China / Hong Kong Market Focus The Sea Voyager Monthly A ship in harbour is safe, but that is not what ships are made for – J.A. Shedd Refer to important disclosures at the end of this report

DBS Group Research . Equity 8 Jan 2018

H-share reform kicks off HSI : 30,736

CSRC kicks off share reform. In our last monthly report, “The ANALYST two reforms to look at”, we stated that it is very likely that Ivan LI CFA, +852 2971 1930 [email protected] regulatory bodies may launch a reform in 1Q18, to allow share capital of H-share listed companies to become freely tradable. It didn’t take long: China Securities Regulatory Commissions Performance of key indices (CSRC) made an announcement just before year end. As of % change Positive to the market in long term. Total value of domestic Indices 1/4/2018 1 week 1 month QTD YTD HS I 30736 2.9 6.5 2.7 2.7 shares involved would be around HK$2,500bn – or around 7% HSCEI 12204 4.5 6.3 4.2 4.2 of the HKEX’s main board market, but many of the domestic Dow Jones 25075 1.2 3.7 1.4 1.4 shares are held by the government or related agencies, and S &P 2724 1.5 3.6 1.9 1.9 those shares may not go into the market at all. Existing Nasdaq 7078 2.0 4.7 2.5 2.5 Japan 23506 3.6 4.8 4.2 4.2 shareholders can only cut their stake in domestic shares, and S hanghai 3386 3.1 2.8 2.7 2.7 they are not allowed to increase their stake. There will be short S henzhen 1941 3.1 4.2 2.4 2.4 term price pressure for the companies involved once their Taiwan 10849 3.0 3.0 2.2 2.2 Korea 2466 2.5 (0.5) 1.2 1.2 identities are known. In the longer term, there are some India 33970 0.1 3.9 0.1 0.1 benefits. HKEX (388 HK) will be the biggest winner, while S ingapore 3501 2.8 1.7 2.7 2.7 Chinese brokers like CITIC Securities (6030 HK) and Haitong Malaysia 1803 2.0 5.2 1.0 1.0 Thailand 1791 2.2 5.5 2.2 2.2 Securities (6837 HK) may also benefit. Indones ia 6292 (0.3) 5.0 (0.9) (0.9) UK 7696 1.0 5.0 0.1 0.1 Several SOEs may join the pilot program. We believe that the F rance 5414 0.8 0.7 1.9 1.9 Germany 13168 0.7 0.9 1.9 1.9 pilot program will include the biggest SOEs like Postal Saving B razil 78647 3.9 8.4 2.9 2.9 Bank (1658 HK), Sinopharm (1099 HK), and PICC Group (1339 Russia 2198 4.3 4.0 4.2 4.2 HK). (728 HK) may join as well. Media reports Source: Thomson Reuters, DBS Vickers, Bloomberg Finance L.P. have also named DongFeng (489 HK), CGN Power (1816 HK), Zhong An Online (6060 HK), and Legend Holdings (3396 HK) .

Recommendation & valuation Good signs in new year. The Hong Kong market exhibited several good signs in the first week of trading. HSCEI rose by Clos ing FY17F Tgt 4.2% YTD, the best among global major markets. Market Ticker price PBV PER yield ROE Price turnover was also strong. Daily average net buy of South (HK$) (X) (X) ( %) ( %) (HK$) Bound Trading reached HK$3.1bn, higher than any earlier Agricultural 1288.HK 3.8 0.9 5.8 5.3 22.8 4.3 months. We also note that risk appetite returned, HIBOR, Bank of China HK 2388.HK 39.6 1.8 13.9 3.6 16.7 50.2 China Res ources Cement 1313.HK 5.5 1.4 11.9 4.2 24.1 6.1 SHIBOR and VIX all fell. Lee & Man Paper 2314.HK 9.0 2.5 8.8 4.0 5.3 11.0 CR Phoenix Healthcare 1515.HK 10.4 2.2 23.6 1.3 13.7 11.8 We saw analysts revising up their earnings estimates. In Swire Properties 1972.HK 25.8 0.6 19.5 2.9 11.4 30.6 December, the 2018/2019 EPS estimates for the HSI CRRC Corp 1766.HK 8.7 2.0 17.3 3.1 3.7 8.4 constituents were revised up by 2.2/4.6% versus 1.0/1.3% in 700.HK 431.8 19.9 52.5 0.2 9.4 512.0 Huaneng Pow er Intl Inc. (1) 902.HK 5.0 0.8 28.2 1.9 3.8 6.2 November. This helped in pushing down the HSI valuations, HKEX (1) 388.HK 254.6 9.2 43.1 1.7 21.7 280.0 thus the fair value of HSI could be revised up higher. (1) consensus estimates

Source: Thomson Reuters, DBS Vickers, Bloomberg Finance L.P.

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Market Focus The Sea Voyager Monthly

CSRC kicks off H-share reform Expect baby steps, and CSRC may halt the program if anything goes wrong. CSRC stated that no more than 3 companies will

be allowed to join the pilot program. The whole process should In our last monthly report, “The two reforms to look at”, we take 3-5 years. stated that it is very likely that regulatory bodies may launch a reform in 1Q18, to allow share capital of H-share listed Will all domestic shares be sold? companies to become freely tradable. It didn’t take long: China

Securities Regulatory Commissions (CSRC) made an Probably not. Many of the domestic shares are held by the announcement just before year end. We will discuss the details government or related agencies, and those shares may not go via Q&A format: into the market at all. For example, CCB (939 HK)’s share

capital is 100% freely tradable, since its H-share IPO in 2005, What are domestic shares? And why are they not freely but 59% of shares is held by Central Huijin, and those shares tradable? are never traded. On the other hand, non-government minority

stakes held by SOEs in different industries (from the company H-share companies are PRC incorporated companies, listed on involved) are likely to be sold. HKEX. Historically, many pre-IPO shareholders of these companies are SOEs; they acquired the stakes for non-financial Is the reform good or bad to the market as a whole? reasons at the very beginning. Hence, it is believed that it may be unfair if they can cash in their shares. There are also Slightly negative or neural in short term, slightly positive in the concerns that if these shares are freely tradable, a large long term. According to CSRC, during the pilot program and number of shares will flow into market, and drag down share until further notice, existing shareholders can only cut their prices. As a result, a large part of the share capital of H-share stake in domestic shares, they are not allowed to increase their listed companies is held as “domestic shares”. They are not stake. There will be short term price pressure for the tradable on HKEX, unless regulatory bodies allow the companies involved once their identities are known. “conversion” (into normal shares). Otherwise, those stakes were only transacted via OTC channels, which lacked market In the longer term, there are some benefits: 1) Market cap and depth, and the selling price was usually at a deep discount to daily turnover of the Hong Kong market will increase, 2) More market price. China companies may opt to list as H-shares, as the

shareholders have a way to cash-out (rather than selling Why is CSRC suddenly allowing those shares to be freely cheaply in OTC markets), 3) Once the free-float portion of the tradable? H-share companies increase, their weights in the international

stock indices will rise as well. Regulators had long intended to launch this reform. They probably feel comfortable now, as the Stock Connect Program Who will be the biggest winner? is running smoothly, and the market depth of HK market has expanded massively. HKEX (388 HK) for sure, from rising market turnover and

market cap, as well as more China companies may consider What is the amount of shares involved? listing as H-shares. Chinese brokers like CITIC Securities (6030

HK) and (6837 HK) may also benefit from There are currently 225 H-share companies. Among these, 98 rising market turnover, as well as primary and secondary capital are also listed as A-shares (in or Shenzhen). We do market activities. not believe the potential reform will include these A-H dually- listed companies – due to the huge divergence of A-H share Has CSRC provided any hints on which companies will qualify prices. For the remaining 127 companies, the total value of for the pilot program? domestic shares would be around HK$2,500bn – or around

7% of the HKEX’s main board market cap (of HK$34,600bn). Almost none. The only concrete criterion is that the company

must have a market cap of no less than HK$1bn. CSRC did What is the timeline? state several other criteria (“falls into the categories of

innovative, green China, share economy”, “match the State’s development policies and directions”, “severing the real

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Market Focus The Sea Voyager Monthly

economy”, “supporting Belt and Road initiative”,” protect Some best performing stocks YTD (%) shareholders and uphold corporate governance”), but these YTD are highly arbitrary. Sector Stock Code Company Name performance (%)

Cement 914 7.6 Any additional approvals needed? Cement 3323 China Nat'l Bldg Mat 12

CSRC has also confirmed that companies need to obtain Cement 1313 China Resources Cement 7.6 shareholders’ approval, or approval from State-owned Assets Conglomerates-HK 4 Wharf Holdings 13.3 Supervision and Administration Commissions (SASAC), if Conglomerates-HK 20 Wheelock 5.2 necessary. Note that for companies listed after Oct 2015, most Oil 386 China Petroleum & Chem 7.2 of the IPO prospectuses have clearly stated that their domestic Oil 883 CNOOC 7.5 shares may be converted into freely tradable shares, thus no Oil 857 PetroChina 6.1 additional shareholder approval will be needed. On the other Properties (China) 817 China J inmao Holdings 11.3 hand, companies listed before Oct 2015 will require formal Properties (China) 81 China Ov erseas Grand Oceans 10.6 shareholder approval before they apply for the reform. Properties (China) 688 China Ov erseas 8.2

Properties (China) 2202 China V anke 10.6 Which companies are likely to join the pilot program? Properties (China) 960 12.4

