China Property – Equity & Bond Weekly Wrap

China Property – Equity & Bond weekly wrap Industry Overview

Equity/Fixed Income | China | Real Estate/Property 26 March 2012

Macro factors dominate again

Equity research Raymond Ngai, CFA >> +852 2536 3987 Research Analyst Equities slumped 4.9%, bonds yields widened to 13.19% Merrill Lynch (Hong Kong) Chinese developers’ shares fell another -4.9% w/w last week, after a 2.3% [email protected] decline. Overall stock market sentiment was not too good in the past week, with Matthew Chow, CFA >> +852 2161 7877 some soft macro numbers coming out from the US and Europe; and actually the Research Analyst Merrill Lynch (Hong Kong) HSCEI index was also down 5% w/w last week, on concerns of weaker economic [email protected] growth (as well as speculation over possible political tensions within China.) Sunny Tam, CFA >> +852 2536 3446 Chinese developers’ bond yields also widened another 62bps to an average Research Analyst 13.19% vs 12.57% in the week before. In the past week, macro factors seem to Merrill Lynch (Hong Kong) dominate share/bond prices again. However, looking ahead March sales numbers [email protected] for developers to be released in early April may give more indication as to how Liying Du >> +852 2161 7008 Research Analyst realistic developers’ 2012 sales targets are, and could provide more company Merrill Lynch (Hong Kong) specific drivers for the sector. [email protected] Credit Research Proposal for more property tax pilot cities approved Alwyn Pang, CFA +852 2536 3485 Last week, the National Development and Reform Committee's 2012 Economic Research Analyst Reform Proposals were approved by the State Council. The Proposals included Merrill Lynch (Hong Kong) setting up more property tax pilot cities when "the time is right". We believe rolling [email protected] out property tax is the right direction. The earlier property tax is introduced to a Joyce Liang +852 2536 3817 Research Analyst wider range of cities, the sooner the HPRs could be removed, in our view. Some Merrill Lynch (Hong Kong) are speculating that Guangzhou and Shenzhen could be the new pilot cities, but [email protected] Guangdong government said in early March that the province has not received Convertibles research notice from the central government to consider trial runs for property tax. Rolling Pauline Lau >> +852 2536 3409 out property tax in Beijing may be difficult, too. As such we think the 2nd batch of Research Analyst cities could also include some top tier-2 cities that are also showing signs of Merrill Lynch (Hong Kong) [email protected] having overheated property markets. . Equity / bonds recommendation changes We suggest a switch from FRANSH’21 to LNGFOR’16 for a yield pick-up of 1.1% Chart 1: CH Developers bond vs equity indices and a shortening in tenor by 5 years. Post FY11 results, we downgraded FRANSH’21s to UW30% from OW70% as we expect meaningful leveraging is set 150 30 to continue into 2012 given its appetite for land bank expansion; we upgraded 100 20 LNGFOR’16s from OW30% to OW70% as the company demonstrated ability to grow while maintaining B/S discipline. Additionally, we recommend to switch from 50 10 YLLG 9.5% ’17 to KWGPRO 13.25% ’17 for KWG’s lessened refinancing risks and improved debt maturity profile post the issuance of US$400m 5-yr bond (full 0 0 report). On the equity side, we still like Franshion for its quality investment Sep-10 Mar-11 Sep-11 Mar-12 property property and also decent project pipeline for the next 2years, we think they would really need to acquire more land to extend its pipeline to 2014 and CH developers shr px index (LHS) beyond. We expect a 40% earnings CAGR for the next 3 years. We maintain our CH developers bond yield index (RHS) BUY rating on the stock (full report). Source: Bloomberg, BofA Merrill Lynch Global Research

c58da9b710df662c >> Employed by a non-US affiliate of MLPF&S and is not registered/qualified as a research analyst under the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Merrill Lynch entities that take responsibility for this report in particular jurisdictions. BofA Merrill Lynch does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 9 to 12. Analyst Certification on Page 7. Link to Definitions on page 7. 11150710 China Property – Equity & Bond weekly wrap 26 March 2012

China property – Equity/Bond perf Top and bottom performers for the past week and YTD

Chart 2: Share price performance for the week of 23,Mar 2012 Chart 3: Chinese developers’ bond price % changes (1 week)

