BOCOM Int'l Research

Morning Express 20 May 2019

Focus of the Day

Hong Kong Property Sector Insights Global Stock Indices CCL set to surpass 210 by 2020E on reversed Rating: Market Perform Close 1D% YTD% expectations HSI 27,946 -0.71 8.60 HSCEI 10,689 -1.14 5.57 Philip Tse, CFA, FRM [email protected] SH A 3,019 -2.49 15.60 — In-depth sector report, including 3 company reports — SH B 293 -1.96 7.98 SZ A 1,603 -3.26 20.95 We identify several factors that continue to support HK residential property SZ B 951 -1.78 13.64 prices: (1) government-led shortage; (2) wealth effect from the stock market; (3) DJIA 25,764 -0.38 10.44 reversed mortgage rate expectations; and (4) healthy mortgage affordability and S&P 500 2,860 -0.58 14.07 low loan-to-value (LTV) ratio. We expect CCL to reach 200 by 2019 and surpass Nasdaq 7,816 -1.04 17.80 FTSE 7,349 -0.07 9.22 210 by 2020, up ~20% from the 1Q19 bottom. CAC 5,438 -0.18 14.96 We prefer developers with ample launch pipeline to catch the upbeat sentiment DAX 12,239 -0.58 15.91 and tap the purchasing power, which can ensure their earnings visibility for the Source: FactSet next 2-3 years. Key Commodity/Forex Indicators We resume coverage on three HK developers, with Buy ratings on SHKP (16 Close 3M% YTD% HK/TP HK$153.00), due to its ample launch pipeline and high-quality IPs with Brent 72.21 9.00 34.14 good earnings visibility, and on Henderson Land (HLD, 12 HK/TP HK$53.50), due Gold 1,274.50 -3.31 -0.30 Silver 14.48 -7.62 -6.37 to its rich saleable resources and potential catalysts from farmland conversion. Copper 6,025.00 -2.67 1.01 We are Neutral on New World Development (NWD, 17 HK/TP HK$13.01) as we JPY 109.98 0.53 -0.24 do not expect its next catalyst to emerge anytime soon. We rate the HK property GBP 1.27 -0.88 -0.01 sector Market Perform. EUR 1.12 -0.92 -2.38

bps change 3M 6M HIBOR 2.01 17.00 2.09 AAC Technologies 2018 HK US 10yr yield 2.39 -10.26 -22.16 Margins likely have bottomed; upgrade to Rating: Neutral↑ Source: FactSet Neutral HSI Technical CP: HK$ 43.05 TP: HK$ 45.00↑ Upside: +4.5% HSI 27,946.46 Chris Yim [email protected] 50D MA 29,480.12 1Q19 results better than feared: 1Q19 net profit fell 61% YoY, which was slightly 200D MA 27,674.63 14D RSI 32.60 ahead of the profit warning. The company attributed this to better-than- Short sell (HK$ m) 17,041 expected orders in late 1Q19. Source: FactSet

Margins should have bottomed: We believe AAC’s margins will see sequential Hao Hong, CFA recovery in 2H19E backed by product mix upgrade (SLS penetration), efficiency Head of Research and yield improvement, and seasonality. Near term, we expect 2Q19 revenue to [email protected] grow 4% QoQ helped by Android flagship ramp-up and a stable outlook from Apple (per Apple 3QFY19 guidance). We expect GPM to remain soft in 2Q19.

Upgrade to Neutral. We believe further deterioration in margins is unlikely but see the escalating trade conflict as a downside risk to end demand. Our new TP of HK$45.00 is based on 14x average 2019-20E EPS (previously HK$35.00 on 12x 2019E P/E). Upgrade from Sell to Neutral.

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Baidu Inc BIDU US 1Q19 missed; downgrade on challenging ad Rating: Neutral↓ growth in 2019 CP: US$ 153.70 TP: US$ 165.00↓ Upside: +7.4% Connie Gu, CPA [email protected] 1Q19 revenue was in line; bottom-line missed consensus by 6%. Baidu saw accelerated traffic but was affected by healthcare ad adjustment and increased ad inventory. AI progress: DuerOS voice assistant installations reached 275m. Apollo saw enlarged adoption in various scenarios. Leveraging AI capability, Baidu cloud revenue grew rapidly to RMB1.3bn. We estimate 2019E cloud revenue to be RMB6.3bn, contributing 6% of total revenue. We expect short-term pressure for search and feed due to adjustment of healthcare interface, macro uncertainty, industry regulation, and increase of ad inventory in the feed industry. The resignation of Hailong Xiang will bring further uncertainty to the search business. As we are cautious on the ad industry, we cut Baidu Core revenue by 12%/15% in 2019E/20E on lower search revenue, partially offset by increase in cloud services. Given growing TAC, we cut 2019E/20E EPS and lower TP from US$232 to US$165. Downgrade to Neutral.