We believe that the pilot program will include the biggest SOEs Properties (China) 813 Shimao Property 12.7 like Postal Saving Bank (1658 HK), Sinopharm (1099 HK), and Properties (China) 3377 Sino-Ocean Group 10 PICC Group (1339 HK). China Telecom (728 HK) may join as IPO in 2H17 2858 Yixin Group Ltd 13.7 well, but note that its H-share IPO was done in 2002, which IPO in 2H17 1337 Razer Inc 6.5 means that they need to obtain shareholder approval before IPO in 2H17 6060 Zhongan Online P&C I 7.1 taking part in the reform. Media reports have also named IPO in 2H17 772 China Literature Ltd 7 DongFeng (489 HK), CGN Power (1816 HK), Zhong An Online Source: Bloomberg Finance L.P., DBS Vickers (6060 HK), and Legend Holdings (3396 HK) (Page 5). Massive net buy from South Bound Trading Good start to the year, risk appetite returns, consensus earnings revised up In terms of funds flow, we saw positive signs as well. For the Stock Connect South Bound Trading Program, the daily average net buy YTD reached HK$3.1bn, higher than any Stellar performance of HSCEI YTD earlier months. Total South Bound trading (Buy+Sell) reached 13.8% of total market turnover, also higher than the average The Hong Kong market exhibited several good signs in the first of earlier months. week of trading. HSI rose by 2.7% YTD, and outperformed most markets. HSCEI rose by 4.2% YTD, the best among Risk appetite returned global major markets. On a more positive note, daily market turnover stayed above HKD100bn for 3 consecutive days, We also note that risk appetite returned, at least temporarily. which has never happened before. The best performing sectors The 1-month HIBOR fell for 5 days in a row, 1-month SHIBOR include Cement, HK Conglomerates, Oil, and China properties. also fell from peak. VIX for Hong Kong market also retreated, Those 2H17 high-profile tech IPOs also performed well YTD. after a slight jump in December.

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Market Focus The Sea Voyager Monthly

1 month HIBOR (%) Hang Seng Index VIX (%) 1.25 20

1.20

1.15

1.10 15

1.05

1.00

0.95 10 1-Jan 2-Jan 3-Jan 4-Jan Jul/17 Jan/17 Jan/18 Sep/17 20-Dec 21-Dec 22-Dec 23-Dec 24-Dec 25-Dec 26-Dec 27-Dec 28-Dec 29-Dec 30-Dec 31-Dec Nov/17 Mar/17 May/17 Source: Bloomberg Finance L.P., DBS Vickers Source: Bloomberg Finance L.P., DBS Vickers

1 month SHIBOR (%) Consensus earning estimates revised up 5.5 The final positive sign is that we saw analysts revising up their earnings estimates in December. In 2H17, we saw the first wave 5.0 of upward earnings revision in July and August. Then, in September to November, the earnings estimates were mostly 4.5 unchanged. Stepping into December, we saw another wave of upward revisions. For example, for the HSI constituents, in December the 2018/2019 EPS estimates were revised up by 4.0 2.2/4.6% versus 1.0/1.3% in November. This helped in pushing down the HSI valuations, thus the fair value of HSI could be revised up higher. 3.5

1-Dec 6-Dec 11-Dec 16-Dec 21-Dec 26-Dec 31-Dec Source: Bloomberg Finance L.P., DBS Vickers HSI constituent EPS estimate (HK$)

3000 2800 2600 2017 2400 2018 2200 2019 2000 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec

Source: Bloomberg Finance L.P., DBS Vickers

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Market Focus The Sea Voyager Monthly

Appendix: List of H-share companies (excluding those listed dually as A-shares)

Market Cap (HK$mn) % of Domestic Listing Date Ticker Name Total Domest ic F ree float shares 10/30/2015 2799 China Huarong Asset Management Co Ltd 146,123 52,459 93,664 36% 9/28/2016 1658 Postal Sav ings Bank of China Co Ltd 339,518 256,321 83,197 75% 11/6/2003 2328 PICC Property and Casualty Co Ltd 233,697 161,209 72,489 69% 11/15/2002 728 China Telecom Corporation Ltd 299,450 248,103 51,346 83% 9/23/2009 1099 Co Ltd 94,911 53,998 40,913 57% 12/12/2013 1359 China Cinda Asset Management Co Ltd 112,204 72,315 39,889 64% 12/7/2012 1339 The People's Insurance Co (Group) of China Ltd 174,787 138,835 35,952 79% 9/28/2017 6060 ZhongAn Online P & C Insurance Co Ltd 109,060 74,200 34,860 68% 12/20/2006 3898 Zhuzhou CRRC Times Electric Co Ltd 62,183 33,229 28,954 53% 12/7/2005 489 Dongfeng Motor Group Co Ltd 82,284 55,012 27,272 67% 11/9/2015 3908 China International Capital Corporation Ltd 68,146 42,151 25,995 62% 2/1/2000 694 Capital International Airport Co Ltd 55,695 31,527 24,169 57% 12/10/2014 1816 CGN Pow er Co L t d 97,260 73,370 23,890 75% 2/7/2001 696 TravelSky Technology Ltd 71,546 48,745 22,801 68% 3/23/2006 3323 China National Building Material Co Ltd 42,274 19,730 22,544 47% 12/19/2014 1958 BAIC Motor Corporation Ltd 79,751 57,694 22,057 72% 7/14/2005 2777 Guangzhou R&F Properties Co Ltd 62,256 42,641 19,615 68% 12/7/2015 416 Bank of J inzhou Co Ltd 50,048 31,471 18,578 63% 12/10/2009 916 China Longyuan Power Group Corporation Ltd 44,120 25,783 18,337 58% 3/30/2016 2016 China Zheshang Bank Co Ltd 80,280 63,316 16,964 79% 12/16/2010 3618 Rural Commercial Bank Co Ltd 56,800 42,524 14,276 75% 12/10/2014 6869 Yangtze Optical F ibre and Cable J oint Stock Ltd Co 26,466 12,825 13,641 48% 6/26/2015 1528 Red Star Macalline Group Corporation Ltd 45,879 32,424 13,455 71% 11/12/2013 3698 Huishang Bank Corporation Ltd 45,636 32,575 13,061 71% 5/15/1997 576 Zhejiang Expressway Co Ltd 38,784 25,980 12,804 67% 6/10/2011 958 Huaneng Renewables Corporation Ltd 26,628 13,949 12,679 52% 8/7/2015 3969 China Railway Signal & Communication Corporation Ltd 55,841 43,339 12,502 78% 12/10/2015 3996 China Energy Engineering Corporation Ltd 39,983 27,664 12,319 69% 12/8/2006 552 China Communications Services Corporation Ltd 35,600 23,308 12,292 65% 10/26/2015 1508 China Reinsurance (Group) Corporation 74,601 62,778 11,823 84% 12/3/2015 3866 Bank of Co Ltd 26,990 15,266 11,724 57% 6/29/2015 3396 Legend Holdings Corporation 68,566 57,163 11,403 83% 5/23/2013 2386 Engineering (Group) Co Ltd 34,051 22,818 11,234 67% 3/30/2016 1578 Bank of Tianjin Co Ltd 36,909 26,180 10,729 71% 2/27/2004 1066 Shandong Weigao Group Medical Polymer Co Ltd 25,157 14,571 10,587 58% 6/20/2017 1551 Guangzhou Rural Commercial Bank Co Ltd 55,907 45,531 10,376 81% 10/30/2003 2357 AviChina Industry & Technology Co Ltd 25,774 15,594 10,180 61% 11/6/2013 1963 Bank of Chongqing Co Ltd 20,013 9,907 10,106 50% 12/29/2014 2066 Shengjing Bank Co Ltd 37,041 27,195 9,845 73% 7/19/2017 1216 Zhongyuan Bank Co Ltd 49,184 39,886 9,298 81% 12/9/2016 6066 CSC F inanc ial Co L t d 51,304 42,376 8,928 83% 2/13/2003 598 Sinotrans Ltd 24,560 15,851 8,708 65% 12/20/2007 1893 China National Materials Co Ltd 23,536 15,864 7,672 67% 3/31/2014 6138 Harbin Bank Co Ltd 26,389 19,133 7,257 73% 10/31/2000 1666 Technologies Co Ltd 14,601 7,434 7,167 51% 12/23/2015 6196 Bank of Zhengzhou Co Ltd 24,002 17,156 6,846 71% 12/29/2015 1558 YiChang HEC ChangJ iang Pharmaceutical Co Ltd 13,583 6,797 6,786 50% 12/8/2006 1818 Zhaojin Mining Industry Co Ltd 20,001 13,485 6,516 67%

Source: DBS Vickers, Bloomberg Finance L.P.

