the accumulated outflow of HK$189.3bn 10-days MA 10,307 funds in the previous 11 weeks before. Hence, despite the rebound of COVID 19 epidemic in 50-days MA 9,925 Hong Kong, Hong Kong stock market short term down side is limited, Hang Seng Index initial 250-days MA 10,314 resistance at 250 Day SMA. For individual stock, HK Stock Connect Southbound Fund net 14-days RSI 61.33 inflow remained on (0700). Besides, Tencent is in talk to a potential acquisition on Primary resistance 10,800 Primary support 10,314 Leyou Technology (1089), which might trigger speculative interest on second and third tier online game companies. On the other hand, China property stocks experienced profit taking pressure in the past few days. However, given the continue rebound of property sales, investors HSI Futures could consider to buy quality stocks such as China Overseas (688), CIFI (0884) and Shimao 10 Jul 9 Jul 8 Jul (0813) during weakness.

Jul 25,695 26,246 26,062 Technical Analysis Volume, 154,547 138,182 154,028 The Hang Seng Index fell 483 points on Friday and lost 250 days SMA (26,063), closed with a black candlestick, market turnover was 194.6 billion. Technically, RSI went down and MACD Open interests 129,325 133,790 130,555 Aug 25,672 26,232 26,054 contracted in the positive region, but the VHSI did not change significantly, reflecting that risk Volume 588 1,371 485 appetite remained. In addition, the inflow form southbound decreased. If the HSI cannot regain Open interests 2,033 1,842 1,059 250 days SMA, the index may further correct. The next support level will be 10 days SMA(25,416). The first support level of the Hang Seng Index is 25,416 points and the second HSCEI Futures support level is 25,000 points. On the other hand, the first resistance level is 26,000 points and the second resistance level is 26,500 points. 10 Jul 9 Jul 8 Jul

Jul 10,525 10,785 10,717 HSI Chart Volume 97,998 89,740 122,995 Open interests 211,180 219,485 222,732 Aug 10,522 10.784 10,716 Volume 1,722 1,307 3,932 Open interests 10,569 9,133 8,107

Sources ：Google Investment Daily Daily Focus Tencent (0700) intends to acquire Leyou Technology (1089)  Leyou (1089) is mainly engaged in network game development and sales TENCENT(700) Info in Europe and America, of which Canada accounts for more than 80% of total revenue. , developed by Leyou, is very popular network Closed price 546.5 game. In the past year, iDreamsky (1119) and A-share listed Century Expected P/E (X) 42.5 Huatong both expressed interest in acquiring Leyou Technology and hold 0.2 discussion with Leyou Technology before, but progress was slow. Dividend yield (%)  Leyou announced on last Friday that it was informed by major 52 week high 564 shareholder that it has terminated the talk with Century Huatong. In 52 week low 311 addition, Leyou also announced that it has entered into an exclusive agreement with its major shareholder, as well as Tencent (0700). Leyou 14RSI 72 may be acquired and privatized by Tencent. Leyou said it was uncertain that an agreement would be reached, and the exclusive talk period with Tencent will last for three months.  Tencent had acquired , a Norwegian game developer, earlier this year, and in May invested HK$500 million in a 20% stake in Japanese game developer Marvelous. In fact, Tencent continue to acquire online game developers to enrich its content especially target at further expansion of overseas gaming market.  The recent Tencent acquisition talk with Leyou might triggere buying interest on Leyou as well as other second and third tiers online companies such as iDreamsky(1119), CMGE(0302) and XD(2400). Besides, Archosaur(9990) is also a quality game developer to be listed this Wednesday. Since Archosaur new game are highly welcome in US and Japan, the recent M&A activities on the sector might also provide support to its share price.

Analyst: Samuel Chua, CFA

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Investment Daily Eversunshine(1995): The investors expecting the results performance for 1H2020

 Some of the property management stocks performed well last Friday, as the market Eversunshine(1995)Info expected that the property management companies may issue positive profit warning for the 1H2020. Closed price 14.34

 In fact as at 31 December 2019, the company provided property management Expected P/E (X) 54.4 services and value-added services in 78 cities in China with GFA under Dividend yield (%) 0.54 management reached approximately 65.2 million sq.m., and the number of projects management totaled 403, representing an increase of approximately 62.2% and 52 week high 14.68 56.2%. Moreover, the company also had contracted GFA amounted to 52 week low 3.37 approximately 110.6 million sq.m., and the number of contracted projects totaled 609, representing an increase of approximately 68.6% and 60.3%. As the reserve 14RSI 70 area reached around 54 milion s.q.m, it is expected to support future revenue growth.

 In addition, the company also placed share at $11.78 in June and raised nearly $1.6 billion, which is expected to support the potential acquisitions, strategic investments and working capital, which will further increase the area under management. In addition, as the stock price also above the placing price, the placing price is expected to become a major support level.

 For the revenue break down, CIFI Group accounted for 50.1% and Third-party Property developers accounted for 49.9%. In fact, revenue from third-party property developers has grown at a CAGR of nearly 159% between 2016 and 2019, optimizing the revenue mix.

 And by property type, Residential Properties accounted for 62.8% and Non-residential Properties accounted for 37.2%. Moreover, Lump sum basis was the major revenue source, accounted for 99.4%.

 In addition, the company's cost to income ratio continued to drop, it dropped from 78.2% in FY2016 to 70.4% in FY2019 and gross profit margin also increased from 21.8% in 2016 to 29.6% last year.