iQIYI Inc IQ US 1Q19 bottom line beat; content cost below Rating: Buy estimate on delayed pipeline CP: US$ 20.38 TP: US$ 30.10↓ Upside: +47.7% Gigi Zhou [email protected] 1Q19 results: (1) Membership revenue was RMB3.4bn, up 64% YoY and in line. Subscribers reached 96.8m, primarily driven by The Legend of Haolan and Golden Eyes. (2) Ad revenue was RMB2.1bn, flat YoY and in line. (3) Other revenue came in at RMB983m, up 143% YoY and beating estimates on games. (4) Content cost at RMB5.3bn beat our estimated RMB6bn, partially due to delayed pipeline. 2Q19 outlook: We estimate revenue at RMB7.2bn, up 17% YoY (guidance: 12- 18%); membership revenue at RMB3.7bn; subscriber net adds at 4m; ad revenue at RMB2.2bn, up 3% QoQ/ down 16% YoY; content distribution/other revenue at RMB315m/968m, down 42%/up 80% YoY; content cost as percentage of revenue at 77%. Valuation: We cut 2019E/20E revenue by 1%/2% and narrow 2019E non-GAAP net loss margin by 1ppt. We trim TP from US$30.40 to US$30.10, implying 2019/20E P/S of 4.7x/3.9x. Maintain Buy.

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Internet Sector Online video monthly monitor (April 2019) Rating: Outperform Connie Gu, CPA [email protected] In April, iQiyi’s MAU continued to lead. Given weak viewership seasonality in 2Q19, Tencent Video’s MAU stayed flattish while other platforms’ MAUs fell slightly in April. Tencent Video led in downloads and gross billing rankings thanks to “Game of Thrones” Season 8.

Tencent Video enjoyed higher content popularity last month: (1) For new exclusive dramas, popularity shares of Tencent Video/iQiyi/Mango TV/Youku were 45%/20%/9%/8%, and “Game of Thrones Season 8” on Tencent Video was ranked first. (2) For self-produced variety shows, Tencent Video/iQiyi achieved popularity shares of 57%/43%. iQiyi’s original variety show “I am Singer/Song-Writer” acquired fewer brand advertisers than “Idol producer II” in 1Q19 due to premature brand effect. We estimate the ad revenue of iQiyi may come under pressure in 2Q19. iQiyi’s original drama “The Thunder” has been a big hit in May.

Maintain Outperform sector rating and top Buy on iQiyi (IQ US).

Internet Sector Weekly As of 17 May 2019 Rating: Outperform Connie Gu, CPA [email protected] Last week, we initiated coverage on Meituan Dianping with a Buy rating. We expect the company to turn around to profitability in 2020.

Alibaba’s 4QFY19 earnings beat on cost control; we expect FY20 revenue to grow 33%. Tencent’s ad revenue missed in 1Q19; we expect its game business to recover in 2Q19. NetEase’s 1Q19 earnings beat on lower marketing cost, while game business remains uncertain in 2019. Baidu’s 1Q19 results missed; we expect continuous pressure on ad growth in 2019. iQIYI’s 1Q19 bottom line beat as content cost was below estimate due to delayed pipeline. Kingsoft’s cloud business beat in 1Q19 in terms of revenue and margin; we upgraded the stock to Buy.

April video data watch: In terms of new online dramas and online variety shows, Tencent Video/iQIYI had popularity shares of 45%/20% and 57%/43%, respectively.

Maintain Outperform sector rating and top Buy on iQIYI (IQ US).