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Market Focus The Sea Voyager Monthly

Appendix: List of H-share companies (excluding those listed dually as A-shares)

Market Cap (HK$mn) % of Domestic Listing Date Ticker Name Total Domest ic F ree float shares 10/30/2015 2799 China Huarong Asset Management Co Ltd 146,123 52,459 93,664 36% 9/28/2016 1658 Postal Savings Bank of China Co Ltd 339,518 256,321 83,197 75% 11/6/2003 2328 PICC Property and Casualty Co Ltd 233,697 161,209 72,489 69% 7/11/2016 1606 China Dev elopment Bank F inancial Leasing Co Ltd 22,756 16,534 6,222 73% 6/6/2014 6198 Qingdao Port International Co Ltd 33,625 27,503 6,122 82% 6/28/2012 816 Huadian Fuxin Energy Corporation Ltd 16,227 11,267 4,961 69% 12/22/2011 579 Beijing J ingneng Clean Energy Co Ltd 14,084 9,250 4,834 66% 12/20/2013 1819 Fuguiniao Co Ltd # 5,189 473 4,715 9% 6/19/2003 2868 Beijing Capital Land Ltd 13,474 8,932 4,542 66% 12/21/2012 1829 China Machinery Engineering Corporation 20,340 15,862 4,478 78% 9/29/2006 3983 China BlueChemical Ltd 11,295 6,956 4,339 62% 12/15/2006 2006 Shanghai J in J iang Int'l Hotels (Group) Co Ltd 16,642 12,482 4,161 75% 10/13/2010 956 China Suntien Green Energy Corporation Ltd 7,876 3,977 3,899 51% 1/12/2017 6122 J ilin J iutai Rural Commercial Bank Corporation Ltd 19,804 16,032 3,772 81% 7/13/2005 1103 Shanghai Dasheng Agriculture Finance Technology Co Ltd 5,353 2,076 3,276 39% 7/12/2012 3948 Inner Mongolia Yitai Coal Co Ltd 35,367 32,208 3,159 91% 8/17/1994 1122 Qingling Motors Co Ltd 6,156 3,084 3,072 50% 9/29/1997 161 AV IC International Holdings Ltd 9,539 6,814 2,725 71% 12/30/2015 1799 Xinte Energy Co Ltd 8,830 6,181 2,649 70% 12/17/2010 1798 China Datang Corporation Renewable Power Co Ltd 6,692 4,391 2,301 66% 12/16/1994 1133 Harbin Electric Co Ltd 4,585 2,335 2,250 51% 8/4/2000 1385 Shanghai Fudan Microelectronics Group Co Ltd 4,483 2,550 1,933 57% 6/19/2014 1330 Dynagreen Environmental Protection Group Co Ltd 4,828 2,960 1,868 61% 6/9/2004 1708 Nanjing Sample Technology Co Ltd 6,336 4,500 1,836 71% 9/24/2003 2698 Weiqiao Textile Co Ltd 5,208 3,404 1,803 65% 7/8/2014 1599 Beijing Urban Construction Design & Dev Group Co Ltd 5,829 4,052 1,777 70% 11/15/2016 1272 Datang Environment Industry Group Co Ltd 8,398 6,631 1,767 79% 7/6/2015 1456 Guolian Securities Co Ltd 7,362 5,649 1,713 77% 4/30/2015 6826 Shanghai Haohai Biological Technology Co Ltd 6,530 4,896 1,634 75% 10/15/2015 1476 Hengtai Securities Co Ltd 8,829 7,301 1,528 83% 10/7/2002 2488 Launch Tech Co Ltd 3,484 1,961 1,523 56% 8/13/2002 1349 Shanghai Fudan-Zhangjiang Bio-Pharmaceutical Co Ltd 4,135 2,612 1,523 63% 12/19/2005 3378 Xiamen International Port Co Ltd 4,198 2,679 1,520 64% 3/6/2014 3636 Poly Culture Group Corporation Ltd 3,862 2,460 1,403 64% 7/6/2012 2068 China Aluminum International Engineering Corp Ltd 8,788 7,470 1,318 85% 7/18/2017 1649 Inner Mongolia Energy Engineering Co Ltd 4,555 3,241 1,314 71% 6/30/2003 2355 Baoye Group Co Ltd 3,230 1,933 1,297 60% 4/27/2006 2345 Shanghai Prime Machinery Co Ltd 2,388 1,126 1,261 47% 5/27/2015 6839 Yunnan Water Investment Co Ltd 3,926 2,729 1,197 70% 11/8/2016 3689 Guangdong Kanghua Healthcare Co Ltd 4,407 3,295 1,112 75% 12/21/2016 1596 Hebei Yichen Industrial Group Corporation Ltd 4,417 3,313 1,104 75% 10/26/2005 3399 Guangdong Yueyun Transportation Co Ltd 4,159 3,083 1,076 74% 6/27/2003 980 Lianhua Supermarket Holdings Co Ltd 3,213 2,144 1,069 67% 4/7/2006 3355 Advanced Semiconductor Manufacturing Corporation Ltd 1,427 375 1,052 26% 12/16/2015 1786 CRCC High-Tech Equipment Corporation Ltd 2,918 1,897 1,021 65% 6/13/2008 2722 Chongqing Machinery & Electric Co Ltd 3,169 2,223 946 70% 7/8/2014 6188 Beijing Digital Telecom Co Ltd 1,860 942 918 51% 4/6/2017 3768 Kunming Dianchi Water Treatment Co Ltd 2,768 1,854 915 67% 11/20/2015 2120 Wenzhou Kangning Hospital Co Ltd 3,290 2,379 912 72% 10/12/2007 3833 Xinjiang Xinxin Mining Industry Co Ltd 2,409 1,582 827 66%

Source: DBS Vickers, Bloomberg Finance L.P.

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Market Focus The Sea Voyager Monthly

Appendix: List of H-share companies (excluding those listed dually as A-shares)

Market Cap (HK$mn) % of Domestic Listing Date Ticker Name Total Domest ic F ree float shares 6/19/2014 3903 Hanhua F inancial Holding Co Ltd 3,036 2,264 772 75% 12/30/2011 1296 Guodian Technology & Environment Group Corporation Ltd 3,274 2,567 707 78% 6/26/2014 1588 Chanjet Information Technology Co Ltd 2,398 1,790 607 75% 12/20/2004 438 IRICO Group New Energy Co Ltd 1,808 1,297 511 72% 7/7/2015 1461 LUZHENG F UTURES Co Ltd 1,693 1,225 468 72% 4/22/2003 2218 Yantai North Andre J uice Co Ltd 1,428 1,000 429 70% 12/21/2001 1075 Capinfo Co Ltd 1,594 1,168 426 73% 12/30/2015 3678 Holly F utures Co Ltd 1,533 1,111 422 72% 12/23/2015 1543 Guangdong J oin-Share Financing Guarantee Invest Co Ltd 1,525 1,106 419 72% 11/25/2016 6189 Guangdong Adway Construction (Group) Holdings Co Ltd 1,655 1,241 414 75% 1/12/2006 3330 Lingbao Gold Group Co Ltd 1,055 648 407 61% 10/10/2003 2308 EVOC Intelligent Technology Co Ltd 1,628 1,221 407 75% 2/26/2008 814 Beijing J ingkelong Co Ltd 890 497 393 56% 3/31/2017 2281 Luzhou Xinglu Water (Group) Co Ltd 1,522 1,141 380 75% 1/9/2004 1265 Tianjin J inran Public Utilities Co Ltd 1,324 964 360 73% 1/15/2014 3332 Nanjing Sinolife United Co Ltd 1,221 869 351 71% 1/13/2015 6866 Zuoli Kechuang Micro-finance Co Ltd 1,156 862 294 75% 9/30/2016 1577 Quanzhou Huixin Micro-credit Co Ltd 1,034 760 274 74% 2/23/2006 1292 Changan Minsheng APLL Logistics Co Ltd 786 519 267 66% 12/14/2015 2289 Charmacy Pharmaceutical Co Ltd 978 725 254 74% 3/11/2015 1858 Beijing Chunlizhengda Medical Instruments Co Ltd 885 640 245 72% 12/16/1999 747 Public Utility Holdings Co Ltd 588 346 242 59% 12/13/1994 1202 PUTIAN Telecommunications Cable Co Ltd 568 341 227 60% 12/22/2004 1000 Beijing Media Corporation Ltd 710 513 198 72% 10/12/2015 1527 Zhejiang Tengy Environmental Technology Co Ltd 694 514 180 74% 1/9/2014 1353 Fujian Nuoqi Co Ltd # 611 450 161 74% 6/28/2002 954 Changmao Biochemical Engineering Co Ltd 450 294 156 65% 1/24/2008 840 Xinjiang Tiany e Water Sav ing Irrigation Sy stem Co Ltd 390 238 152 61% 1/12/2016 1459 J ujiang Construction Group Co Ltd 592 444 148 75% 11/11/2014 1289 Sunlit Science and Technology Co Ltd 330 248 83 75%

Source: DBS Vickers, Bloomberg Finance L.P.

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Market Focus The Sea Voyager Monthly

HSI Member 5D Performance - Top&Bottom 10 DBSV Universe Sector Performance - YTD

Conglomerates-HK 9.27 WHARF HLDG (4 HK) 14.4 Cement 9.07 CHINA OVERSEAS (688 HK) 11.2 oil 6.90 Properties (China) 6.18 SINOPEC CORP-H (386 HK) 9.2 Chemicals 5.74 SUNNY OPTICAL (2382 HK) 7.7 Warehouse 4.99 Steel, aluminium & copper 4.59 CNOOC (883 HK) 6.9 Pharmaceutical & Health Care 4.26 CHINA RES LAND (1109 HK) 6.7 Software & Computer Services 4.05 NEW WORLD DEV (17 HK) 6.7 Auto 4.00 HANG LUNG PPT (101 HK) Banking and Finance (China) 3.75 6.1 Hardware & Equipment 3.14 CCB-H (939 HK) 5.9 Insurance 3.11 PETROCHINA-H (857 HK) 5.5 Water Infrastructure, Environmental 3.00 Railway & Construction HANG SENG BANK (11 HK) 2.99 -0.1 Education 2.69 CHINA RES POWER (836 HK) -0.1 Transportation - Ports & Airports 2.56 BANK EAST ASIA (23 HK) -0.1 Renewable Energy 1.87 Properties (HK) 1.65 BOC HONG KONG HO (2388 HK) -0.4 Gas Utilities 1.44 CLP HOLDINGS (2 HK) -0.9 Industrials 1.43 Banking and Finance (HK) 1.22 SANDS CHINA LTD (1928 HK) -2.7 REIT 1.04 MENGNIU DAIRY (2319 HK) -3.2 Household/Personal (China/HK) 0.46 (151 HK) -3.3 Telecom Services (China) 0.37 GALAXY ENTERTAIN (27 HK) Telecom Services (HK) -0.10 -4.5 Retailers -0.10 HENGAN INTL (1044 HK) -4.6 Media -0.46 Food and Beverages -0.61 -15 -10 -5 0 5 10 15 Rest -2.10 -4 -2 0 2 4 6 8 10 Source: Bloomberg Finance L.P., DBS Vickers Source: Bloomberg Finance L.P., DBS Vickers