CR Land 0% Powerlong 0.29 COLI 0% GZI REIT -1% COLI 0.21 Shui On Land -1% Yuzhou 0.00 Vanke "A" -2% CR Land -0.21 Poly "A" -2% SOHO China -3% Glorious -0.28 Hang Seng Index -3% Shui On Land -0.40 Renhe -3% -0.54 Agile -4% Roadking China Pty Index -5% Longfor -0.75 Shimao -5% Sino Ocean -1.25 Franshion -5% -1.37 Yuexiu Property -6% Franshion Country Garden -6% Hopson -1.74 Longfor -6% Central China -1.76 R&F -6% Evergrande -1.76 Yanlord -6% Kaisa -6% Yanlord -1.79 C C Land -8% KWG -1.82 Hopson -9% COGO -9% Country Garden -1.87 Beijing Cap. Land -9% GZ R&F -2.06 Evergrande -10% Shimao -2.41 Greentown -11% Glorious -11% Agile -2.86 KWG -12% Kaisa -3.02 Sino-Ocean -12% Poly HK -18% -3.50 -3.00 -2.50 -2.00 -1.50 -1.00 -0.50 0.00 0.50 -20% -15% -10% -5% 0% 5% Source: Bloomberg, BofA Merrill Lynch Global Research

Source: Bloomberg

Chart 4: Share price performance for year-to-date 2012 Chart 5: Chinese developers’ bond price % changes (YTD)

KWG 67% Yuzhou 30.00 Greentown 59% R&F 48% Hopson 30.00 Beijing Cap. 36% Glorious 29.20 Yuexiu Property 36% Yanlord 33% Powerlong 28.10 Shui On Land 31% KWG 25.17 COGO 29% Sino Ocean Evergrande 28% 24.93 Franshion 27% GZ R&F 24.38 Agile 26% Evergrande 20.15 Longfor 23% Kaisa 20% Agile 15.99 Shimao 19% Roadking 15.72 GZI REIT 16% Kaisa 15.57 China Pty Index 15% Hopson 14% Shimao 15.51 COLI 13% Yanlord 14.95 Hang Seng Index 12% C C Land 11% Country Garden 14.39 Vanke "A" 9% Central China 13.01 Poly HK 7% Franshion 9.06 Poly "A" 6% SOHO China 5% Longfor 8.88 Country Garden 3% COLI 6.09 CR Land 3% Sino-Ocean 1% Shui On Land 2.62 Renhe -1% CR Land 2.08 Glorious -8% - 5.00 10.00 15.00 20.00 25.00 30.00 35.00 -50% -25% 0% 25% 50% 75%

Source: Bloomberg, BofA Merrill Lynch Global Research Source: Bloomberg

Chinese developers would see heighted

2 China Property – Equity & Bond weekly wrap 26 March 2012

offshore bond maturity/refinancing in Chart 6: Sector – offshore bonds maturity profile – chart 2014-2016; it is crucial to lengthen the US$ bn debt maturity profile when the window is 6.0 5.4 open. 5.0 4.1 3.6 3.7 4.0 3.0 1.6 1.7 2.0 1.1 1.0 0.5 - 2012 2013 2014 2015 2016 2017 2018 2021

Source: Bloomberg, Company reports, BofA Merrill Lynch Global Research

Shui On Land finalizes US$338m syn loan Shui On Land has recently finalized a new 3-year US$338m syndication loan, mainly to refinancing one of their existing US$300m syndication loan due this year. With this syndication loan finalized, the company’s FY12 offshore refinancing is done. Looking ahead the company will have another Rmb7.8bn offshore loans due in 2013, the company is actually actively looking for a spin-off of its commercial properties, which may help improve its overall debt/liquidity profile (full report).

