Investment Daily

23 December 2019

Major Market Indicators

20 Dec 19 Dec 18 Dec Market Overview

Mkt. Turn.(mn) 93,400 79,300 94,400 HK Stock Activities might slow down ahead of long holiday; Stock Advances 839 741 769 Accumulate 5G concept stocks during weakness Stock Declines 856 910 887 US Treasury Secretary Mnuchin said that China and the United States will sign the first-phase trade agreement in early January next year; stocks resumed HSI 27,871 27,800 27,884 upward momentum on Friday. The closed at 27,871 points, up 71 Change +71 -84 +41 points, which is still capped by the resistance of 28,000; the H-Share Index rose 44 HSI Turn.($bn) 36.59 28.18 37.08 points to 11,030 points, while the market turnover was HK$93.4 billion. Link Reits HSCEI 11,030 10,986 11,025 (823) purchased properties in , Australia for 683mn Australian dollar, stock Change +44 -39 +60 price rose 2.8%. The recently announced Chinese telecommunications industry HSCEI Turn.($bn) 30.36 23.66 35.37 revenue improved in November, while the shares price of the three major telecommunications operators rose 1.6-3.6% on Friday. US President Trump last Friday said he had a “very good talk” with Chinese President HSI Technical Indicators Xi Jinping and a formal signing of a partial U.S.-China trade deal is being arranged. 10-days MA 27,317 Besides, US consumer spending growth for the third quarter was revised higher to 50-days MA 26,908 3.2% from 2.9%. US stock market rose last Friday. All the three major US stock index 250-days MA 27,500 hit record high again, which rose 0.3-0.5% last Friday. 14-days RSI 64.98 On the other hand, after recent rally, oil price retreated last Friday, fell 1.2% to Primary resistance 28,000 US$60.4 per barrel. Looking ahead this week, in view of the lack of major events as Primary support 27,500 well as only three and a half trading days, holiday mood will dominate the US stock market in the near term. HS CEI Technical Indicators China and US trade deal is likely to be signed in early January. Besides, China 10-days MA 10,754 government announced measure to enhance the financing of private owned enterprises 50-days MA 10,596 as well as allow them to participate in major industries, which will boost market 250-days MA 10,726 sentiment. However, ahead of long holiday, market activities might slow down, which 14-days RSI 64.98 will limit market upward momentum. Primary resistance 11,500 For individual stocks, Alibaba hit new high in the US ADR market with strong market Primary support 11,000 turnover, which is likely to be the market focus in the near term. On the other hand, 5G concept stocks suffered from profit taking pressure in the past few trading days. However, as 5G prospect remained good, investors could accumulate during HSI Futures weakness. 20 Dec 19 Dec 18 Dec Nov 27,940 27,804 27,917 Technical Analysis Volume 147,631 120,309 139,035 The Hang Seng Index rose 71 points on Friday with trading volume $93.42 billion. Open interests 132,251 133,724 136,181 Although it closed with white candlesticks, there was great resistance at 28,000 points. Dec 28,019 27,885 27,998 The VHSI continues to stay at recent low, but the RSI and MACD continued to show signs of weakening, and the STC index also stay at overbought region, which may Volume 12,135 2,692 2,190 limit the market performance. The first support of the Hang Seng Index is 27,500 Open interests 22,067 12,316 9,778 points, the second support is 27,000 points, on the other hand, the first resistance is HSCEI Futures 28,000 points, and the second resistance is 28,200 points.

20 Dec 19 Dec 18 Dec HSI Chart Nov 11,063 10,973 11,022

Volume 60,505 59,393 77,288 Open interests 236,887 240,414 239,660 Dec 11,094 11,006 11,053 Volume 24,995 10,494 3,817 Open interests 27,217 43,897 34,128

Sources ：Google Investment Daily Daily Focus

China Telecom Industry: Latest update

 The Ministry of Industry and Information Technology announced that the China Telecom(728) Info telecommunication business revenue in the first eleven months of 2019 had totaled RMB 1,203.9 billion, a year-on-year increase of 0.5%. For November, Closed price 3.13 telecom revenue wasRmb106.6 billion, an increase of 3.2% year-on-year. Expected P/E (X) 10.1  For the first eleven months of 2019, the three telecommunications companies realized fixed network revenue of Rmb383.8 billion, a year-on-year increase of Dividend yield (%) 3.9 9.4%, which was an increase of 0.1 percentage point from first ten months; the 52 week high 4.41 first eleven months mobile network revenue was Rmb820.5 billion, a decrease 52 week low 2.91 of 3.2 %, but was already0.3 percentage points better than in the first ten months. 14RSI 55  On the other hand, (0941) announced that there was a net increase of 2.96 million mobile customers in November, the growth rate accelerated; of which 4G customers had a net increase of 3.97 million monthly. In contrast, China Telecom (0728) slowed down in November, with a monthly increase of 1.86 million mobile subscribers, of which 4G subscribers increased by 1.93 million. On the other hand, (0762) had a net reduction of 860,000 mobile billing subscribers in November, but 4G subscribers still saw a net increase of 1.83 million.