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Economic data releases for this week – US Economic data releases for this week – China Date Event Survey Prior Date Event Survey Prior 21 May Existing Home sales (m) 5.35 5.21 - - - - 22 May MBA mortgage applications (%) -- -0.60 23 May Initial jobless claims (k) 215 212 23 May New Home sales (k) 675 692 24 May Durable goods order (%) -2.00 2.60 Source: Bloomberg Source: Bloomberg

BOCOM Research latest reports Date Report Analyst 17 May Baidu Inc (BIDU US) - 1Q19 missed; downgrade on challenging ad growth in 2019 Connie Gu, CPA, Brandy Sun, Gigi Zhou 17 May Hong Kong Property Sector - CCL set to surpass 210 by 2020E on reversed expectations Philip Tse, CFA, FRM, Carmen Wong, Jennifer Zhang 17 May iQIYI Inc (IQ US) - 1Q19 bottom line beat; content cost below estimate on delayed pipeline Gigi Zhou, Connie Gu, CPA, Brandy Sun 17 May Property Sector Weekly - As of 16 May 2019 Philip Tse, CFA, FRM, Jennifer Zhang, Carmen Wong 17 May Healthcare Sector Insights - Consolidation empowers distributor giants; Top Buy SH Pharma Kelvin Chen, PhD, Li Zhao, PhD, Kent Lin, Mengmeng Xi 17 May Insurance Sector Monthly - ST stock prices hit by external factors, valuation recovery goes on Li Wan, CFA, FRM 16 May NetEase Inc (NTES US) - 1Q19 beat on lower marketing cost; games still uncertain in 2019 Brandy Sun, Connie Gu, CPA, Gigi Zhou 16 May Technology Sector - Choppy semis recovery in 2H19E; downgrade Hua Hong Chris Yim, Xinhe Deng 16 May Alibaba Group (BABA US) - 4QFY19 beat on cost control; FY20E revenue to grow 33% Connie Gu, CPA, Brandy Sun, Gigi Zhou 16 May Tencent Holdings (700 HK) - Ad missed in 1Q19, game to recover in 2Q19E Connie Gu, CPA, Brandy Sun, Gigi Zhou 16 May Renewable Energy Sector Weekly - As of 15 May 2019 Louis Sun, Bob Wen 15 May Automobile Sector Monthly - April PV sales disappointing Angus Chan 15 May Transportation & Infrastructure Sector Weekly - As of 10 May 2019 Fay Zhou, Luya You, Maggie Wang, Vicky Zhang 15 May Meituan Dianping (3690 HK) - Leading core business & food+platform strategy to drive Connie Gu, CPA, Brandy Sun, Gigi Zhou 2020E turnaround; initiate with Buy 15 May Kingsoft Corp (3888 HK) - Cloud beat in revenue and margin improvement, upgrade to Buy Brandy Sun, Connie Gu, CPA, Gigi Zhou 15 May China Macro Review - Long-term vision not obscured by short-term changes Fei Peng, Karen Tan, Hanna Cai 15 May Healthcare Sector Weekly - As of 14 May 2019 Li Zhao, PhD, Kelvin Chen, PhD, Kent Lin, Mengmeng Xi 15 May FIT Hon Teng Ltd (6088 HK) - 1Q19 in line; positive earnings outlook intact Chris Yim, Xinhe Deng 14 May Bilibili Inc (BILI US) - 1Q19 revenue/profit beat; live broadcast paying users reached 1.2m Gigi Zhou, Connie Gu, CPA, Brandy Sun 14 May Tencent Music Entertainment (TME US) - 1Q19 revenue met consensus; pay-for-stream Gigi Zhou, Connie Gu, CPA, Brandy Sun model yet to ramp up Source: BOCOM Int'l

