Investment Daily

31 May 2021

Major Market Indicators Market Overview 28 May 27 May 26 May

Mkt. Turn.(mn) 172,700 250,500 164,300 China Official Media Warn on RMB Downside Risk; Support at 100

Stock Advances 784 964 988 Day SMA Stock Declines 974 727 705 Asian stock market performed well, support Hong Kong stock market to resume its uptrend HSI 29,124 29,113 29,166 on early Friday. Of which, banking stock performed well. However, tech stock emerged Change +11 -53 +155 selling pressure afterward, the closed 11 points higher at 29,124 while HSI Turn.($bn) 64.19 94.97 61.31 tech index fell 166 points to 7,958. Market turnover was HK$172.7bn. Of which, HSCEI 10,794 10,848 10,856 HSBC(0005) scale down its US operation business, share price rose 3.8% to HK$50.80. Change -55 -7 +63 Besides, JD Logistic (2618) first day listing, its share price rose 3.3% to HK$41.70. HSCEI Turn.($bn) 59.59 97.57 60.14 US core PCE price index rose 3.1% yoy in April, which is higher than market expectation. however, it did not have much impact on US stock market last Friday. Besides, US HSI Technical Indicators President Biden announced a US$6 trillion budget which triggered continuous optimism on US economy recovery. The Dow once rose more than 160 points last Friday. 10-days MA 28,645 50-days MA 28,670 However, US stock narrowed its gain in the late session, the three major US stock index 250-days MA 26,643 rose 0.1-0.2% respectively. On the other hand, despite higher inflation, 10 Year US treasury 14-days RSI 58.10 yield fell 3 basis points to 1.58%. Looking ahead, investors focus will eye on a series of US Primary resistance 29,405 economic data to be announced this week, especially the non farm payroll data on coming Primary support 28,916 Friday HS CEI Technical Indicators Several China official media warned on the potential downside risk of RMB exchange rate 10-days MA 10,684 during the weekend. It might impact investment sentiment on China stocks. After 50-days MA 10,896 accumulating obvious gain in the past few trading days, Hong Kong stock might 250-days MA 10,548 consolidate at current level today. Hang Seng Index support is at 100 Day SMA (28,916). 14-days RSI 51.21 Primary resistance 11,000 Hong Kong Stock Connect recorded a net outflow of HK$1.8bn last Friday. Net sell mainly Primary support 10,683 concentrated on (1810), (0941) and (3690). Of which, Meituan 1Q21 net loss was better than expectation. However, given increased competition, HSI Futures it might need longer time to turnaround. Meituan share price short term upside is limited. On the other hand, Hong Kong maintained zero local infections for 28 days, which might

28 May 27 May 26 May help to resume cross border travel with China and Macau. It will benefit Hong Kong retail, Jun 28,986 29,185 29,155 investment property stocks, as well as Macau gaming stock and AIA(1299). Volume 94,726 101,660 138,189

Open interests 117,168 28,380 61,254 HSI Chart Jul 28,870 29,074 29,031 Volume - 77,552 67,539 Open interests - 113,425 84,294

HSCEI Futures

28 May 27 May 26 May

Jun 10,711 10,867 10,835 Volume 81,131 105,173 143,523 Open interests 184,863 35,641 81,769 Sources ：Google Jul 10,653 10,794 10,755 Volume - 100,233 103,957 Open interests - 193,806 164,038