Table 1: YTD debt/equity raisings Amount Company Ticker Type Announcement date Tenor Maturity Offer price CCY LC$MM USD equivalent Coupon Discount Shui On Land 272 HK Senior Notes 12-Jan-12 3-year 26-Jan-15 100.00 SGD 250 199 8.00% Shui On Land 272 HK Senior Notes 9-Feb-12 3-year 16-Feb-15 100.00 USD 475 475 9.75% COLI 688 HK Senior Notes 9-Feb-12 5-year 15-Feb-17 99.816 USD 750 750 4.875% Country Garden 2007 HK Placement 1-Mar-12 3.23 HKD 2,183 276 8% CR Land 1109 HK Bilateral loan 12-Jan-12 2-year 12-Jan-14 HKD 1,300 168 CR Land 1109 HK Syn. Loan 22-Feb-12 2-year 22-Feb-14 HKD 300 39 Agile 3383 HK Bilateral loan 6-Mar-12 18 mths 6-Sep-13 HKD 385 50 Agile 3383 HK Senior Notes 13-Mar-12 5-year 20-Mar-17 99.903 USD 700 700 9.875% COGO 81 HK Convertible 13-Mar-12 5-year 21-Mar-17 HKD 2,200 283.9 2% KWG 1813 HK Senior Notes 15-Mar-12 5-year 22-Mar-17 99.12 USD 400 400 13.25% Shui On Land 272 HK Syn. loan 19-Mar-12 3-year 19-Mar-15 USD 338 338 3,678.9 Source: HKEX, Company reports, Bloomberg, BofA Merrill Lynch Global Research

3 China Property – Equity & Bond weekly wrap 26 March 2012

Bonds vs Equity valuations Chart 7: Bond yield vs P/B Chart 8: Bond yield vs P/E

2.0 P/B (X) 16 P/E (X) Longfor 1.8 14 COLI Mingfa 1.6 Low default risk, Country Garden Ev ergrande 12 CR Land normal/rich equity Shui On Land 1.4 Yanlord lti 10 1.2 Longfor CR Land Agile Mingfa 8 COLI 1.0 Country Garden Central China Franshion 0.8 Sino Ocean 6 Agile GZ R&F KWG Yuzhou Franshion Shimao Hopson 0.6 Shimao EvergrandeKWG Kaisa Glorious Low default risk, Yanlord Glorious 4 Kaisa 0.4 Shui On LandSino Ocean depressed equity Pow erlong Central China Powerlong 2 0.2 valuation GZ R&F Hopson Bond yield (%) - - Bond yield (%) 0 5 10 15 20 25 0 5 10 15 20 25 30

Source: Bloomberg, BofA Merrill Lynch Global Research Source: Bloomberg, BofA Merrill Lynch Global Research

Sector valuation tables Table 2: China Property Valuation Summary Company BofAML BBG BofAML Price Mkt Cap NAV Disc/ P/E (x) P/BV (x) Div. Yield Ticker tickers Rating (LC) (US$ mn) LC/shr Premium '11E '12E '13E '12E '13E '12E '13E Residential COLI CAOVF 688 HK Buy 14.64 15,406 19.0 -23% 9.2 8.1 7.3 1.5 1.3 2.4% 2.7% CR Land CRBJF 1109 HK Buy 12.88 9,664 22.2 -42% 13.4 11.8 10.2 1.1 1.0 3.4% 3.9% Evergrande XEVRF 3333 HK Buy 4.12 7,901 11.0 -62% 5.9 4.8 4.1 1.3 1.0 5.2% 6.0% Longfor XLOFF 960 HK Buy 10.84 7,196 16.8 -36% 10.3 8.6 7.0 1.7 1.4 2.3% 2.9% Country Garden CTRYF 2007 HK Buy 3.01 6,735 5.4 -44% 7.4 6.9 6.2 1.2 1.1 5.1% 5.7% Agile Property AGPYF 3383 HK Buy 8.78 3,900 18.2 -52% 6.6 5.7 4.9 1.0 0.8 5.2% 6.2% Shimao SIOPF 813 HK Buy 7.90 3,526 23.0 -66% 5.3 5.2 4.9 0.7 0.6 6.2% 6.6% Guangzhou R&F GZUHF 2777 HK Buy 9.06 3,759 21.7 -58% 5.4 4.9 4.8 0.9 0.8 8.8% 9.5% Sino-Ocean SIOLF 3377 HK Underperform 3.64 2,654 8.9 -59% 7.9 7.6 7.5 0.5 0.4 4.0% 4.0% Yanlord YLDGF YLLG SP Underperform 1.27 1,957 2.4 -47% 15.3 11.1 10.3 0.8 0.7 1.0% 1.1% Glorious XULGF 845 HK Underperform 1.25 1,254 5.1 -76% 3.9 3.7 3.7 0.4 0.4 2.7% 2.7% KWG Property KWGPF 1813 HK Neutral 4.37 1,628 13.1 -67% 5.6 4.9 4.7 0.7 0.6 6.9% 7.2% COGO CSVGF 81 HK Buy 8.74 1,712 14.3 -39% 10.7 7.6 5.9 1.9 1.5 0.6% 0.7% Kaisa XKSIF 1638 HK Neutral 1.61 1,017 7.3 -78% 5.0 4.0 3.6 0.5 0.4 0.0% 0.0% Hopson HPDLF 754 HK Underperform 4.60 1,028 16.2 -72% 4.2 5.5 4.9 0.2 0.2 3.7% 3.7% Average -55% 7.8 6.7 6.0 1.0 0.8 3.8% 4.2% Commercial Renhe Commercial RNHEF 1387 HK Neutral 0.88 2,396 3.3 -73% 5.7 5.0 4.8 1.0 0.9 4.0% 4.1% Franshion FRSHF 817 HK Buy 1.90 2,241 4.4 -57% 12.5 8.8 6.1 0.6 0.6 3.2% 4.6% SOHO China SOHOF 410 HK Buy 5.42 3,621 10.3 -47% 17.7 5.3 4.2 0.9 0.8 5.9% 6.1% Shanghai Shimao XHGNF 600823 CH Underperform 11.07 2,056 28.2 -61% 11.2 10.2 6.9 1.2 1.1 1.0% 1.5% Shui On Land SOLLF 272 HK Neutral 3.08 2,310 6.7 -54% 12.6 9.8 8.2 0.5 0.5 2.0% 2.4% Mingfa XMFAF 846 HK Underperform 2.09 1,637 4.6 -55% 24.0 8.7 12.0 1.3 1.2 2.9% 3.0% GZI REIT GZIRF 405 HK Buy 3.98 546 6.1 -35% 14.9 14.8 14.6 0.7 0.7 6.8% 6.8% Hui Xian REIT XURHF 87001 HK Neutral 3.84 3,053 7.0 -45% 25.4 21.7 18.5 0.8 0.8 6.4% 7.2% Average -53% 15.5 10.5 9.4 0.9 0.8 4.0% 4.5% Source: Bloomberg, BofA Merrill Lynch Global Research

