Investment Daily Note 29 April 2013

Investment Daily Note 29 April 2013

IN TODAY’S ISSUE … Equity Indices Close d-d (%) YTD (%) Stop Stocks Last Target Positive Factors losses Hang Seng Index 22,547 0.7 (0.5) China Life 1Q net profit up 80%. Worst time is HSCEI 10,834 0.6 (5.3) 20.90 22.00 19.00 (2628.HK) over for Chinese insurers DJIA 14,712 0.1 12.3 SJM Holdings Share price may rise amid coming 19.76 22.00 18.00 S&P 500 1,582 (0.2) 10.9 (880.HK) Golden Week holiday on 1st May NASDAQ 3,279 (0.3) 8.6

DAX 7,814 (0.2) 2.7 U.S. stocks were mixed amid forecast-missing GDP growth in 1Q13 CAC 40 3,810 (0.8) 4.6 With the U.S. forecast-missing GDP growth at 2.5% in 1Q13, U.S. stocks FTSE 100 6,426 (0.3) 9.0 were mixed and the Dow ended 11-point higher at 14,712 points while the Nikkei 225 13,926 (0.3) 33.6

S&P 500 snapped its five-day winning streak, down by 0.2%. Hong Kong Taiwan weighted 8,022 0.0 4.2 ADRs retreated in the U.S. market, with their closing prices effectively putting the HSI at 22,511, down by 37 points or 0.17%. New York gold Shanghai Comp. 2,177 (1.0) (4.0) futures in June closed at US$1,464.7/oz, up by US$11.1/oz. New York oil Shenzhen Comp. 8,691 (0.9) (4.7) futures in June closed at US$92.64/bbl, down by US$0.36/bbl. Hong Kong Market Turnover

HSI up 146 points and is set to test 100-day MA. Chinese financials HK$bn % chg. stood out amid positive results HSI 23.8 8.7

Hong Kong stocks rose along with external markets last week. The Hang HSCCI 4.9 0.4 Seng Index opened 158-point higher and jumped as much as 289 points, HSCEI 16.4 (4.6) touching 22,690. However, the uptrend was capped by Chinese stocks’ Main Board 62.4 19.3 decline as the Shanghai Composite ended around 1% lower at 2,177 points. The HSI closed at 22,547, up 146 points. Market turnover was HK$62.4bn. Major ETF Some Hong Kong stocks moved higher on earning results in the reporting 1D chg 5D chg period. Chinese financials led the rally amid positive results, among which Close (%) (%)

Minsheng Bank (1988.HK, HK$9.99) and ABC (1288.HK, HK$3.69) CSOP A50 advanced around 1.7% each, driven by their forecast-beating 1Q net profits. (2822.HK) 9.91 (0.1) (3.2) ChinaAMC CSI 300 Chinese and Hong Kong property plays bucked the market uptrend and (3188.HK) 30.45 (0.2) (3.0) slipped. Meanwhile, China South Air (1055.HK, HK$4.08) fell amid E Fund CSI 100 disappointing results, while Yanzhou Coal (1171.HK, HK$8.44) tumbled (3100.HK) 29.00 (0.5) (3.2) 6.2% to a four-year low as its first-quarter net profit plunged 77.5% to X iShares FTSE A50 RMB480mn. BYD (1211.HK, HK$28.15) soared 12.2% as first-quarter net (2823.HK) 43.40 (0.1) (1.8) profit jumped 320% and the automaker was expected to have a 29-fold X WISE CSI 300 (2827.HK) 26.90 (0.6) (2.9) growth in net profit in 1H13. However, the positive newsflow failed to drive SPDR Gold Trust up industry peers and Geely Auto (175.HK, HK$3.83) remained soft. (2840.HK) 1,098 1.4 3.4 Macau gaming plays outperformed and Sands China’s (1928.HK, Value Gold ETF HK$42.65) share pirce hit a fresh high again. (3081.HK) 36.00 1.0 2.4

Value Japan ETF (3084.HK) 12.50 (0.5) (0.3)

Source: Bloomberg

Reports available at: http://www.shkfg.com http://www.thomsonreuters.com http://www.capitaliq.com Bloomberg Code:

Sun Hung Kai Financial 1 Investment Daily Note 29 April 2013

HSI: rallied beyond the 50-day MA and broke above downtrend

Source: Bloomberg and SHK Financial

China Life: 80% growth in 1Q net profit, with share price up above short-term downtrend

Tightened regulations from the central government struck bancassurance sales in the insurance industry, while insurers’ core businesses are weakened by keen competition from banking rivals’ wealth management solutions. Besides, the weak investment sentiment of the A-share market also dragged their returns of investment. Leading insurer China Life (2628.HK, HK$20.90) have suffered from earning declines over the past two years. New uncertainties came from recent adverse factors such as new confirmed cases of H7N9 bird flu and the Sichuan earthquake. Chinese insurers’ share prices saw sustained downtrend year-to-date.