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Market Focus The Sea Voyager Monthly

DBSV HK top ten BUYs

Clos ing DBS V Tgt PER CAGR ROE PBV Div yield Ticker price rating Price FY17F FY18F 16-18 FY17F FY18F FY17F FY18F FY17F FY18F Top picks (HK$) (HK$) (X) (X) ( %) ( %) ( %) (X) (X) ( %) ( %) Agricultural Bank of China 1288.HK 3.8 BUY 4.3 5.8 5.5 3.9 22.8 22.7 0.9 0.8 5.3 5.6 Bank of China HK 2388.HK 39.6 BUY 50.2 13.9 11.7 -19.6 16.7 16.8 1.8 1.7 3.6 4.3 China Res ources Cement 1313.HK 5.5 BUY 6.1 11.9 11.1 56.3 24.1 20.8 1.4 1.2 4.2 4.5 Lee & Man Paper 2314.HK 9.0 BUY 11.0 8.8 7.9 35.7 5.3 5.7 2.5 2.0 4.0 4.4 CR Phoenix Healthcare 1515.HK 10.4 BUY 11.8 23.6 29.0 N/A 13.7 14.8 2.2 2.0 1.3 1.0 Swire Properties 1972.HK 25.8 BUY 30.6 19.5 19.5 4.4 11.4 13.1 0.6 0.6 2.9 2.9 CRRC Corp 1766.HK 8.7 BUY 8.4 17.3 15.5 10.3 3.7 3.9 2.0 1.9 3.1 3.4 Tencent 700.HK 431.8 BUY 512.0 52.5 37.2 42.5 9.4 10.1 19.9 14.9 0.2 0.3 Huaneng Pow er Intl Inc. (1) 902.HK 5.0 NR 6.2 28.2 9.6 -11.3 3.8 8.4 0.8 0.8 1.9 5.4 HKEX (1) 388.HK 254.6 NR 280.0 43.1 37.6 19.3 21.7 23.9 9.2 8.5 1.7 2.1 Simple average 22.5 18.5 15.7 13.3 14.0 4.1 3.4 2.8 3.4

(1) consensus estimates Source: DBS Vickers

- Stronger 2H for Guangxi as the construction phase Our top picks list in alphabetical order of infrastructure is expected to pick up following the rainy season in 2Q17. Agricultural Bank of China (1288.HK)

- Key winner from rising bond yields. CR Phoenix Healthcare (1515.HK) - Potential for net interest income to rise, benefits from continuous rise in corporate mid- to long- - Major opportunity of this segment is M&A of term credit demand. hospitals under state-owned enterprises (SOE) as the central government requires SOE to dispose of - Steady NIM expansion, and sizeable debt their hospitals before Dec 2018. instrument investment. - We believe CR Phoenix (1515 HK) can capture the - Improving asset quality with a decline in opportunity and rapidly expand by winning more NPL/special-mention loan ratio. IOT agreements with public hospitals.

Bank of China Hong Kong (2388.HK) CRRC Corporation (1766.HK) - Move into ASEAN has shown initial success in - Railway investments are expected to remain stable terms of growth. under the 13th five-year plan. - Completed its Malaysian, Thailand, Indonesian and - New rolling stock procurements by CRC were slow Brunei branch acquisitions; these were in 1Q17 but are expected to improve in 2H17. consolidated in 1H17. - Since April 2017, CRC has started to tender out - Acquisitions of its Philippines and Vietnam new rolling stock contracts amounting to branches are underway and it has signed an asset c.Rmb55bn. purchase agreement in Cambodia. Full impact will be visible from FY18. - It is estimated that demand in Southeast Asia, North America, and Europe could reach US$34bn, - Highest CASA ratio after Hang Seng Bank. BOCHK US$25bn, and US$39bn, respectively, by 2020. has a strong deposit franchise, with CASA ratio of about 60%. China Resources Cement (1313.HK) Huaneng Power (902.HK) - Expected hikes in cement and clinker prices in - 3Q17 results have improved significantly. September as strong seasonality kicks off in South - Coal price is likely to have peaked, profitability China. should continue to improve.

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Market Focus The Sea Voyager Monthly

- Restructuring theme is the mid-term share price - Net gearing low at 14%, the lowest since its listing catalyst. (due to the sales proceeds from ALASSIO, mid- levels). HKEX (388.HK) - Given its heavy office exposure in Island East, Swire - The revision of the listing rules will provide new Properties stands to benefit the most from the engines to drive top line growth. favourable ongoing office decentralisation trend. - Companies with Weighted Voting Right may be - The company could also tap the decentralised able to list in Hong Kong in 2H18. Several China office demand through its Wong Chuk Hang office Tech giants are potential candidates. development (50/50 JV with China Motor Bus) - In short term, domestic shares of H-share which is scheduled for completion in 2018. companies may become freely tradable in 2018, Tencent (700.HK) subject to regulatory approvals. This may help trading volume in the market. - Large sticky user base and traffic are not only making it the largest mobile game developer in

China, but also allowing it to embrace the Lee and Man Paper (2314.HK) potential for significantly higher ad monetisation. - Regulators have increased the frequency for - WeChat starts to pilot keyword-based ads to pollutant emission surveillance and continue to monetise Mini Programs. shut down non-complying capacity. It is also - We expect Tencent’s online advertising revenue to increasingly difficult to obtain approval for capacity deliver a CAGR of 52.0% during FY16-19F, with expansion. its market share going up from 9.3% in FY16 to - Market supply is expected to remain tight. 15.0% in FY19F. - We expect the ASP to remain strong for the rest of - Already an oligopoly with Alipay (支付寶), we the year as peak season approaches in 4Q2017. expect Tenpay’s (財付通) revenue to grow by Swire Properties (1972.HK) 135.8% in FY17F.

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Market Focus The Sea Voyager Monthly

DBSV universe comparison table

Mkt Share Target Stock Cap Price Price upside PE (x) PE (x) PB (x) Yld (%) ROE (%) code Stock name (US$m) (HK$) (HK$) (%) Remd 17F 18F 17F 17F 17F Auto manufacturers & dealers 1114 Brilliance China 13,843 21.45 25.60 19 B 17.9 12.3 3.2 0.5 19.5 1211 BYD Company 24,638 70.60 92.00 30 B 35.3 26.8 3.0 0.8 8.7 002594 CH BYD Company-A@@@ 22,701 65.05 74.00 14 H 38.3 29.1 3.2 0.8 8.7 1958 BAIC Motor Co 10,202 10.50 8.90 -15 B 11.9 9.0 1.5 2.9 13.2 1728 China ZhengTong 2,349 8.29 9.30 12 B 16.4 12.8 1.5 1.6 9.9 1828 Dah Chong Hong 869 3.68 3.40 -8 B 12.7 10.4 0.7 2.4 6.0 489 Dongfeng Motor Group 10,526 9.55 11.00 15 H 5.0 4.8 0.6 2.8 13.5 175 Automobile 31,498 27.45 19.00 -31 H 25.3 20.6 6.6 0.8 29.4 2333 Great Wall Motor 11,454 9.81 11.10 13 H 11.8 9.6 1.5 2.6 13.2 601633 CH Great Wall Motor-A @@@ 14,396 12.33 13.40 9 H 17.5 14.2 2.2 2.0 13.2 2238 Guangzhou Automobile 17,737 19.04 25.00 31 B 10.0 8.2 2.0 3.0 22.0 601238 CH Guangzhou Automobile-A @@@ 23,373 25.09 30.40 21 H 15.5 12.7 3.1 1.9 22.0 425 Minth Group 7,134 48.90 39.80 -19 B 21.3 17.5 3.8 1.9 19.3 1316 Nexteer Automotiv e Group 6,010 18.76 21.50 15 B 17.3 14.9 4.5 1.2 28.9 1148 Xinchen China Power Hldgs 200 1.22 1.40 15 B 9.4 6.6 0.4 0.0 4.7 881 ZhongSheng 5,313 18.32 19.00 4 B 12.1 10.5 2.2 1.6 20.4 Banking and Finance (China) 1288 Agricultural Bank of China 159,540 3.84 4.30 12 B 5.8 5.5 0.8 5.3 14.6 601288 CH Agricultural Bank of China-A@@@ 145,570 3.87 3.96 2 B 6.7 6.3 0.9 4.6 14.6 3988 Bank of China 150,254 3.99 5.30 33 B 6.0 5.5 0.7 5.2 12.5 601988 CH Bank of China-A@@@ 150,630 4.00 4.88 22 B 6.9 6.3 0.8 4.6 12.5 3328 56,332 5.93 5.85 -1 H 6.0 5.9 0.6 5.1 10.9 601328 CH Bank of Communications-A@@@ 59,752 6.29 5.21 -17 H 7.2 7.1 0.8 4.2 10.9 939 242,096 7.57 8.50 12 B 6.6 6.0 1.0 4.5 15.2 601939 CH China Construction Bank-A@@@ 243,375 7.61 7.83 3 B 7.6 6.9 1.1 4.0 15.2 998 China Citic Bank 31,486 5.03 4.85 -4 H 5.2 5.3 0.5 4.9 11.6 601998 CH China Citic Bank-A@@@ 39,999 6.39 4.46 -30 S 7.5 7.6 0.8 3.4 11.6 3968 106,622 33.05 30.00 -9 B 10.2 9.0 1.6 2.9 16.7 600036 CH China Merchants Bank-A@@@ 95,653 29.65 27.60 -7 B 10.5 9.2 1.6 2.9 16.7 1988 37,057 7.94 5.80 -27 S 5.5 5.7 0.7 4.0 13.2 600016 CH China Minsheng Bank-A@@@ 39,857 8.54 5.35 -37 S 6.7 7.0 0.8 3.3 13.2 3618 Chongqing Rural Com Bank 7,266 5.68 6.70 18 B 5.6 5.0 0.8 4.1 15.4 Banking and Finance (HK) 2388 Bank of China HK 53,489 39.55 50.20 27 B 15.6 11.7 2.2 3.1 12.8 23 Bank of East Asia 12,063 34.10 30.05 -12 FV 16.3 17.9 1.1 2.6 7.8 2356 Dah Sing Banking Group 3,182 17.72 20.40 15 B 10.0 9.1 1.0 2.5 10.1 11 Hang Seng Bank 47,347 193.60 202.00 4 B 13.5 16.9 2.6 4.5 13.7 Cement 914 Anhui Conch Cement 26,810 39.55 40.00 1 B 12.9 11.9 2.0 3.5 16.8 600585 CH Anhui Conch Cement-A @@@ 21,760 32.10 31.23 -3 B 12.3 11.4 1.9 4.3 16.8 3323 China Nat'l Bldg Mat 5,408 7.83 3.79 -52 FV 16.5 15.7 0.6 1.3 3.8 1313 China Resources Cement 4,621 5.53 6.07 10 B 11.9 11.1 1.2 4.2 11.1 Chemicals chg to Industrials 2283 T K Group 550 5.16 5.10 -1 B 14.8 12.0 5.1 3.7 37.7 Conglomerates-HK 4 Wharf Holdings # 11,885 30.60 85.00 178 B 6.2 6.1 0.3 7.6 4.7 20 Wheelock # 15,331 58.70 68.90 17 B 8.9 10.4 #DIV /0! 2.3 6.1 Education 1317 China Maple Leaf Educational Sy stems 1,588 9.00 8.86 -2 H 24.4 22.5 4.3 1.4 18.6 6169 China Yuhua Education ^^ 1,497 3.90 4.60 18 B 20.3 22.8 4.0 2.2 18.5 1569 Minsheng Education Group 833 1.62 2.03 25 H 17.1 15.4 1.6 5.2 11.4 2001 China New Higher Education Group^^ 851 4.65 5.32 14 B 25.9 17.3 2.9 1.8 13.3 1565 Virscend Education 1,936 4.90 4.70 -4 H 38.3 25.3 4.7 1.3 12.7 6068 Wisdom Education 1,278 4.90 5.14 5 B 35.7 24.5 4.8 1.2 15.5