4 China Property – Equity & Bond weekly wrap 26 March 2012

Table 3: Summary of recommendation on Chinese property developer bonds Mid_ OW OW OW UW UW UW Issuer Bond Amount (US$ mn) MDY SP Mkt Cap (US$bn) Mid-price YTM (%) 100% 70% 30% 30% 70% 100% Agile AGILE 8.875 '17 650 Ba2 BB 3.9 93 10.7 X Agile AGILE 10.0 '16 300 Ba2 BB 3.9 98 10.4 X Country Garden COGARD 11.125 '18 900 Ba3 BB- 6.7 98 11.6 X Country Garden COGARD 10.5 '15 400 Ba3 BB- 6.7 100 10.6 X Country Garden COGARD 11.25 '17 550 Ba3 BB- 6.7 99 11.4 X Country Garden COGARD 11.75 '14 375 Ba3 BB- 6.7 105 9.6 X Evergrande EVERRE* 7.5 '14 854 B2 BB- 7.9 89 14.9 X Evergrande EVERRE 13.0 '15 1,350 B2 BB- 7.9 97 14.1 X Evergrande EVERRE* 9.25 '16 569 B2 BB- 7.9 87 13.9 X Longfor LNGFOR 9.5 '16 750 Ba3 BB 7.1 100 9.6 X Shimao SHIMAO 11.0 '18 350 B1 BB- 3.5 91 13.2 X Shimao SHIMAO 9.65 '17 500 B1 BB- 3.5 88 12.9 X Shimao SHIMAO 8.0 '16 350 B1 BB- 3.5 87 11.7 X Central China CENCHI 12.25 '15 300 B1 B+ 0.6 98 13.1 X Glorious GLOPRO 13.0 '15 300 Caa1 B 1.3 88 17.7 X Hopson HPDLF 11.75 '16 300 Caa1 B 1.1 85 17.5 X Hopson HPDLF 8.125 '12 350 Caa1 B 1.1 95 18.0 X Kaisa KAISAG 13.5 '15 650 B2 B+ 1.0 97 14.8 X KWG KWGPRO 12.75 '16 350 B1 B+ 1.6 97 13.9 X KWG KWGPRO 12.5 '17 250 B1 B+ 1.6 94 14.1 X Powerlong PWRLNG 13.75 '15 200 B2 B 0.7 88 18.7 X Powerlong PWRLNG* 11.5 '14 115 B2 B 0.7 89 18.4 X Road King ROADKG 7.625 '14 200 Ba3 BB- 0.7 92 11.9 X Road King ROADKG 9.5 '15 350 Ba3 BB- 0.7 92 12.4 X Yanlord YLLG 10.625 '18 400 B1 B+ 1.9 90 13.1 X Yanlord YLLG 9.5 '17 300 B1 B+ 1.9 90 12.2 X Yuzhou YUZHOU 13.5 '15 200 B2 B 0.5 89 17.6 X CR Land CHIBEI 4.625 '16 1,000 Baa2 BBB 9.7 101 4.4 X COLI CHIOLI 5.5 '20 1,000 Baa2 BBB 15.3 101 5.6 X Franshion FRANSH 6.75 '21 500 Ba1 BB 2.3 90 8.4 X Source: BofA Merrill Lynch Global Research; Prices as of 23 March 2011