 In fact, the three mainland telecom operators share price fell to recent year low in early December, as investors concerned the impact from the implementation of mobile number portable. However, China telecom industry revenue improved in Oct and Nov, especially for the mobile service. It might reflect that mobile service price war has been cool down. Hence, we are not too bearish of mobile bumber portable impact on the telecom operator revenue and profit in 2020.

 For 5G business, since it is still at initial stage, the revenue impact in 2020 will not be too substantial. On the other hand, since all three telecom operators will adopt prudent attitude toward handset subsidies as well as 5G capex, we believe that it will not have much burden on their profit and balance sheet.

 Overall speaking, we believe that 2020 is a flat year for China telecom operators. However, telecom operators such as China Mobile (0941) and China Telecom (0728) valuation below 11x FY19 prospective P/E, valuation is not demanding. Of which, our preference remain on China Telecom, given its higher profit growth as well as anticipated synergy from the co-ordination on 5G network with China Unicom.

Analyst: Samuel Chua, CFA

http://www.kgieworld.com 23 December 2019 2

Investment Daily Link REIT(0823): Expand portfolio mix to overseas market

 The company announced that it acquired a target property, A grade commercial office building stratum tower located at 100 Market Street, Sydney, Link REIT(0823)Info Australia, from certain funds managed by Blackstone at approximately Closed price 81.1 AUD683 million (approximately HK$3.67 billion) Expected P/E (X) 28  The targeted property has a total net lettable area of approximately 28,385.3 square metres and is s 100% occupied by three tenants, being: (i) an S&P/ASX Dividend yield (%) 3.6 100 listed property investor; (ii) a Commonwealth government body; and (iii) a 52 week high 98.38 sovereign wealth fund. The weighted average lease expiry (by rental income) of 8.45 years with leases expiring between 2027 and 2030 and the net passing 52 week low 74.23 income of approximately AUD26.7 million per year. 14RSI 54  Base on the passing income of approximately AUD26.7 million, the rate of return is about 4% and is higher than the capitalization rate of office properties in Hong Kong. In addition, although the company's gearing ratio will rise from 12.1% to 13.5%, it is still at a relatively low level.

 As the newly acquired project only accounts for less than 2% of the company's portfolio value, the positive impact on the results performance may be limited. But the acquisition is expected to diversify the company's property portfolio mix, and to capture the opportunities outside China and Hong Kong. The company expects that the Hong Kong properties will account for 70% to 75% of the total property value, no more than 20% for mainland properties and no more than 10% for overseas properties. While the customer’s type, retail will still be the focus, and office properties will increase to 15% to 20%.

 In fact, the company will continue to look for asset enhancement opportunities and aim to achieve double-digit return on investment. Moreover, it will also set up set up Mainland China headquarters at Link Square to provide centralized management of expanding portfolio in Mainland China.

 The company owns 126 properties in Hong Kong and five properties in Mainland China. As the company’s properties in Hong Kong are mostly connected to public housing estates, it has sizeable catchments and good connectivity. As at 30 September 2019, occupancy rate for the portfolio remained stable at 96.9% and the overall portfolio reversion rate stood at 18.1%, however it was the lowest since FY2008.

 The company will continue the unit buyback programme, moreover, it will also change the board lot size from 500 Units to 100 Units, which will decrease the value per hand from around HK$40,000 to HK$8,000, and help in broadening the shareholders base.

 In terms of valuation, the company’s expected P/E is 28X, P/B is 0.9X, dividend yield is 3.6%, recommended investors to accumulate when consolidated to around 80.