Source: DBS Vickers # P/NAV ; @@@ denominated in RMB; ^^ Core profit and EPS

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Market Focus The Sea Voyager Monthly

DBSV universe comparison table

Mkt Share Target Cap Price Price upside PE (x) PE (x) PB (x) Yld (%) ROE (%) Stock code Stock name (US$m) (HK$) (HK$) (%) Remd 17F 18F 17F 17F 17F Food and Beverages 600597 CH Bright Dairy & Food@@@ 2,936 15.57 14.20 -9 B 33.9 31.1 3.6 1.0 10.9 506 China Foods 1,556 4.35 5.08 17 H 7.2 40.7 1.7 2.3 26.8 2319 China Mengniu 11,278 22.45 26.90 20 B 31.7 24.8 3.2 0.7 10.7 1117 China Modern Dairy 1,192 1.52 1.52 0 H n.a. 94.2 1.3 0.0 -9.7 291 China Resources Beer 11,620 28.00 25.46 -9 B 46.2 38.2 4.1 0.9 9.1 322 Tingyi Holding 10,844 15.12 14.06 -7 B 43.0 32.3 3.9 1.2 9.4 168 Tsingtao Brewery 7,267 42.05 28.20 -33 H 33.0 30.8 2.7 0.9 8.3 600600 CH Tsingtao Brewery-A @@@ 6,887 39.85 24.40 -39 FV 35.8 33.4 2.9 1.0 8.3 220 Uni-President China 3,625 6.56 5.30 -19 FV 28.6 29.2 1.9 1.0 6.8 345 V itasoy 2,724 20.15 18.70 -7 H 34.2 37.0 8.5 1.8 26.5 151 Want Want China 9,966 6.25 7.10 14 H 20.6 19.7 4.8 2.8 24.7 288 WH Group 16,765 8.94 9.47 6 B 15.5 13.8 2.4 1.9 16.2 Gas Utilities 384 Holdings 14,173 22.30 28.20 26 B 26.4 17.3 5.3 1.1 21.6 2688 ENN Energy Holdings 7,695 55.55 66.00 19 B 15.0 13.1 3.0 3.2 21.4 Hardware & Equipment 552 China Comm Serv ices 4,554 5.14 5.80 13 B 10.9 9.9 1.1 3.3 10.1 600498 CH F iberHome Telecom 4,312 30.26 43.00 42 B 37.6 28.2 3.6 1.2 10.8 6869 Yangtze Optical Fibre and Cable 3,390 38.80 46.50 20 B 18.1 16.2 4.3 1.4 26.2 763 ZTE 16,240 30.30 28.30 -7 H 22.7 20.8 2.6 1.3 12.3 000063 CH ZTE -A @@@ 19,778 36.90 29.60 -20 FV 32.7 30.0 0.0 n.a. 12.3 Household/Personal (China/HK) 2111 Best Pacific Int'l Hldgs 640 4.83 5.75 19 B 13.0 10.1 2.2 2.0 18.4 6388 Coach @ ^^^ 1,104 30.34 37.62 24 B 16.0 14.3 3.2 4.0 20.8 1169 Haier Electronics 8,065 22.50 27.46 22 B 16.2 14.2 2.4 0.9 16.7 1044 Hengan 13,171 85.45 86.10 1 B 22.8 20.3 5.4 2.6 24.9 600612 CH Lao Feng Xiang@@@ 2,077 42.54 42.21 -1 H 15.7 n.a. 3.8 3.2 26.0 494 Li & Fung 4,507 4.16 n.a. n.a. NR 18.5 n.a. 1.4 4.8 7.9 2331 Li Ning 1,856 6.68 7.70 15 B 27.7 18.3 2.7 0.0 10.9 311 Luen Thai 318 1.71 3.36 97 B 7.5 n.a. 0.5 8.1 7.4 000333 CH Midea Group Co Ltd@@@ 57,256 57.29 56.70 -1 H 21.7 17.7 4.3 1.8 23.1 1982 Nameson Holdings Ltd 897 3.08 3.40 10 B 16.8 15.6 3.5 2.2 29.3 1382 Pacific Textiles 1,517 8.20 10.50 28 B 12.2 13.7 3.7 7.3 29.8 1913 Prada 9,672 29.55 31.27 6 B 29.9 35.5 2.7 3.4 9.0 600690 CH Qingdao Haier@@@ 17,879 19.04 21.60 13 B 17.0 14.9 5.0 1.8 27.5 1910 Samsonite Int'l ^^ 6,493 35.70 39.29 10 B 24.8 22.5 3.9 1.4 14.8 1836 Stella International 1,169 11.50 13.00 13 H 14.1 12.4 1.2 5.3 8.3 2678 Texhong Textile Group 1,194 10.20 13.00 27 B 6.4 5.9 1.3 4.5 22.1 321 Texwinca 772 4.37 4.50 3 H 12.6 15.9 1.1 14.2 8.3 Industrials 517 Cosco SHIPPING International 612 3.12 5.12 64 B 14.4 15.7 0.6 4.8 4.2 2314 Lee and Man Paper 5,197 9.01 11.00 22 B 8.8 7.9 2.0 4.0 25.2 2689 Nine Dragons 7,342 12.28 17.80 45 B 11.1 7.7 1.6 2.9 15.7 698 Tongda Group 1,564 2.02 2.60 29 B 11.2 8.3 2.2 2.6 20.6 3393 Wasion Group 528 4.11 2.95 -28 FV 11.9 12.1 0.8 3.8 7.1 Insurance 1299 AIA 105,030 68.00 75.00 10 B 19.5 19.1 2.7 1.6 14.6 2628 China Life Insurance 89,847 24.85 32.00 29 B 19.1 17.0 1.8 1.8 9.6 601628 CH China Life Insurance-A@@@ 108,792 30.09 28.07 -7 H 27.3 24.2 2.6 1.3 9.6 2601 China Pacific Insurance 45,209 39.00 54.00 38 B 19.8 16.2 2.1 2.7 15.4 601601 CH China Pacific Insurance-A@@@ 46,090 39.76 47.37 19 B 23.7 19.5 2.6 2.2 15.4 1508 China Reinsurance 17,724 1.77 1.50 -15 FV 11.1 9.8 0.8 3.4 7.6 966 China Taiping 14,413 31.35 38.00 21 B 21.1 16.9 1.8 0.7 8.9 945 Manulife 44,309 162.80 197.00 21 B 11.0 10.5 1.2 3.1 11.1 1339 PICC Group 22,358 4.12 3.90 -5 H 9.8 9.3 0.8 1.0 11.3 2328 PICC P&C 26,317 15.76 11.70 -26 S 9.6 8.8 1.5 2.7 16.3 2318 196,072 83.85 100.00 19 B 17.7 15.3 2.9 1.2 17.8 601318 CH Ping An Insurance-A@@@ 166,469 71.19 87.75 23 B 17.7 15.3 2.9 1.2 17.8

Source: DBS Vickers # P/NAV ; @@@ denominated in RMB; ^^ Core profit and EPS

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Market Focus The Sea Voyager Monthly