Table 4: Summary of views on Chinese property developer convertible bonds Implied Mid Mid Delta Volatility Issuer Bond Views Currency Amount Mkt Cap Price Yield (%) (%) MDY SP Agile Property Agile Property 4% '16 Attractive yield, delta and volatility play USD 500 3.9 91.875 8.3% 0 - Ba2 BB COLI COLI 0% '14 Attractive volatility play USD 500 15.4 126.5 NA 22 29 Baa2 BBB Country Garden Country Garden 2.5% '13 Attractive yield play, illiquid CNY 781 6.7 116.5 6.6% 0 - Ba3 BB Kaisa Kaisa 8% '15 Unattractive CNY 1500 1.0 91 14% 0 - B1 B+ Mingfa Mingfa 5.25% '16 Attractive yield play HKD 1488 1.6 91 21.3% 0 - - - Shui On Land Shui On Land 4.5% '15 Unattractive CNY 2720 2.3 96.875 6.7% 15 23 - - Soho China Soho China 3.75% '14 Unattractive HKD 2800 3.7 112.375 NA 54 31 - - Yanlord Yanlord 5.85% '14 Unattractive SGD 375 1.9 100.375 4.5% 0 - Ba3 BB- Source: BofA Merrill Lynch Global Research; Prices as of 23 March 2011

5 China Property – Equity & Bond weekly wrap 26 March 2012

Recent research on China Property

Equity research The Building Blog, 26 March 2012 – Names of 2nd batch property tax pilot cities undecided

Shanghai Shimao, 26 March 2012 – FY11 results missed by 12%, conservative 2012 targets

The Building Blog, 23 March 2012 – Proposal for more property tax pilot city is approved

The Building Blog, 22 March 2012 – Peoples’ Daily: Home price to income ratio is 15x in first tier cities

Franshion Properties (China) Limited, 22 March 2012 – Solid results, but needs to manage growth profile

Shui On Land, 22 March 2012 – Decent FY11 results, but debt levels look high

The Building Blog, 21 March 2012 – SHKP to launch Shanghai Arch at Rmb150K-160K/sqm

Guangzhou R&F -H, 21 March 2012 – A stable high yield company

The Building Blog, 20 March 2012 – China sales: Volume rebounded after a small correction

Kaisa Group Holdings, 20 March 2012 – Maintain Neutral as further margin erosion is expected

Shui On Land, 19 March 2012 – Increasing asset turnover, a good start

Guangzhou R&F -H, 19 March 2012 – Expect 19% growth in underlying net profit to Rmb4.36bn.

Franshion Properties (China) Limited, 19 March 2012 – Expect 43% growth in FY11 underlying net profit to HK$1.5bn

Sino-Ocean Land, 19 March 2012 – Reiterate Underperform: Just from bad to worse

The Building Blog, 16 March 2012 – Upgrade COLI to BUY after strong FY11 results

China Overseas Land & Investment, 16 March 2012 – Another 20% growth despite high base

China Overseas Grand Oceans Group, 15 March 2012 – Financing growth at low cost

Property Monthly Monitor – China: Mar 2012, 15 March 2012 Fixed income/ Convertibles research Yuzhou Properties Co., 23 March 2012 - Gearing stabilized with adequate liquidity

Franshion Properties China Ltd., 22 March 2012 – Transformation sets to continue

Kaisa Group Holdings Ltd., 20 March 2012 – Decent FY11 results, but more challenges ahead

KWG Property Holding Ltd., 16 March 2012 – Initiate coverage on the new KWGPRO’17 with OW30%

China Overseas Land & Investment Ltd., 15 March 2012 – Growth achieved without impairing B/S

Agile Property Holdings Ltd, 14 March 2012- Initiate coverage on the new AGILE’17 with OW70%

Longfor Properties Co. Ltd., 12 March 2012 – Anchor of the sector

China Resources Land Ltd., 12 March 2012 – Lack of relative value

6 China Property – Equity & Bond weekly wrap 26 March 2012

Link to Definitions Credit Click here for definitions of commonly used terms.