Investment Daily Daily Focus

Hong Kong Property Sector: Residential Property Sales Strong

 Hong Kong's residential property market remained robust over the SHK PPT (0016) Info weekend as The Pavilia Farm phase three in Tai Wai, which is developed Closed price 121.20 by New World Development (0017), attracted around 10,000 prospective Expected P/B (X) 0.6 buyers. Expected Dividend 4.1  The first batch of 182 flats for Pavilia Farm phase three, measuring yield (%) between 310 sq ft and 1,014 sq ft, are offered at an average price of 52 week high 124.75 HK$19,999 per sq ft after a maximum 20% discount is applied. In fact, 52 week low 85.55 the total Pavilia Farm phase three could provide 892 units with 683,039 sq 14RSI 60.8 ft. It is expected to cash in HK$14bn for New World Development.  In fact, Hong Kong economy seem bottom in early 2021. Thanks to the COVID 19 epidemic is more under control. Of which, Hong Kong maintained zero local infections for 28 days, which might help to resume cross border travel with China and Macau. Besides, major developed countries adopt very loosen monetary policy, inflation concern intensified which will favor property market. Hong Kong property residential sales will continue firm in the near term.  Together with the anticipated mainland tourist revisiting Hong Kong in 2H21, Hong Kong investment property rental is likely to be stabilized. Together with US dollar index remained weak, Hong Kong property stock is likely to outperform in the near term. Our top pick is SHK Properties (0016), current valuation is 40% discount to book value, target price is HK$135.00. Besides, New World Development residential property sales is strong in the past 12 months, which enable to lower its debt level. Together with trading 50% discount to book, and 4.8% dividend yield, suggest accumulate during weakness, target price is HK$46.00. Analyst: Samuel Chua, CFA

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Investment Daily Meituan (3690): 1Q21 Net losses in line with expectation

 Meituan’s 1Q21 revenue grew 121% YoY to Rmb37.0, beating consensus Meituan (3690) Info by 3.8%; and adjusted net losses expanded to Rmb3.9bn, in line with Closed price 265.20 market expectation. Expected P/S (X) 6.6  Revenue saw strong growth across the board in 1Q21, core food delivery Expected Dividend - segment revenue surged 117% YY to Rmb20.6bn, as the company yield (%) invested Rmb500mn on subsidies for delivery riders and food delivery 52 week high 460.00 volume was up 111% YoY to 2.9bn, and daily average volume surged 52 week low 144.00 114% YoY to 32.3mn. Total turnover of food delivery doubled to 14RSI 49.0 Rmb142.7bn in the period.  In-store, hotel and travel revenue also grew 113% YoY to Rmb6.6bn, with in-store dining transaction and volume both hit new high in the Spring Festival, reflecting consumption recovery post-pandemic period. Hotel booking nights also grew 136% YoY, mainly due to low base last year.  New initiatives revenue rose 137% YoY to Rmb9.9bn in 1Q21, and Meituan Select, Meituan’s community group purchase business, has expanded to over 2,600 cities, completing company target of nationwide expansion. Meituan expects user could grow 300-400mn for this new business in the coming few years, on migration from its other core businesses.  Operating margin was down 6.7ppts YoY to -6.4%, higher than consensus, thanks to in-store, hotel and travel segment margin improvement (+20ppts YoY), with greater economies of scale impact on demand recovery.  New initiatives segment losses expanded from Rmb1.4bn in 1Q20 to Rmb8.0bn in 1Q21, due to increasing investments on retail and Meituan Select businesses, including on warehouses, logistics and increasing commission for group leaders, etc.  Looking into 2Q21, Meituan has adjusted its fee mechanism for its food delivery in early-May, leading to criticism of charging too high commissions. According to local media report, Alibaba has launched a visible fee mechanism for its food delivery business, and even cut commission rate in several key regions. Meituan has implemented a visible fee mechanism afterwards. We therefore expect price competition to intensify on food delivery business.  Coupled with the fact that Nanjing city has issued guidance recently, stating that food delivery agencies should build an official employment relationship with riders, and participate in social insurance program. We see food delivery costs to rise going ahead, weighing down profitability. With increasing investments on Meituan Select, there are greater uncertainties on turnaround timetable.  The counter now trades at 6.6x 12M forward PS, higher than its 3-year average of 5.2x. We expect share price to remain range-bound at HK$240-310, and suggest investors to wait for a lower entry point. Analyst: Christopher Ho, CFA

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Investment Daily

Shanghai /Shenzhen -Hong Kong Stock Connect Statistics SH Connect SZ Connect Combined Southbound Balance (RMB bn) 51.26 50.47 83.71 Balance as % of Quota Amount 98.6 97.1 99.7