 The company's financial condition is healthy. At the end of last year, its bank balances, deposits and cash were approximately RMB 1.283 billion, and its gearing ratio was zero, which provided more resources for M & A activities. In 2019, the company also acquired of 55% equity interests in Qingdao Yayuan Property Management Company Limited, which was guaranteed that Qingdao Yayuan’s net profits would not be less than RMB70.0 million, RMB73.0 million and RMB76.0 million for the year 2020, 2021 and 2022, respectively, and is expected to support future performance.

 In terms of valuation, the Expected P / E ratio is 54.4 times, the P / B ratio is 12.6 times, with Expected dividend yield around 0.54%, as the share price performed well recently and the valuation is not low, recommend investors to adopt wait and see attitude at current level.

Analyst: Li Kam Ming, CFA, FRM

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Investment Daily

Shanghai /Shenzhen -Hong Kong Stock Connect Statistics SH Connect SZ Connect Combined Southbound Balance (RMB bn) 52.57 53.42 79.43 Balance as % of Quota Amount 101.1 102.7 94.6 Top 10 Most Actively Traded Stocks(SH-HK Connect Southbound) Stock Name Stock code Buy Trades (HKD) Sell Trades (HKD) Turnover (HKD) SMIC 981 1,132,577,425 1,408,463,225 2,541,040,650 TENCENT 700 1,469,686,950 723,720,250 2,193,407,200 XIAOMI-W 1810 668,156,188 444,994,972 1,113,151,160 MEITUAN-W 3690 228,459,240 363,297,220 591,756,460 CCB 939 377,151,610 122,671,810 499,823,420 CITIC SEC 6030 164,731,560 303,858,390 468,589,950 KINGSOFT 3888 322,086,200 113,036,150 435,122,350 GEELY AUTO 175 225,250,260 165,850,180 391,100,440 CHINA LIFE 2628 131,042,050 250,675,050 381,717,100 SUNNY OPTICAL 2382 133,683,450 223,492,800 357,176,250 Sources: HKEx Top 10 Most Actively Traded Stocks(SZ-HK Connect Southbound) Stock Name Stock code Buy Trades (HKD) Sell Trades (HKD) Turnover (HKD) SMIC 981 683,758,200 581,616,285 1,265,374,485 TENCENT 700 739,944,900 196,919,350 936,864,250 XIAOMI-W 1810 213,783,240 185,779,300 399,562,540 MICROPORT 853 213,741,600 182,061,050 395,802,650 MEITUAN-W 3690 225,518,880 134,161,380 359,680,260 BYD COMPANY 1211 225,202,450 129,761,900 354,964,350 VIVA BIOTECH 1873 221,980,755 94,419,425 316,400,180 SUNNY OPTICAL 2382 127,879,970 185,377,420 313,257,390 CHINASOFT INT'L 354 122,719,220 169,118,240 291,837,460 ZTE 763 142,795,850 144,929,130 287,724,980 Sources: HKEx Other Statistics

Ten Most Actively Traded Stocks Stock Name Code Change Closed Price Turnover(Million) TENCENT 700 -2.93% 546.50 129.55 BABA-SW 9988 -2.37% 255.40 114.29 SMOORE INTL 6969 0.00% 31.00 85.07 SMIC 981 3.25% 41.25 54.40 ALI HEALTH 241 -5.73% 22.20 51.79 XIAOMI-W 1810 0.24% 16.88 51.44 MEITUAN-W 3690 -0.76% 208.20 46.58 PING AN 2318 -1.95% 87.90 36.61 GEELY AUTO 175 3.90% 17.60 31.63 CHINA TOWER 788 -3.70% 1.56 31.51

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Investment Daily Ten Short Sell Stocks

Stock Name Code Short Selling Turnover Short Selling Ratio Turnover BABA-SW 09988.HK 3.44B 11.43B 30.10% TENCENT 00700.HK 2.48B 12.95B 19.13% PING AN 02318.HK 1.14B 3.66B 31.06% MEITUAN-W 03690.HK 941.93M 4.66B 20.22% XIAOMI-W 01810.HK 687.78M 5.14B 13.37% TRACKER FUND 02800.HK 661.80M 1.80B 36.86% HKEX 00388.HK 644.58M 2.94B 21.90% SUNNY OPTICAL 02382.HK 526.05M 2.03B 25.95% AIA 01299.HK 519.76M 1.91B 27.25% NTES-S 09999.HK 516.13M 1.94B 26.66% Source: AAStocks Economic Calendars

Date Country Event Survey Prior Tue US Jun. CPI YoY 0.6% 0.1% Jun. CPI Ex Food and Energy YoY 1.1% 1.2% Thu US Jun. Retail Sales Advance MoM 5.5% 17.7% Initial Jobless Claims (Till Jul 11) 1,314k Continuing Jobless Claims (Till Jul 4) 18,062k China Jun. Industrial Production YoY 4.8% 4.4% 2Q. GDP YoY 2.5% -6.8% Jun. Retail Sales YoY 0.2% -2.8% Euro Zone ECB Monetary Policy Meeting Fri US Jun. Housing Starts 1,180k 974k Jul. University of Michigan Sentiment 80.0 78.1

All the above named KGI analyst(s) is SFC licensed person accredited to KGI Asia Ltd to carry on the relevant regulated activities. Each of them and/or his/her associate(s) does not have any financial interest in the respectively covered stock, issuer and/or new listing applicant.

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