Financials Click here for definitions of commonly used terms.

Analyst Certification We, Raymond Ngai, CFA, Liying Du, Matthew Chow, CFA, and Sunny Tam, CFA, hereby certify that the views each of us has expressed in this research report accurately reflect each of our respective personal views about the equity securities and issuers. We also certify that no part of our respective compensation was, is, or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report.

We, Alwyn Pang, CFA, and Joyce Liang, hereby certify that the views each of us has expressed in this research report accurately reflect each of our respective personal views about the fixed income securities and issuers. We also certify that no part of our respective compensation was, is, or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report.

Greater China - Property Coverage Cluster Investment rating Company BofA Merrill Lynch ticker Bloomberg symbol Analyst BUY Agile Property Holdings Ltd AGPYF 3383 HK Matthew Chow, CFA Cheung Kong (Holdings) Limited CHEUF 1 HK Karl Choi, CFA China Overseas Grand Oceans Group CSVGF 81 HK Liying Du China Overseas Land & Investment CAOVF 688 HK Raymond Ngai, CFA China Resources Land CRBJF 1109 HK Matthew Chow, CFA Country Garden CTRYF 2007 HK Matthew Chow, CFA E-House China EJ EJ US Sunny Tam, CFA Evergrande Real Estate Group XEVRF 3333 HK Raymond Ngai, CFA Franshion Properties (China) Limited FRSHF 817 HK Sunny Tam, CFA Guangzhou R&F -H GZUHF 2777 HK Raymond Ngai, CFA Henderson Land HLDVF 12 HK Raymond Ngai, CFA Henderson Lnd -A HLDCY HLDCY US Raymond Ngai, CFA Link REIT LKREF 823 HK Karl Choi, CFA Longfor Properties Co.Ltd XLOFF 960 HK Matthew Chow, CFA New World Development NDVLF 17 HK Matthew Chow, CFA Shimao Property SIOPF 813 HK Sunny Tam, CFA SHK Properties-A SUHJY SUHJY US Raymond Ngai, CFA Soho China Ltd SOHOF 410 HK Sunny Tam, CFA Sun Hung Kai Properties SUHJF 16 HK Raymond Ngai, CFA Yuexiu REIT GZIRF 405 HK Sunny Tam, CFA NEUTRAL Fortune REIT FRIVF FRT SP Karen Fan Fortune REIT XUOFF 778 HK Karen Fan Great Eagle Holdings GEAHF 41 HK Karen Fan Hang Lung Properties HLPPF 101 HK Sunny Tam, CFA Hui Xian REIT XURHF 87001 HK Sunny Tam, CFA Hysan Development Company Limited HYSNF 14 HK Karl Choi, CFA Kaisa Group Holdings XKSIF 1638 HK Liying Du Kerry Properties KRYPF 683 HK Matthew Chow, CFA KWG Property Holding Ltd KWGPF 1813 HK Matthew Chow, CFA Renhe Commercial Holdings RNHEF 1387 HK Sunny Tam, CFA

7 China Property – Equity & Bond weekly wrap 26 March 2012

Greater China - Property Coverage Cluster Investment rating Company BofA Merrill Lynch ticker Bloomberg symbol Analyst Shui On Land SOLLF 272 HK Sunny Tam, CFA Sino Land SNLAF 83 HK Raymond Ngai, CFA Swire Properties Ltd. XAFEF 1972 HK Karl Choi, CFA UNDERPERFORM Champion REIT CMPNF 2778 HK Karl Choi, CFA Glorious Property Holdings XULGF 845 HK Matthew Chow, CFA Hongkong Land Holdings Limited HKHGF HKL SP Karl Choi, CFA Hopson Development Holdings Ltd HPDLF 754 HK Raymond Ngai, CFA Mingfa Group XMFAF 846 HK Sunny Tam, CFA Shanghai Shimao XHGNF 600823 CH Sunny Tam, CFA Sino-Ocean Land SIOLF 3377 HK Matthew Chow, CFA Yanlord Land Group Ltd YLDGF YLLG SP Matthew Chow, CFA