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HSI constituents Company Stock Current Mkt 5D YTD ------52-week------P/E------Yield P/B name code price cap chg chg High Low 2018 2019E 2020E 2019E 2019E (HK$) (HK$ m) (%) (%) (HK$) (HK$) (x) (x) (x) (%) (x) CKH 1 HK 78.25 301,751 -1.88 4.06 92.05 73.35 7.74 7.27 6.70 4.38 0.62 CLP 2 HK 87.40 220,812 -0.17 -1.24 96.95 80.05 16.31 18.11 17.55 3.56 1.85 HK & CHINA GAS 3 HK 18.96 291,726 1.28 17.04 19.26 14.64 31.34 31.87 30.29 2.03 4.31 HSBC 5 HK 65.55 1,326,482 -2.02 1.16 77.80 60.50 13.26 11.67 11.27 6.11 0.99 POWER ASSETS 6 HK 55.90 119,305 0.27 2.57 57.80 51.65 15.61 15.46 15.13 5.01 1.40 HANG SENG 11 HK 200.40 383,133 -1.28 13.99 216.60 167.80 16.06 15.31 14.63 4.12 2.27 HLD 12 HK 48.20 212,141 1.37 23.59 50.85 36.20 10.74 14.05 14.44 3.87 0.66 SHKP 16 HK 134.00 388,253 0.00 20.07 141.60 100.90 12.77 11.77 10.66 3.75 0.69 NWD 17 HK 12.32 125,946 -1.91 18.92 13.88 9.76 15.40 13.54 13.25 4.06 0.56 SWIRE PACIFIC 19 HK 94.55 85,588 -2.12 14.33 102.30 78.80 18.95 15.14 13.39 3.70 0.51 GEG 27 HK 49.85 215,940 -8.28 0.10 70.40 40.75 15.94 15.98 15.43 1.91 3.03 MTRC 66 HK 48.00 294,793 3.90 16.50 49.00 37.55 25.81 23.41 21.80 2.71 1.59 SINO 83 HK 13.06 89,030 0.31 -2.68 15.48 12.00 7.59 17.21 16.21 4.21 0.59 HLP 101 HK 17.60 79,160 3.04 17.96 19.92 14.04 19.34 18.55 17.25 4.27 0.57 WANT WANT 151 HK 6.07 75,567 -1.62 10.77 8.11 5.24 19.24 17.35 N/A 3.18 3.67 GEELY 175 HK 13.06 118,771 -5.22 -5.36 24.40 10.22 8.40 8.07 7.14 2.85 1.88 CITIC LTD 267 HK 10.76 313,011 -1.47 -12.38 13.08 10.40 6.22 5.96 5.56 4.04 0.52 WH GROUP 288 HK 7.53 110,761 -2.21 24.88 9.60 5.28 14.92 11.99 10.14 3.69 1.65 SINOPEC 386 HK 5.66 144,406 -1.39 1.25 8.21 5.41 9.68 9.22 8.54 8.07 0.82 HKEX 388 HK 244.60 307,734 -2.94 7.94 285.40 196.70 32.61 28.96 26.18 3.11 7.31 COLI 688 HK 28.50 312,252 -1.38 5.95 30.95 22.55 6.95 6.80 5.85 3.86 0.98 TENCENT 700 HK 355.80 3,387,415 -6.86 13.31 429.20 252.20 38.08 32.27 26.11 0.32 7.04 UNICOM 762 HK 8.42 257,636 -4.75 0.72 11.40 8.07 22.47 16.69 11.89 2.42 0.70 LINK 823 HK 94.85 200,069 1.72 19.61 96.80 67.35 37.97 35.39 32.12 2.88 1.10 CR POWER 836 HK 10.64 51,183 0.00 -29.35 16.20 10.52 7.32 6.78 5.44 5.64 0.67 PETROCHINA 857 HK 4.56 96,211 -0.87 -6.56 6.59 4.55 13.85 12.17 11.04 4.28 0.59 CNOOC 883 HK 13.38 597,383 0.00 10.58 15.64 11.32 9.99 9.66 9.00 5.09 1.18 CCB 939 HK 6.29 1,512,225 -2.78 -2.63 8.25 6.07 5.39 5.10 4.78 5.92 0.65 CHINA MOBILE 941 HK 72.55 1,485,496 0.62 -3.72 87.25 67.95 11.11 11.09 10.75 4.42 1.18 CK INFRA 1038 HK 63.65 168,716 1.52 7.34 65.85 56.65 15.37 14.37 14.04 4.01 1.42 HENGAN 1044 HK 62.95 74,890 -4.77 10.44 79.25 52.40 17.59 15.36 14.30 4.46 3.65 SHENHUA 1088 HK 16.48 56,009 -2.49 -3.96 22.00 16.16 6.54 6.57 6.81 5.86 0.81 CSPC 1093 HK 14.04 87,652 1.45 24.25 26.05 10.06 23.98 19.23 15.61 1.64 4.30 CR LAND 1109 HK 32.45 224,909 -1.82 7.81 36.00 24.20 10.28 8.31 6.90 4.20 1.27 CKA 1113 HK 60.50 223,451 -2.50 5.58 72.20 50.90 9.26 7.90 8.69 3.47 0.63 SBP 1177 HK 7.88 99,196 6.78 52.71 13.60 4.63 30.20 27.76 24.01 0.77 2.76 AIA 1299 HK 77.05 931,316 -1.15 18.54 83.45 58.25 44.62 19.07 16.50 1.73 2.72 ICBC 1398 HK 5.52 479,103 0.00 -1.25 6.75 5.16 5.93 5.59 5.34 5.37 0.70 SANDS 1928 HK 38.85 314,101 -6.27 13.27 48.30 30.30 21.34 18.72 16.55 5.16 8.84 WHARF REIC 1997 HK 57.40 174,280 -1.46 22.52 62.65 45.80 17.34 16.87 15.84 3.84 0.78 COUNTRY GARDEN 2007 HK 11.32 245,194 -5.03 18.78 16.80 7.89 6.43 5.09 4.38 6.02 1.42 AAC TECH 2018 HK 43.05 52,323 -8.21 -5.28 131.90 40.70 12.19 15.17 12.83 2.97 2.24 SHENZHOU 2313 HK 101.60 152,727 -1.17 14.48 109.30 82.85 29.63 24.89 20.93 2.03 5.33 PING AN 2318 HK 86.95 647,567 -2.14 25.74 95.45 66.55 12.95 10.28 9.11 2.85 2.13 MENGNIU 2319 HK 30.15 118,492 1.69 23.57 30.95 21.45 34.13 26.83 22.50 0.87 3.67 SUNNY OPTICAL 2382 HK 76.20 83,580 -15.99 9.48 173.00 61.40 29.44 20.32 15.68 1.23 5.96 BOCHK 2388 HK 32.45 343,087 -1.52 11.51 40.55 27.95 10.72 10.19 9.50 4.78 1.24 CHINA LIFE 2628 HK 18.70 139,150 -4.40 12.38 23.05 15.50 42.23 13.09 11.93 3.04 1.30 BOCOM 3328 HK 6.07 212,522 -1.62 -0.65 6.90 5.42 5.57 5.29 5.00 5.80 0.56 BOC 3988 HK 3.49 291,842 -0.57 3.25 4.25 3.23 5.21 4.98 4.73 6.18 0.55