Top 10 Most Actively Traded Stocks(SH-HK Connect Southbound) Stock Name Stock code Buy Trades (HKD) Sell Trades (HKD) Turnover (HKD) XIAOMI-W 1810 449,770,010 964,107,710 1,413,877,720 CHINA MOBILE 941 110,799,975 780,399,900 891,199,875 700 466,398,750 408,053,574 874,452,324 WUXI BIO 2269 446,439,200 212,743,650 659,182,850 SMIC 981 288,703,000 197,774,800 486,477,800 MEITUAN-W 3690 198,863,900 203,365,980 402,229,880 SMOORE INTL 6969 198,025,150 182,123,250 380,148,400 2382 267,883,270 109,542,120 377,425,390 BYD ELECTRONIC 285 201,825,400 143,054,650 344,880,050 HYGEIA HEALTH 6078 297,786,950 46,771,950 344,558,900 Sources: HKEx Top 10 Most Actively Traded Stocks(SZ-HK Connect Southbound) Stock Name Stock code Buy Trades (HKD) Sell Trades (HKD) Turnover (HKD) MEITUAN-W 3690 343,189,080 837,252,560 1,180,441,640 TENCENT 700 454,802,000 551,895,202 1,006,697,202 XIAOMI-W 1810 212,988,540 624,110,750 837,099,290 GANFENGLITHIUM 1772 207,153,660 515,163,740 722,317,400 SMOORE INTL 6969 358,637,450 273,107,850 631,745,300 SIHUAN PHARM 460 210,003,110 253,388,520 463,391,630 BYD ELECTRONIC 285 306,962,675 133,060,375 440,023,050 SMIC 981 119,737,125 294,657,300 414,394,425 VIVA BIOTECH 1873 206,056,510 198,729,116 404,785,626 WUXI BIO 2269 158,581,600 198,104,700 356,686,300 Sources: HKEx Other Statistics

Ten Most Actively Traded Stocks Stock Name Code Change Closed Price Turnover(Million) TENCENT 700 -0.66% 601.50 91.94 JD LOGISTICS 2618 0.00% 41.70 71.67 XIAOMI-W 1810 -1.55% 28.60 54.03 BABA-SW 9988 -0.67% 207.40 50.73 MEITUAN-W 3690 -2.43% 265.20 45.33 HSBC HOLDINGS 5 3.78% 50.80 34.38 AIA 1299 0.98% 103.20 26.09 PING AN 2318 0.12% 84.85 23.56 WUXI BIO 2269 -5.03% 115.10 23.05 ICBC 1398 0.59% 5.10 20.09

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Investment Daily Ten Short Sell Stocks

Stock Name Code Short Selling Turnover Short Selling Ratio Turnover TRACKER FUND 02800.HK 2.05B 3.48B 58.74% BABA-SW 09988.HK 1.11B 5.07B 21.81% TENCENT 00700.HK 1.05B 9.19B 11.42% XIAOMI-W 01810.HK 709.62M 5.40B 13.13% PING AN 02318.HK 638.07M 2.36B 27.09% AIA 01299.HK 608.61M 2.61B 23.33% HSBC HOLDINGS 00005.HK 563.72M 3.44B 16.40% ISHARES A50 02823.HK 531.73M 684.95M 77.63% A-LIVING 03319.HK 481.40M 738.26M 65.21% JD HEALTH 06618.HK 410.56M 779.93M 52.64% Source: AA Stocks Economic Calendars

Date Country Event Survey Prior Mon US Market will close China May. NBS Manufacturing PMI 51.2 51.1 Tue US May. Markit Manufacturing PMI 61.5 May. ISM Manufacturing 61.0 60.7 Euro Zone May. Markit Manufacturing PMI 62.8 62.8 May. CPI Estimate YoY 1.9% 1.6% China May. Caixin Manufacturing PMI 52.0 51.9 Thu US Initial Jobless Claims (Till May 29) 406k Continuing Jobless Claims (Till May 22) 3,642k Fri US May. Change in Nonfarm Payrolls 663k 266k

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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