8 China Property – Equity & Bond weekly wrap 26 March 2012

Important Disclosures

Opinion history

Agile Property Holdings Ltd / AGILE Security Date^ Action Recommendation 8.875, Senior, USD, 2017:B 28-Feb-2011 NA 15-May-2011 Coverage Reinstatement Overweight-70% 10.000, Senior, USD, 2016:B 28-Feb-2011 NA 15-May-2011 Coverage Reinstatement Overweight-70% 9.875000, Senior, USD, 2017:B 13-Mar-2012 Initial Overweight-70% Table reflects credit opinion history as of previous business day's close. ^First date of recommendation within last 12 months. The BofA Merrill Lynch Credit Opinion key is contained below. B=Bond; CS=Capital Security (Not including Equity Preferred); CDS=Credit Default Swap; EP=Equity Preferred

China Resources Land Ltd. / CRHZCH Security Date^ Action Recommendation 4.625, Senior, USD, 2016:B 19-Jun-2011 Initial Overweight-70% 12-Mar-2012 Downgrade Underweight-30% Table reflects credit opinion history as of previous business day's close. ^First date of recommendation within last 12 months. The BofA Merrill Lynch Credit Opinion key is contained below. B=Bond; CS=Capital Security (Not including Equity Preferred); CDS=Credit Default Swap; EP=Equity Preferred

KWG Property Holding Ltd. / KWGPRO Security Date^ Action Recommendation 12.750, Senior, USD, 2016:B 15-May-2011 Initial Underweight-30% 01-Feb-2012 Upgrade Overweight-30% 12.500, Senior, USD, 2017:B 15-May-2011 Initial Underweight-70% 06-Jan-2012 Upgrade Underweight-30% 01-Feb-2012 Upgrade Overweight-30% 13.250000, Senior, USD, 2017:B 15-Mar-2012 Initial Overweight-30% Table reflects credit opinion history as of previous business day's close. ^First date of recommendation within last 12 months. The BofA Merrill Lynch Credit Opinion key is contained below. B=Bond; CS=Capital Security (Not including Equity Preferred); CDS=Credit Default Swap; EP=Equity Preferred

Longfor Properties Co. Ltd. / LNGFOR Security Date^ Action Recommendation 9.500, Senior, USD, 2016:B 15-May-2011 Initial Overweight-30% 15-Jul-2011 Downgrade Underweight-30% 06-Jan-2012 Upgrade Overweight-30% 12-Mar-2012 Upgrade Overweight-70% Table reflects credit opinion history as of previous business day's close. ^First date of recommendation within last 12 months. The BofA Merrill Lynch Credit Opinion key is contained below. B=Bond; CS=Capital Security (Not including Equity Preferred); CDS=Credit Default Swap; EP=Equity Preferred

BofA Merrill Lynch Credit Opinion Key The BofA Merrill Lynch Global Research Credit Opinion Key is designed to allow BofA Merrill Lynch Global Credit Research to provide recommendations on an issuer’s bonds, capital securities, equity preferreds and CDS as described below. An issuer level recommendation may also be provided in respect of an issuer as explained below. BofA Merrill Lynch Global Research credit recommendations are assigned using a three-month time horizon. Issuer Recommendations: If an issuer credit recommendation is provided, it is applicable to all bonds of the issuer except bonds specifically referenced in the report with a different credit recommendation. Where there is no issuer credit recommendation, only individual bonds with specific recommendations are covered. Issuer credit recommendations do not cover equity preferreds or CDS related to the issuer. Issuer credit recommendations do not cover capital securities of the issuer unless a statement to that effect is provided in the relevant research report. CDS Recommendations: CDS are recommended on an individual basis under the Credit Opinion Key. Issuer credit recommendations do not apply to CDS. Capital Securities: Capital securities are recommended individually unless the research report specifically states that the issuer credit recommendation applies to such securities. In cases where the issuer credit recommendation applies to capital securities of the issuers, it is not applicable to capital securities that we classify as equity preferreds. Equity Preferreds: Equity preferreds are recommended on an individual basis under the Credit Opinion Key. Issuer credit recommendations do not apply to equity preferreds.