HANG SENG INDEX 27,946.46 16,630,489 -2.11 8.13 31,512.63 24,585.53 19.81 16.37 14.41 3.50 2.57 Source: FactSet

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HSCEI constituents Company Stock Closing Mkt 5D YTD ------52-week------P/E------Yield P/B name code price cap chg chg High Low 2018 2019E 2020E 2019E 2019E (HK$) (HK$ m) (%) (%) (HK$) (HK$) (x) (x) (x) (%) (x) CITIC LTD 267 HK 10.76 313,011 -1.47 -12.38 13.08 10.40 6.22 5.96 5.56 4.04 0.52 GDI 270 HK 14.44 94,406 -3.48 -4.62 15.60 12.36 18.82 17.59 16.04 4.09 2.22 CGH 384 HK 23.55 122,897 -5.23 -15.59 36.60 20.20 19.15 14.95 12.71 1.93 3.36 SINOPEC 386 HK 5.66 144,406 -1.39 1.25 8.21 5.41 9.68 9.22 8.54 8.07 0.82 CRG 390 HK 5.88 24,739 -1.01 -17.53 7.96 5.74 7.21 6.11 5.51 2.73 0.59 DONGFENG 489 HK 6.91 19,733 1.32 -2.68 9.30 6.75 4.04 4.06 3.99 5.35 0.40 TENCENT 700 HK 355.80 3,387,415 -6.86 13.31 429.20 252.20 38.08 32.27 26.11 0.32 7.04 CHINA TELECOM 728 HK 3.86 53,567 -2.77 -3.50 4.47 3.50 13.08 12.18 11.33 3.26 0.77 AIR CHINA 753 HK 7.45 33,992 -10.46 9.24 10.32 5.90 12.26 8.51 7.15 2.59 0.92 CHINA TOWER 788 HK 1.88 87,728 -6.93 27.03 2.28 1.03 89.64 52.05 32.14 1.22 1.54 PETROCHINA 857 HK 4.56 96,211 -0.87 -6.56 6.59 4.55 13.85 12.17 11.04 4.28 0.59 CNOOC 883 HK 13.38 597,383 0.00 10.58 15.64 11.32 9.99 9.66 9.00 5.09 1.18 HUANENG 902 HK 4.60 21,622 -2.95 -7.63 6.10 4.07 135.04 11.58 9.21 6.17 0.71 CONCH 914 HK 44.95 58,417 -2.07 18.29 52.10 35.70 7.03 6.96 6.82 4.37 1.57 CCB 939 HK 6.29 1,512,225 -2.78 -2.63 8.25 6.07 5.39 5.10 4.78 5.92 0.65 CHINA MOBILE 941 HK 72.55 1,485,496 0.62 -3.72 87.25 67.95 11.11 11.09 10.75 4.42 1.18 CNCB 998 HK 4.66 69,351 -1.06 -2.10 5.81 4.61 4.66 4.41 4.15 5.85 0.46 HENGAN 1044 HK 62.95 74,890 -4.77 10.44 79.25 52.40 17.59 15.36 14.30 4.46 3.65 SHENHUA 1088 HK 16.48 56,009 -2.49 -3.96 22.00 16.16 6.54 6.57 6.81 5.86 0.81 CSPC 1093 HK 14.04 87,652 1.45 24.25 26.05 10.06 23.98 19.23 15.61 1.64 4.30 SINOPHARM 1099 HK 30.00 35,784 -1.15 -8.81 39.50 29.95 13.48 11.96 10.61 2.50 1.65 CR LAND 1109 HK 32.45 224,909 -1.82 7.81 36.00 24.20 10.28 8.31 6.90 4.20 1.27 BYD 1211 HK 