DBSV universe comparison table

Mkt Share Target Stock Cap Price Price upside PE (x) PE (x) PB (x) Yld (%) ROE (%) code Stock name (US$m) (HK$) (HK$) (%) Remd 17F 18F 17F 17F 17F Media 752 Pico F ar East 493 3.13 2.70 -14 FV 12.8 12.0 2.0 5.4 16.5 511 TVB ^^ 1,555 27.75 36.00 30 B 24.6 14.0 1.7 5.4 7.2 Oil & Gas producers 386 China Petroleum & Chem 95,091 6.14 7.50 22 B 12.5 13.0 0.9 5.2 7.0 883 CNOOC 68,877 12.06 13.00 8 B 14.7 10.1 1.2 4.0 8.0 857 PetroChina 135,320 5.78 6.50 12 B 38.7 22.4 0.8 1.9 1.9 Pharmaceutical & Health Care 2877 China Shineway 797 7.53 5.90 -22 FV 13.8 12.2 0.9 5.2 6.8 570 China Traditional Chinese Medicine 2,568 4.53 6.50 43 B 14.5 12.1 1.3 2.1 9.6 1681 Consun Pharmaceutical 842 7.54 9.80 30 B 14.9 12.3 2.7 1.2 19.8 000999 CH CR Sanjiu Medical & Pharm@@@ 4,031 26.74 26.40 -1 B 18.8 17.0 2.7 1.9 15.2 1093 CSPC Pharmaceutical 14,055 17.60 14.60 -17 B 39.5 31.9 8.8 0.9 24.3 853 Microport Scientific 1,414 7.59 6.90 -9 H 34.5 27.0 3.7 0.7 11.4 1515 CR Phoenix Healthcare 1,718 10.36 11.80 14 B 23.6 29.0 2.0 1.3 8.9 1498 PuraPharm Corporation 102 3.23 4.20 30 B 11.4 n.a. 1.3 2.7 12.1 1066 Shandong Weigao 3,251 5.62 6.20 10 H 15.5 13.6 1.7 1.9 11.4 1099 Sinopharm Group 12,141 34.30 42.00 22 B 15.9 14.0 2.3 1.7 14.9 600535 CH Pharmaceutical Group 6,003 36.08 32.00 -11 H 17.6 n.a. 4.2 2.0 26.1 300026 CH Tianjin Chase Sun Pharm@@@ 1,999 4.31 7.13 66 H 4.7 n.a. 0.7 2.8 14.9 2666 Univ ersal Medical 1,708 7.78 10.40 34 B 10.0 8.2 1.5 3.0 16.2 2393 Yestar International 915 3.29 3.40 3 H 26.3 20.9 5.6 1.5 22.9 2120 Wenzhou Kangning Hospital 421 45.05 45.00 0 B 36.7 29.1 2.6 0.8 7.4 002603 CH Yiling Pharmaceutical 2,878 15.52 14.20 -9 H 25.9 n.a. 2.9 0.8 11.9 Properties (China) 3383 Agile Property # 6,213 12.40 8.94 -28 H 8.3 7.7 0.7 6.4 11.7 832 Central China # 1,153 3.68 3.25 -12 B 8.0 6.5 0.7 4.4 13.6 817 China J inmao Holdings # 5,230 3.83 3.20 -16 H 11.2 9.7 0.8 3.6 10.3 81 China Ov erseas Grand Oceans # 1,346 4.61 5.00 8 B 7.6 5.2 0.4 0.7 12.5 688 China Ov erseas # 38,121 27.20 28.28 4 B 9.1 8.4 1.0 3.3 14.0 1109 # 21,101 23.80 28.79 21 B 8.7 7.5 0.8 3.1 15.4 2202 China V anke # 48,718 34.50 25.00 -28 B 13.2 11.3 1.5 3.3 20.3 000002 CH China V anke-A @@@ 46,769 33.12 22.20 -33 H 14.9 12.7 1.6 3.0 20.3 2007 # 42,247 15.52 18.32 18 B 13.7 8.5 0.8 2.3 26.1 3333 China Evergrande Group # 47,146 28.00 32.90 18 B 10.2 8.1 1.0 n.a. 51.2 207 Joy City # 2,294 1.26 1.42 13 B 32.4 25.8 0.5 1.1 1.8 3380 Logan Property Holdings # 5,920 8.41 9.32 11 B 8.5 6.5 0.6 4.7 22.2 960 Longfor Properties 16,618 22.00 21.22 -4 B 11.4 9.1 0.8 3.1 14.8 813 Shimao Property # 8,301 19.16 13.50 -30 H 10.3 8.6 0.7 5.2 10.0 272 Shui On Land # 2,279 2.21 2.05 -7 H 10.5 20.6 0.4 2.9 3.9 3377 Sino-Ocean Group # 5,735 5.93 5.20 -12 B 9.3 8.4 0.8 3.7 9.0 410 Soho China # 3,126 4.70 5.02 7 B 52.7 58.4 0.5 0.0 1.2 Yllg sp Yanlord Land # @@ 2,524 1.72 2.25 31 B 6.3 5.4 0.9 2.7 11.7

Source: DBS Vickers # P/NAV ; @@@ denominated in RMB; ^^ Core profit and EPS

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Market Focus The Sea Voyager Monthly

DBSV universe comparison table

Mkt Share Target Stock Cap Price Price upside PE (x) PE (x) PB (x) Yld (%) ROE (%) code Stock name (US$m) (HK$) (HK$) (%) Remd 17F 18F 17F 17F 17F Properties (HK) # 1113 CK Asset Holdings 32,706 69.15 75.65 9 B 12.8 10.7 0.7 2.4 7.1 35 F ar East Consortium 1,332 4.55 5.20 14 B 8.8 6.8 0.4 4.1 10.8 41 Great Eagle 3,611 41.00 39.05 -5 H 14.5 14.5 0.5 3.1 3.4 101 Hang Lung Properties 11,253 19.56 21.50 10 B 18.6 17.9 0.6 3.8 3.7 12 Henderson Land 26,871 52.50 59.00 12 B 12.4 20.9 0.7 3.1 6.3 HKL SP Hongkong Land @ 16,705 7.10 8.93 26 B 18.2 17.4 0.6 2.7 2.9 14 Hy san Dev elopment 5,719 42.75 38.60 -10 H 17.6 18.2 0.6 3.2 3.8 173 K. Wah Intl 1,735 4.44 5.29 19 B 7.3 3.3 0.4 4.1 6.9 683 Kerry Properties 6,697 36.20 30.20 -17 B 9.1 12.5 0.5 3.7 6.8 66 MTR 35,692 46.45 41.80 -10 H 28.5 30.2 1.0 7.0 6.7 17 New World Dev 15,076 11.98 12.24 2 B 16.0 17.5 0.5 3.8 4.1 16 SHK Properties 49,097 132.50 144.70 9 B 14.8 13.1 0.6 3.1 5.3 83 Sino Land 11,335 13.74 15.84 15 B 15.5 17.8 0.5 3.9 4.4 1972 Swire Properties 19,307 25.80 30.60 19 B 19.5 19.5 0.6 2.9 3.4 88 Tai Cheung 738 9.34 10.20 9 B 29.4 24.4 0.4 3.4 2.8 369 Wing Tai Properties 933 5.42 6.77 25 B 7.0 13.1 0.3 3.5 4.1 Renewable Energy 1250 Beijing Enterprises Clean Energy % 1,885 0.23 0.31 34 B 12.5 9.0 2.0 0.0 19.6 1381 Canv est Env ironment Protection 1,435 4.57 5.50 20 B 19.7 16.7 2.4 0.8 14.9 1816 CGN Power 12,441 2.14 3.04 42 B 10.6 9.1 1.3 2.8 13.2 916 China Longyuan Power 5,644 5.49 7.51 37 B 9.3 8.3 0.9 2.2 9.5 451 GCL New Energy 1,513 0.62 0.69 11 B 10.3 8.6 1.8 0.0 18.9 958 Huaneng Renewables Corp 3,406 2.52 3.50 39 B 6.6 6.2 0.9 2.3 15.0 2208 Xinjiang Goldwind-H 6,123 13.46 11.20 -17 B 13.6 10.8 1.8 2.9 14.0 002202 CH Xinjiang Goldwind-A@@@ 8,675 19.07 14.82 -22 B 22.6 18.0 3.0 1.8 14.0 968 Xinyi Solar Holdings 2,545 2.68 3.00 12 B 8.1 7.1 2.1 5.2 30.6 Railway & Construction 1800 China Comm Construction 19,097 9.23 12.90 40 B 6.6 5.8 0.8 3.0 12.9 601800 CH China Comm Construction-A @@@ 27,187 13.14 17.00 29 H 11.1 9.8 1.4 2.1 12.9 1186 China Railway Construction 16,085 9.26 12.90 39 B 6.7 6.1 0.7 2.2 11.4 601186 CH China Railway Construction-A @@@ 19,907 11.46 12.50 9 H 9.9 8.9 1.1 1.8 11.4 390 China Railway Group 17,299 5.92 8.90 50 B 7.9 7.4 0.8 2.2 10.8 601390 CH China Railway Group-A@@@ 24,868 8.51 9.30 9 H 13.5 12.5 1.4 1.5 10.8 1766 CRRC Corp 32,085 8.74 8.40 -4 B 17.3 15.5 1.9 3.1 11.4 601766 CH CRRC Corp- A @ @ @ 46,403 12.64 10.60 -16 H 29.5 26.4 3.3 2.1 11.4 3311 China State Construction 7,195 11.14 13.60 22 B 9.6 8.2 1.5 3.1 18.4 Real Estate Inv estment Trust 2778 Champion REIT 4,298 5.77 5.38 -7 H nm nm 0.6 4.0 2.5 778 Fortune REIT 2,384 9.75 10.38 6 B nm nm 0.7 5.2 3.3 6139 J inmao Inv estment 1,277 4.99 5.10 2 B nm nm 1.3 7.2 5.3 1270 Langham Hospital Inv estments 932 3.49 3.60 3 B nm nm 0.6 6.2 3.1 808 Prosperity REIT 633 3.37 3.65 8 B nm nm 0.6 5.3 6.4 435 Sunlight REIT 1,143 5.44 5.52 1 H nm nm 0.6 6.1 5.4 823 Link REIT 20,683 73.50 65.80 -10 H nm nm 1.2 3.1 13.3 Restaurants 341 Cafe de Coral 1,573 21.00 24.00 14 H 24.1 24.2 3.5 3.9 14.3