9 China Property – Equity & Bond weekly wrap 26 March 2012

Recommendation Investor Action Points (Cash and/or CDS) Primary Investment Return Driver Overweight-100% Up to 100% Overweight of investor's guidelines Compelling spread tightening potential Overweight-70% Up to 70% Overweight of investor's guidelines Carry, plus some spread tightening expected Overweight-30% Up to 30% Overweight of investor's guidelines Good carry, but little spread tightening expected Underweight-30% Down to 30% Underweight of investor's guidelines Unattractive carry, but spreads unlikely to widen Underweight-70% Down to 70% Underweight of investor's guidelines Expected spread underperformance Underweight-100% Down to 100% Underweight of investor's guidelines Material spread widening expected Time horizon – our recommendations have a 3 month trade horizon Investment Rating Distribution: Real Estate/Property Group (as of 01 Jan 2012) Coverage Universe Count Percent Inv. Banking Relationships* Count Percent Buy 71 49.65% Buy 37 55.22% Neutral 34 23.78% Neutral 14 41.18% Sell 38 26.57% Sell 11 29.73% Investment Rating Distribution: Global Group (as of 01 Jan 2012) Coverage Universe Count Percent Inv. Banking Relationships* Count Percent Buy 2029 52.00% Buy 1337 72.11% Neutral 1009 25.86% Neutral 657 71.34% Sell 864 22.14% Sell 487 60.20% * Companies in respect of which BofA Merrill Lynch or one of its affiliates has received compensation for investment banking services within the past 12 months. For purposes of this distribution, a stock rated Underperform is included as a Sell.

FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators of potential price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst’s assessment of a stock’s: (i) absolute total return potential and (ii) attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). There are three investment ratings: 1 - Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. Analysts assign investment ratings considering, among other things, the 0-12 month total return expectation for a stock and the firm’s guidelines for ratings dispersions (shown in the table below). The current price objective for a stock should be referenced to better understand the total return expectation at any given time. The price objective reflects the analyst’s view of the potential price appreciation (depreciation). Investment rating Total return expectation (within 12-month period of date of initial rating) Ratings dispersion guidelines for coverage cluster* Buy ≥ 10% ≤ 70% Neutral ≥ 0% ≤ 30% Underperform N/A ≥ 20% * Ratings dispersions may vary from time to time where BofA Merrill Lynch Research believes it better reflects the investment prospects of stocks in a Coverage Cluster. INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure) and 9 - pays no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classification(s). A stock’s coverage cluster is included in the most recent BofA Merrill Lynch Comment referencing the stock.

Price charts for the securities referenced in this research report are available at http://pricecharts.ml.com, or call 1-800-MERRILL to have them mailed. Credit Opinion History Tables for the securities referenced in this research report are available at http://pricecharts.ml.com, or call 1-800-MERRILL to have them mailed. The company is or was, within the last 12 months, an investment banking client of MLPF&S and/or one or more of its affiliates: Agile Property, COLI, CR Land, Longfor. MLPF&S or an affiliate has received compensation from the company for non-investment banking services or products within the past 12 months: Agile Property, COGO, CR Land. The company is or was, within the last 12 months, a non-securities business client of MLPF&S and/or one or more of its affiliates: Agile Property, COGO, CR Land. In the US, retail sales and/or distribution of this report may be made only in states where these securities are exempt from registration or have been qualified for sale: Agile Property, COGO, COLI, CR Land, KWG, Longfor. MLPF&S or an affiliate expects to receive or intends to seek compensation for investment banking services from this company or an affiliate of the company within the next three months: Agile Property, COLI, CR Land, Longfor. The company is or was, within the last 12 months, a securities business client (non-investment banking) of MLPF&S and/or one or more of its affiliates: Agile Property, CR Land. BofA Merrill Lynch Research personnel (including the analyst(s) responsible for this report) receive compensation based upon, among other factors, the overall profitability of Bank of America Corporation, including profits derived from investment banking revenues. BofA Merrill Lynch Global Credit Research analysts regularly interact with sales and trading desk personnel in connection with their research, including to ascertain pricing and liquidity in the fixed income markets.

10 China Property – Equity & Bond weekly wrap 26 March 2012

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11 China Property – Equity & Bond weekly wrap 26 March 2012

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