47.30 43,280 -4.06 -5.31 59.70 40.90 44.79 32.04 27.68 0.50 1.94 ABC 1288 HK 3.34 102,668 -2.34 -2.62 4.23 3.34 4.99 4.88 4.60 6.14 0.59 NCI 1336 HK 36.60 37,848 -4.94 17.68 46.25 27.60 12.69 10.17 8.88 2.81 1.34 PICC 1339 HK 2.93 25,568 -2.98 -6.98 4.09 2.93 8.60 6.75 6.13 2.33 0.67 CINDA 1359 HK 1.90 25,778 -1.55 0.00 2.89 1.83 5.77 4.62 4.22 6.57 0.43 ICBC 1398 HK 5.52 479,103 0.00 -1.25 6.75 5.16 5.93 5.59 5.34 5.37 0.70 PSBC 1658 HK 4.45 88,360 -3.26 7.75 5.59 4.13 6.32 5.71 5.05 4.71 0.67 CRRC 1766 HK 6.81 29,767 1.79 -10.86 8.39 5.92 15.38 13.04 11.53 2.89 1.25 GF SEC 1776 HK 9.50 16,167 -2.06 -10.55 14.02 8.73 14.94 9.40 8.16 3.59 0.69 CCC 1800 HK 7.20 31,878 -0.28 -2.70 8.72 7.00 5.41 4.70 4.29 4.18 0.48 CGN POWER 1816 HK 2.06 22,997 1.48 10.75 2.27 1.72 9.50 8.68 7.89 4.21 1.07 MSB 1988 HK 5.67 47,176 0.89 5.00 6.33 5.27 4.25 4.12 3.96 5.40 0.47 VANKE 2202 HK 28.55 45,050 -2.06 7.33 35.10 21.75 7.98 6.73 5.73 5.12 1.46 GAC 2238 HK 7.57 23,457 -4.30 -3.07 10.40 6.79 6.23 6.08 5.24 5.67 0.81 SHENZHOU 2313 HK 101.60 152,727 -1.17 14.48 109.30 82.85 29.63 24.89 20.93 2.03 5.33 PING AN 2318 HK 86.95 647,567 -2.14 25.74 95.45 66.55 12.95 10.28 9.11 2.85 2.13 PICC P&C 2328 HK 7.86 54,228 -2.36 -1.87 9.98 7.54 9.95 7.69 6.92 4.36 0.98 GWM 2333 HK 5.81 18,008 -1.69 29.40 7.94 4.06 8.97 8.81 8.33 4.10 0.84 CPIC 2601 HK 28.85 80,067 -2.86 13.81 36.20 24.60 12.77 10.50 9.29 4.66 1.41 CHINA LIFE 2628 HK 18.70 139,150 -4.40 12.38 23.05 15.50 42.23 13.09 11.93 3.04 1.30 HUARONG 2799 HK 1.37 34,310 -6.16 -4.20 2.79 1.33 30.16 4.16 3.66 4.97 0.36 BOCOM 3328 HK 6.07 212,522 -1.62 -0.65 6.90 5.42 5.57 5.29 5.00 5.80 0.56 CMB 3968 HK 37.15 170,552 0.27 29.44 41.25 27.00 10.45 9.18 8.14 3.27 1.44 BOC 3988 HK 3.49 291,842 -0.57 3.25 4.25 3.23 5.21 4.98 4.73 6.18 0.55 CITIC SEC 6030 HK 15.06 34,312 -4.08 11.56 20.40 11.94 19.56 11.80 10.74 3.57 0.95 ZA ONLINE 6060 HK 23.25 10,923 -5.30 -7.19 54.40 23.25 N/A N/A 159.46 0.00 1.98 HAITONG SEC 6837 HK 8.65 29,493 -5.57 15.33 11.26 6.40 16.93 10.29 9.15 3.19 0.70 HTSC 6886 HK 12.74 21,901 -4.21 2.74 18.08 10.06 16.50 11.28 9.72 4.22 0.82