Some Chinese insurers delivered surprising 1Q13 results during HK shares’ peak earning season last week. CPIC’s (2601.HK, HK$27.90) 1Q13 net profit surged 240% to RMB2.23bn while China Life’s net profit jumped 79.1% yoy to RMB10.08bn (up 180% from 4Q12), signaling the worst time is over for the insurance industry.

We believe the investor pessimism seems to be overdone. The insurer picked up the growth momentum in March after its first-quarter premium income slightly retreated 1.62% yoy. Meanwhile, China Life expanded the asset allocation for fixed-income investment, which pushed returns of investment up 37.2% yoy. On the other hand, China Life’s prospects are still positive as its investment performance improved and loss from impairment of assets fell 89% to RMB847mn in 1Q13 (due mainly to a decline of securities assets eligible for impairment). Technically, the share price rallied beyond the short-term downtrend and is expected to test resistance of the 50-day MA (around HK$21.80). Recommendation: Buy, targeting HK$23.5, with stop-losses at HK$19.00.

Sun Hung Kai Financial 2 Investment Daily Note 29 April 2013

China Life (2628.HK) broke above short-term downtrend and is testing 50-day MA

Source: Bloomberg and SHK Financial

SJM may catch up uptrend ahead of May 1 Golden Week holiday

China’s May 1 Golden Week holiday is a peak season for visitor arrivals in Hong Kong and Macau. Our top-pick is Macau’s gaming sector due to its solid fundamentals among beneficiaries from the Golden Week holiday, mainly because China’s anti-corruption measures in recent months may have restrained sales of luxury goods including gold and jewelry. Macau’s gross gaming revenue (GGR) jumped 25.4% yoy to a record MOP31.34bn in March, according to the official figures released by the Gaming Inspection and Coordination Bureau. The positive monthly data reflected robust growth of Macau’s gaming sector, and April’s GGR data (to be released by early May) may have a high single-digit to a low double-digit growth (yoy) on consensus numbers.

In the Macau gaming sector, Sands China (1928.HK, HK$42.65), Melco Int'l (200.HK, HK$15.40) and MGM China (2282.HK, HK$18.20) recently broke beyond their resistance levels, and SJM looks likely to catch up the uptrend. SJM Holdings (880.HK, HK$19.76) is Macau’s leading casino operator, but its market share contracted to 26.7% last year amid intensified competition from new casino projects in Cotai. SJM’s casino project in Cotai, which was approved in Oct 2012, would be completed in three years. The new casino may be a new driver for re-valuation and the earning growth in the future though it has no profit contribution in the short-term. On the valuation front, the estimated EV/EBITDA was 10.6X only in 2013, the lowest among peers. Technically, the share price rallied beyond the 50-day MA and the short-term downtrend. Recommendation: Buy at HK$19.70, targeting HK$22.00, with stop-losses at HK$18.00.

Sun Hung Kai Financial 3 Investment Daily Note 29 April 2013

SJM Holdings (880.HK) rallied beyond 50-day MA

Source: Bloomberg and SHK Financial

Sun Hung Kai Financial 4 Investment Daily Note 29 April 2013

ECONOMIC DATA RELEASES AND EVENTS

Date Country/region Event Period Survey Prior

Mon. 29Apr Euro-Zone Euro-Zone Consumer Confidence Apr -22.3 -22.3 (Final)

US Personal Income Mar 0.4% 1.1%

US Personal Spending Mar 0.1% 0.7%

US Pending Home Sales (MoM) Mar 1.6% -0.4% Tue. 30 Apr Euro-Zone CPI Estimate (YoY) Apr 1.6% 1.7%

Euro-Zone Unemployment Rate Mar 12.1% 12.0%

US Chicago Purchasing Manager Apr 53.0 52.4

US S&P/CS Composite-20 (YoY) Feb 9.00% 8.08%

US S&P/CS 20 City (MoM) Feb 1.00% 1.02% Wed. 1 May China Manufacturing PMI Apr 50.9 50.9