Analyst: Ken Li Kam Ming, CFA, FRM

http://www.kgieworld.com 23 December 2019 3

Investment Daily

Shanghai /Shenzhen -Hong Kong Stock Connect Statistics SH Connect SZ Connect Combined Southbound Balance (RMB bn) 48.54 49.78 82.13 Balance as % of Quota Amount 93.3 95.7 97.8

Top 10 Most Actively Traded Stocks(SH-HK Connect Southbound) Stock Name Stock code Buy Trades (HKD) Sell Trades (HKD) Turnover (HKD) 700 237,865,340 150,742,120 388,607,460 CCB 939 215,435,640 169,133,730 384,569,370 2382 84,180,080 273,125,110 357,305,190 ICBC 1398 271,013,100 68,039,370 339,052,470 CHINA MOBILE 941 203,363,675 38,508,550 241,872,225 -W 3690 135,974,300 37,738,790 173,713,090 SUNAC 1918 67,289,850 92,848,010 160,137,860 3988 138,235,330 8,882,740 147,118,070 -W 1810 113,426,092 31,851,356 145,277,448 CHINA TELECOM 728 96,363,680 15,724,460 112,088,140 Sources: HKEx Top 10 Most Actively Traded Stocks(SZ-HK Connect Southbound) Stock Name Stock code Buy Trades (HKD) Sell Trades (HKD) Turnover (HKD) CCB 939 167,574,220 14,122,390 181,696,610 SUNNY OPTICAL 2382 39,887,520 137,354,930 177,242,450 MEITUAN-W 3690 52,889,140 107,018,430 159,907,570 TENCENT 700 26,701,240 117,834,640 144,535,880 CHINA SHENHUA 1088 112,673,600 12,038,770 124,712,370 XIAOMI-W 1810 96,941,976 24,516,128 121,458,104 SUNAC 1918 83,892,100 32,999,650 116,891,750 ABC 1288 103,841,500 1,224,050 105,065,550 BOSIDENG 3998 22,835,160 79,896,900 102,732,060 AAC TECH 2018 4,581,650 72,100,050 76,681,700 Sources: HKEx Other Statistics

Ten Most Actively Traded Stocks Stock Name Code Change Closed Price Turnover(Million) TENCENT 700 -0.11% 375.20 8117.6 BABA-SW 9988 1.07% 207.00 3479.3 CHINA MOBILE 941 2.40% 63.95 2408.0 PING AN 2318 -0.22% 91.80 1952.4 AIA 1299 -0.31% 79.90 1908.6 CCB 939 -0.30% 6.62 1724.6 MEITUAN-W 3690 -1.45% 102.00 1682.1 HKEX 388 0.55% 256.40 1610.1 SUNNY OPTICAL 2382 -3.68% 138.60 1275.0 ICBC 1398 0.34% 5.98 1221.1

http://www.kgieworld.com 23 December 2019 4

Investment Daily Ten Short Sell Stocks

Stock Name Code Short Sell Turnover Short Sell Ratio TRACKER FUND 02800.HK 1.61B 2.60B 62.06% TENCENT 00700.HK 1.26B 8.12B 15.55% BABA-SW 09988.HK 904.70M 3.48B 26.00% R&F PROPERTIES 02777.HK 579.46M 1.02B 56.92% CAM CSI300 03188.HK 463.63M 803.61M 57.69% XIAOMI-W 01810.HK 396.89M 1.22B 32.65% ICBC 01398.HK 341.85M 1.22B 28.00% CHINA TOWER 00788.HK 336.44M 1.05B 32.19% HKEX 00388.HK 316.77M 1.61B 19.67% CHINA MOBILE 00941.HK 300.72M 2.41B 12.49% Source: AAStocks Economic Calendars

Date Country Event Survey Prior Mon US Nov. Durable Goods Orders 1.5% 0.5% Nov. New Home Sales 730k 733k Tue US Market will close at 1:00 pm (Christmas Eve) Hong Kong Half Day Market (Christmas Eve) Wed US Market will close (Christmas Day) Hong Kong Market will close (Christmas Day) Thur US Initial Jobless Claim (Till Dec 21) Continuing Jobless Claim (Till Dec 14) China Nov. Industrial Profits YoY -9.9% Hong Kong Market will close (The first weekday after Christmas Day)

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.

Some of KGI Asia Ltd. equity research and earnings estimates are available electronically on KGIEWORLD.COM. Please contact your KGI representative for inf ormation. The information Disclaimer and opinions in this report are those of KGI Asia Ltd. internal research activity. KGI Asia Ltd. does not make any represent ation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained in this report. The information and opinions contained in this report are subject to change without any notice. No person accepts any liability whatsoever for any loss however arising from any use of this report or its c ontents. This report is not to be construed as an invitation or offer to buy or sell securities and/or to participate in any investment activity. This report is being supplied solely for informational purposes and may not be reproduced or published (in whole or in part) for any purpose without the prior written consent of KGI Asia Ltd.. Members of the KGI group and their affiliates may provide services to an y companies and affiliates of such companies mentioned herein. Members of the KGI group, their affiliates and their directors, officers and employees may from time to time have a position in any securities mentioned herein.

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