HANG SENG CHINA ENT INDX 10,688.75 10,218,251 -2.22 5.57 12,407.80 9,833.69 19.51 16.14 13.80 3.35 2.92 Source: FactSet

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Rating System Analyst Stock Rating: Analyst Industry Views: Buy: The stock's total return is expected to exceed that of the Outperform: The analyst expects the industry coverage universe corresponding industry over the next 12 months. to be attractive relative to the relevant broad market benchmark over the next 12 months. Neutral: The stock's total return is expected to be in line with that of the corresponding industry over the next 12 months. Market perform: The analyst expects the industry coverage universe to be in line with the relevant broad market Sell: The stock's total return is expected to be below that of the benchmark over the next 12 months. corresponding industry over the next 12 months. Underperform: The analyst expects the industry coverage Not-Rated: The analyst does not have conviction regarding the universe to be unattractive relative to the relevant broad outlook of the stock's total return relative to that of the market benchmark over the next 12 months. corresponding industry over the next 12 months. Broad market benchmark for Hong Kong is the Hang Seng Composite Index, for China A-shares is the MSCI China A Index, for US-listed Chinese companies is S&P US Listed China 50 (USD) Index.

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Analyst certification The authors of this report, hereby declare that: (i) all of the views expressed in this report accurately reflect their personal views about any and all of the subject securities or issuers; and (ii) no part of any of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report; (iii) no insider information/ non-public price-sensitive information in relation to the subject securities or issuers which may influence the recommendations were being received by the authors. The authors of this report further confirm that (i) neither they nor their respective associates (as defined in the Code of Conduct issued by the Hong Kong Securities and Futures Commission) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of the report; (ii)) neither they nor their respective associates serve as an officer of any of the Hong Kong listed companies covered in this report; and (iii) neither they nor their respective associates have any financial interests in the stock(s) covered in this report except for one coverage analyst who is holding shares of Shimao Property Holdings Limited.

Disclosure of relevant business relationships BOCOM International Securities Limited, and/or its associated companies, has investment banking relationship with Bank of Communications, Guolian Securities Co. Ltd., Luzhou Xinglu Water (Group) Co., Ltd., BOCOM International Holdings Company Limited, HPC Holdings Limited, Sichuan Energy Investment Development Co., Ltd, Light Year Holdings Limited, Analogue Holdings Limited, Redsun Properties Group Limited, 51 CREDIT CARD INC., Zhejiang New Century Hotel Management Co., Ltd, Meituan Dianping, Shandong Gold Mining Co., Ltd, Xinchengyue Holdings Limited, Ever Reach Group (Holdings) Company Limited, Watts International Maritime Engineering Limited, Kaisa Property Holdings Limited, Chengdu Expressway Co., Ltd, China Kepei Education Group Limited, Yincheng International Holding Co., Ltd, Tai Hing Group Holdings Limited, Shenwan Hongyuan Group Co., Ltd, Dexin China Holdings Company Limited and S.A.I. Leisure Group Company Limited. within the preceding 12 months.

BOCOM International Global Investment Limited currently holds more than 1% of the equity securities of Orient Securities Company Limited. BOCOM International Global Investment Limited currently holds more than 1% of the equity securities of Everbright Securities Company Limited. BOCOM International Global Investment Limited currently holds more than 1% of the equity securities of Guolian Securities Co., Ltd. BOCOM International Global Investment Limited currently holds more than 1% of the equity securities of Guotai Junan Securities Co., Ltd.

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Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors. 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 any law, regulation, rule or other registration or licensing requirement. BOCOM International Securities Ltd is a subsidiary of Bank of Communications Co Ltd.

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