Source: DBS Vickers # P/NAV ; @@@ denominated in RMB; ^^ Core profit and EPS

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Market Focus The Sea Voyager Monthly

DBSV universe comparison table

Mkt Share Target Cap Price Price upside PE (x) PE (x) PB (x) Yld (%) ROE (%) Stock code Stock name (US$m) (HK$) (HK$) (%) Remd 17F 18F 17F 17F 17F Retailers BABA Alibaba Group @@^^ 475,632 185.71 234.00 26 B 49.8 34.2 10.7 0.0 17.5 814 Beijing J ingkelong 114 2.16 2.56 19 H 18.0 16.1 0.5 2.7 2.5 116 Chow Sang Sang 1,600 18.48 20.65 12 B 14.5 12.7 1.3 2.7 9.3 330 Esprit Holdings 1,033 4.24 5.40 27 H 123.0 47.4 0.7 0.0 0.6 709 Giordano 822 4.09 5.10 25 B 12.7 11.5 2.2 7.9 17.9 3308 Golden Eagle 2,070 9.67 12.09 25 B 15.5 11.8 2.6 3.0 17.7 493 GOME Retail Holdings 2,620 0.95 1.00 5 H 60.7 53.3 0.8 0.5 1.3 J D US JD.com Inc@@ 59,741 43.67 60.00 37 B 804.5 93.7 9.5 0.0 1.2 1212 Lifesty le 2,116 10.32 13.66 32 B 7.5 10.0 4.6 6.1 80.5 590 Luk Fook 2,508 33.40 37.32 12 H 19.3 16.8 2.2 3.3 11.6 178 Sa Sa 1,199 3.10 3.46 12 B 27.8 24.4 4.2 5.5 14.5 1700 Springland Int'l 494 1.73 1.73 0 H 11.1 10.2 0.7 4.6 6.1 6808 Sun Art Retail Group 9,738 7.98 9.31 17 B 24.2 22.2 3.0 2.1 12.3 601933 CH Yonghui Superstores-A@@@ 12,573 10.27 11.13 8 B 52.3 43.7 4.7 1.8 9.4 Software & Computer Serv ices 1310 HKBN Ltd. 1,281 9.96 13.30 34 B 58.5 27.0 8.9 4.5 13.7 268 Kingdee ^^ 1,690 4.55 3.30 -27 H 55.7 38.4 3.1 0.0 5.8 3888 Kingsoft Corp ^^ 4,619 27.50 29.00 5 B 27.6 20.5 3.5 0.4 13.0 777 NetDragon Websoft 1,515 22.10 36.00 63 B 736.6 58.8 2.5 0.9 0.3 8008 SUNeV ision 1,815 6.11 5.90 -3 B 39.2 39.4 6.7 2.2 17.4 700 Tencent ^^ 524,677 431.80 512.00 19 B 52.5 37.2 14.9 0.2 34.5 600588 CH Yonyou Network Tech@@@ 4,823 21.39 12.60 -41 FV 77.1 50.9 5.4 0.9 7.0 Steel, aluminium & copper 347 Angang Steel 6,858 7.41 8.60 16 B 9.1 7.8 0.9 3.3 10.7 000898 CH Angang Steel-A @@@ 6,090 6.58 8.10 23 B 9.5 8.2 1.0 3.2 10.7 1378 China Hongqiao Group 9,421 9.13 9.55 5 H 8.9 6.0 1.2 2.8 13.8 323 Maanshan I & S 3,773 3.83 2.79 -27 H 7.0 6.3 1.2 0.0 17.6 600808 CH Maanshan I & S-A @@@ 4,216 4.28 3.49 -18 H 9.0 8.1 1.5 0.0 17.6 486 United Co RUSAL PLC 11,350 5.84 8.00 37 B 9.7 6.7 2.4 3.7 29.4 Telecom Serv ices (China) 941 204,689 78.15 104.00 33 B 12.0 11.3 1.4 8.0 11.5 762 China Unicom 42,585 10.88 15.60 43 B 51.6 32.8 1.0 0.7 1.9 728 China Telecom 38,305 3.70 5.20 41 B 12.8 11.6 0.8 3.3 6.2 Telecom Serv ices (HK) 1883 CITIC Telecom 938 2.07 3.00 45 B 8.3 7.9 0.9 6.0 11.0 6823 HKT Trust 9,676 9.99 12.60 26 B 16.0 15.7 1.9 6.3 12.1 215 Hutchison Telecom 1,917 3.11 3.10 0 H 2.2 44.3 0.8 2.8 45.5 315 SmarTone 1,342 9.36 7.30 -22 FV 15.2 15.4 2.3 6.4 15.1 Transportation - Ports & Airports 694 Beijing Capital Intl Airport ^^ 7,124 12.86 16.00 24 B 20.0 15.3 2.2 2.0 11.8 1848 China Aircraft Leasing Group 709 8.17 12.00 47 B 7.9 6.7 1.6 6.3 22.1 144 China Merchants Port Hldgs 8,805 21.00 28.70 37 B 11.4 14.5 1.0 10.6 8.1 1199 COSCO SHIPPING Ports ^^ 3,128 8.00 9.90 24 B 13.2 12.1 0.6 3.0 11.3

Source: DBS Vickers # P/NAV ; @@@ denominated in RMB; ^^ Core profit and EPS

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Market Focus The Sea Voyager Monthly

DBSV universe comparison table

Mkt Share Target Stock Cap Price Price upside PE (x) PE (x) PB (x) Yld (%) ROE (%) code Stock name (US$m) (HK$) (HK$) (%) Remd 17F 18F 17F 17F 17F Warehouse 925 Beijing Properties 298 0.34 0.44 29 B n.a. n.a. 0.6 0.0 -3.1 600340 CH China Fortune Land Dev@@@ 15,458 33.97 41.45 22 B 9.9 9.9 3.3 2.4 29.7 1668 China South City 2,213 2.16 2.77 28 B 15.0 15.0 0.6 2.3 15.9 200053 CH Shenzhen Chiwan Petroleum 1,066 23.80 28.71 21 B n.a. n.a. 2.7 0.0 -0.8 Water Infrastructure, Environmental 371 Beijing Enterprises Water % 6,974 6.20 8.00 29 B 11.2 11.2 2.7 2.2 21.6 300070 CH Beijing Originwater@@@ 8,648 17.92 23.50 31 B 19.0 19.0 3.1 0.5 15.3 257 China Ev erbright Intl 6,308 11.00 13.00 18 B 10.8 10.8 2.5 3.0 19.8 CEWL SP China Ev erbright Water @@ 900 0.46 0.65 43 B 12.5 12.5 0.9 0.1 6.8 1363 CT Environmental Group 1,172 1.45 1.10 -24 H 13.2 13.2 2.1 1.9 17.5 6136 Kangda International 461 1.75 2.10 20 B 7.2 7.2 0.8 1.2 10.1 SIIC SP SIIC Env ironment @@ 1,021 0.52 0.53 2 H 13.1 13.1 0.9 0.0 6.1 1065 Tianjin Cap Env ironmental 882 4.83 5.00 4 H 11.2 11.2 1.2 1.7 10.1 600874 CH Tianjin Cap Env ironmental-A @@@ 2,768 15.16 8.10 -47 S 41.2 41.2 4.3 0.5 10.1 CEL SP CITIC Env irotech @@ 1,273 0.74 0.80 8 H 14.4 14.4 1.6 1.1 9.7

Source: DBS Vickers # P/NAV ; @@@ denominated in RMB; ^^ Core profit and EPS

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DBSVHK recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

Completed Date: 5 Jan 2018 19:58:21 (HKT) Dissemination Date: 8 Jan 2018 10:00:44 (HKT) Sources for all charts and tables are DBS Vickers unless otherwise specified. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers (Hong Kong) Limited (“DBSV HK”). This report is solely intended for the clients of DBS Bank Ltd., DBS Bank (Hong Kong) Limited (DBS HK), DBSV HK, and DBS Vickers Securities (Singapore) Pte Ltd. (“DBSVS”), its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSV HK. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., DBS HK, DBSV HK, DBSVS, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report. This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

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ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBSVS, DBSV HK or their subsidiaries and/or other affiliates have proprietary positions in The Wharf Holdings Limited (4 HK), Dongfeng Motor Group Company Limited (489 HK), Geely Automobile Holdings Limited (175 HK), China Mengniu Dairy Company Limited (2319 HK), Group Company Limited (1044 HK), Li & Fung Limited (494 HK), Li Ning Company Limited (2331 HK), GOME Retail Holdings (493 HK), China Communications Construction Company Limited (1800 HK), China Railway Construction Corporation Limited (1186 HK), China Railway Group Limited 'H' (390 HK), Crrc Corporation Limited (1766 HK), China State Construction International Holdings Limited (3311 HK), Nine Dragons Paper Holdings Limited (2689 HK), Beijing Enterprises Water Group Limited (371 HK), China Everbright International Limited (257 HK), China Overseas Land & Investment Limited (688 HK), China Resources Land Limited (1109 HK), Sino-Ocean Group Holding Limited (3377 HK), Henderson Land Development Company Limited (12 HK), New World Development Company Limited (17 HK), Sun Hung Kai Properties Limited (16 HK), Hysan Development Company Limited (14 HK), Mtr Corporation Limited (66 HK), Fortune Real Estate Investment Trust (778 HK), Prosperity Real Estate Investment Trust (808 HK), Link Real Estate Investment Trust (823 HK), Brilliance China Automotive Holdings Limited (1114 HK), Angang Steel Company Limited (347 HK), China Merchants Port Holdings Company Limited (144 HK), Beijing Capital International Airport (694 HK), China Mobile Limited (941 HK), China Unicom (Hong Kong) Limited (762 HK), China Telecom Corporation Limited (728 HK), Zte Corporation (763 HK), Anhui Conch Cement Company Limited (914 HK), China National Building Material (3323 HK), Haier Electronics Group Company Limited (1169 HK), Hkt Trust & Hkt Limited (6823 HK), China Resources Cement Holdings Limited (1313 HK), Smartone Telecommunications Holdings Ltd (315 HK), Hutchison Telecommunications Hong Kong Holdings Limited (215 HK), Guangzhou Automobile Group Company Limited (2238 HK), Minth Group Limited (425 HK), Sinopharm Group Company Limited (1099 HK), Great Wall Motor Company Limited (2333 HK), Jinmao Investments & Jinmao (China) (6139 HK), CK Asset Holdings (1113 HK), China Company Limited 'H' (2202 HK), Cgn Power Company Limited (1816 HK), Hkbn Limited (1310 HK), Tencent Holdings Limited (700 HK), China Longyuan Power Group (916 HK), Kingsoft Corporation Limited (3888 HK), Byd Company Limited (1211 HK), Cnooc Limited (883 HK), Boc Hong Kong (Holdings) Limited (2388 HK), Hang Seng Bank Limited (11 HK), Agricultural Bank Of China Limited (1288 HK), Bank Of China Limited (3988 HK), Bank Of Communications Company Limited (3328 HK), China Construction Bank Corporation (939 HK), China Citic Bank Corporation Limited (998 HK), China Merchants Bank Company Limited (3968 HK), China Minsheng Banking Corporation Limited (1988 HK), Petrochina Company Limited (857 HK), China Petroleum & Chemical Corporation (386 HK), Langham Hospitality Investment Limited (1270 HK), Enn Energy Holdings Limited (2688 HK), Aia Group Limited (1299 HK), China Life Insurance Company Limited (2628 HK), China Pacific Insurance (Group) Company Limited (2601 HK), The People'S Insurance Company (Group) (1339 HK), Picc Property & Casualty Company Limited (2328 HK), Ping An Insurance (Group) Company (2318 HK), Huaneng Power International Incorporated (902 HK) and Hong Kong Exchanges & Clearing Limited (388 HK) recommended in this report as of 02 Jan 2018.

DBS Bank Ltd, DBS HK, DBSVS, DBSV HK or their subsidiaries and/or other affiliates have proprietary positions in Hongkong Land Holdings Limited (HKL SP), Yanlord Land Group Limited (Yllg sp), CRRC Corporation Limited (601766 CH), China Vanke Company Limited (000002 CH), Zte Corporation (000063 CH), Midea Group Company Limited (000333 CH), Byd Company Limited (002594 CH), Agricultural Bank Of China Limited (601288 CH), China Construction Bank Corporation (601939 CH), China Life Insurance Company Limited (601628 CH) and Ping An Insurance (Group) Company (601318 CH) recommended in this report as of 30 Nov 2017.

2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

3. DBS Bank Ltd, DBS HK, DBSVS, DBSV HK, their subsidiaries and/or other affiliates have a net long position exceeding 0.5% of the total issued share capital in Fortune Real Estate Investment Trust (778 HK), Prosperity Real Estate Investment Trust (808 HK), Jinmao Investments & Jinmao (China) (6139 HK), Hkbn Limited (1310 HK), China Minsheng Banking Corporation Limited (1988 HK) and Langham Hospitality Investment Limited (1270 HK) recommended in this report as of 02 Jan 2018.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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4. DBS Bank Ltd, DBS HK, DBSVS, DBS Vickers Securities (USA) Inc (“DBSVUSA”), DBSV HK or their subsidiaries and/or other affiliates beneficially own a total of 1% of the issuer's market capitalisation of Jinmao Investments & Jinmao (China) (6139 HK), China Minsheng Banking Corporation Limited (1988 HK), Postal Savings Bank Of China Company Limited (1658 HK) and Langham Hospitality Investment Limited (1270 HK) as of 02 Jan 2018.

5. Compensation for investment banking services: DBS Bank Ltd, DBS HK, DBSVS, DBSV HK, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from China Mengniu Dairy Company Limited (2319 HK), China Railway Group Limited 'H' (390 HK), China Jinmao Holdings (817 HK), Sino-Ocean Group Holding Limited (3377 HK), Mtr Corporation Limited (66 HK), China Merchants Port Holdings Company Limited (144 HK), Yanlord Land Group Limited (Yllg sp), Dah Chong Hong Holdings Limited (1828 HK), China Overseas Grand Oceans Group (81 HK), CITIC Envirotech (CEL SP), Beijing Properties Holdings Limited (925 HK), Far East Consortium International Limited (35 HK), China Aircraft Leasing Group Holdings (1848 HK), Boc Hong Kong (Holdings) Limited (2388 HK), Agricultural Bank Of China Limited (1288 HK), Agricultural Bank Of China Limited (601288 CH), Bank Of China Limited (3988 HK), Bank Of China Limited (601988 CH), Bank Of Communications Company Limited (3328 HK), Bank Of Communications Company Limited (601328 CH), China Construction Bank Corporation (939 HK), Postal Savings Bank Of China Company Limited (1658 HK), Bank Of Jinzhou Company Limited (416 HK) and China Construction Bank Corporation (601939 CH) as of 30 Nov 2017.

DBS Bank Ltd, DBS HK, DBSVS, DBSV HK, their subsidiaries and/or other affiliates of DBSVUSA , within the next 3 months, will receive or intend to seek compensation for investment banking services from Boc Hong Kong (Holdings) Limited (2388 HK), Boc Hong Kong (Holdings) Limited (2388 HK), The Bank Of East Asia Limited (23 HK), Agricultural Bank Of China Limited (1288 HK), Agricultural Bank Of China Limited (601288 CH), Bank Of China Limited (3988 HK), Bank Of China Limited (601988 CH), Bank Of Communications Company Limited (3328 HK), Bank Of Communications Company Limited (601328 CH), China Construction Bank Corporation (939 HK), China Construction Bank Corporation (601939 CH), China Merchants Bank Company Limited (3968 HK), China Merchants Bank Company Limited (600036 CH), China Minsheng Banking Corporation Limited (1988 HK), China Minsheng Banking Corporation Limited (600016 CH) and Postal Savings Bank Of China Company Limited (1658 HK) as of 30 Nov 2017.

6. DBS Bank Ltd, DBS HK, DBSVS, DBSV HK, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for China Mengniu Dairy Company Limited (2319 HK), China Jinmao Holdings (817 HK), Sino-Ocean Group Holding Limited (3377 HK), Mtr Corporation Limited (66 HK), Yanlord Land Group Limited (Yllg sp), CITIC Envirotech (CEL SP), Beijing Properties Holdings Limited (925 HK), Far East Consortium International Limited (35 HK), China Aircraft Leasing Group Holdings (1848 HK), Bank Of China Limited (3988 HK), Bank Of China Limited (601988 CH), Bank Of Jinzhou Company Limited (416 HK) ,Postal Savings Bank Of China Company Limited (1658 HK) and China Construction Bank Corporation (939 HK) in the past 12 months, as of 30 Nov 2017.

DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

7. Disclosure of previous investment recommendation produced: DBS Bank Ltd, DBSVS, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA in the preceding 12 months.

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RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”). DBS holds Australian Financial Services Licence no. 475946. DBSVS is exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSVHK is regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report is being distributed in Hong Kong by DBS Bank Ltd, DBS Bank (Hong Kong) Limited and DBS Vickers (Hong Kong) Limited, all of which are registered with or licensed by the Hong Kong Securities and Futures Commission to carry out the regulated activity of advising on securities. Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report. Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. United This report is produced by DBSVHK which is regulated by the Hong Kong Securities and Futures Commission

Kingdom This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd (“DBSVUK”). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, International Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, . DBS Bank Financial Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for Centre professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

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United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as defined Emirates in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent. United States This report was prepared by DBSVHK. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. DBS Vickers (Hong Kong) Limited 18th Floor Man Yee building, 68 Des Voeux Road Central, Central, Hong Kong Tel: (852) 2820-4888, Fax: (852) 2868-1523 Company Regn. No. 31758

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DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE DBS Vickers (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 18th Floor Man Yee Building 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 68 Des Voeux Road Central Capital Square, Marina Bay Financial Centre Tower 3 Central, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 852 2820 4888 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 852 2863 1523 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] Participant of the Stock Exchange of Hong Kong Ltd e-mail: [email protected] Company Regn. No. 196800306E

INDONESIA THAILAND PT DBS Vickers Sekuritas (Indonesia) DBS Vickers Securities (Thailand) Co Ltd Contact: Maynard Priajaya Arif Contact: Chanpen Sirithanarattanakul DBS Bank Tower 989 Siam Piwat Tower Building, Ciputra World 1, 32/F 9th, 14th-15th Floor Jl. Prof. Dr. Satrio Kav. 3-5 Rama 1 Road, Pathumwan, Jakarta 12940, Indonesia Bangkok Thailand 10330 Tel: 62 21 3003 4900 Tel. 66 2 857 7831 Fax: 6221 3003 4943 Fax: 66 2 658 1269 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

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