US MBA Mortgage Applications Apr 26 ─ 0.2%

US ADP Employment Change Apr 160K 158K

US Construction Spending (MoM) Mar 0.6% 1.2%

US ISM Manufacturing Apr 51.3 51.3 Thu. 2 May Euro-Zone ECB Announces Interest Rates 0.75% 0.75%

Euro-Zone PMI Manufacturing (Final) Apr ─ 46.5

US FOMC Rate Decision ─ 0.25%

US Trade Balance Mar -$41.9B -$43.0B

US Initial Jobless Claims Apr 26 ─ ─

US Continuing Claims Apr 20 ─ ─

China HSBC Manufacturing PMI (Final) Apr 50.7 51.6 Fri. 3 May Euro-Zone PPI (YoY) Mar ─ 1.3%

China Non-manufacturing PMI Apr ─ 55.6

US Change in Nonfarm Payrolls Apr 155K 88K

US Change in Manufacturing. Payrolls Apr 5K -3K

US Unemployment Rate Apr 7.6% 7.6%

US Factory Orders Mar -1.3% 3.0%

US ISM Non-Manufacturing Composite Apr 54.4 54.4 Sources: Bloomberg and Sun Hung Kai Financial; Note: Hong Kong time

Sun Hung Kai Financial 5 Investment Daily Note 29 April 2013

APPENDICES

MAJOR INDEX FORWARD P/E

HSI HSCEI

29 21 24 18

19 15

14 12

9 9

6 4 Jan06 Jan07 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan06 Jan07 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13

Forward P/E (X) +/- 1 s.d. Mean Forward P/E (X) +/- 1 s.d. Mean

Shanghai Composite S&P 500

45 20

18 37 16 29 14 21 12

13 10

5 8 Jan06 Jan07 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan06 Jan07 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Forward P/E (X) +/- 1 s.d. Mean Forward P/E (X) +/- 1 s.d. Mean

Sources: Bloomberg and Sun Hung Kai Financial

Major Index Valuations and Estimated Earnings Growth

FY13E P/E 7-year avg. fwd. Deviation FY13E EPS FY14E EPS Index (X) P/E (X) from avg. (%) growth (%) growth (%)

HSI 10.8 13.6 (20.6) (0.9) 8.9

HSCEI 8.0 12.7 (36.6) 10.4 20.8

Shanghai Composite 9.5 17.3 (45.2) 26.1 22.9

S&P 500 14.4 14.3 0.5 8.4 22.7

Sources: Bloomberg and Sun Hung Kai Financial

Sun Hung Kai Financial 6 Investment Daily Note 29 April 2013

MARKET DATA

Previous Day’s Best/Worst Performers

Stock Price 1D chg. 1W chg. 1M chg. Ytd chg. Turnover FY1 FY2 code (HK$) (%) (%) (%) (%) (HK$m) P/E (X) P/E (X) Best

BYD Company 1211.HK 28.150 12.2 16.3 13.7 21.1 355.3 52.2 36.8 Tingyi 322.HK 21.200 3.2 5.2 4.7 (1.6) 207.5 30.0 24.6 Want Want China 151.HK 12.380 3.0 6.2 4.0 15.9 287.4 31.3 26.1 Weichai Power 2338.HK 28.250 2.7 4.6 9.3 (17.9) 76.5 12.4 10.6 China Unicom 762.HK 11.080 2.6 8.0 6.5 (10.8) 576.0 19.2 14.0

Worst

Yanzhou Coal 1171.HK 8.440 (6.2) (4.5) (19.3) (34.2) 590.1 10.0 8.4 Sinopharm 1099.HK 22.850 (2.8) (6.9) (8.8) (5.8) 263.6 18.3 14.9 CHALCO 2600.HK 2.870 (2.7) 0.7 (4.0) (19.2) 51.8 N/A N/A Shangdong Weigao 1066.HK 7.400 (2.6) 11.8 5.3 (4.0) 58.2 21.5 17.6 Sino Land 83.HK 12.960 (2.6) 1.6 (1.5) (7.0) 124.0 11.8 12.2 Note: Best/worst performers from HSI, HSCEI and HSCCI.

HSCI Volume Filter

Stock Price 1D chg. Avg. vol. Prev. vol. % FY1 FY2 Company code (HK$) (%) (m shares) (m shares) increase P/E (X) P/E (X) China Pharma 1093.HK 3.960 (1.2) 22.6 404.8 1,691.8 22.0 17.4 Chiho-Tiande 976.HK 3.680 (0.5) 0.5 4.8 814.4 24.5 15.3 Jinchuan Int'l 2362.HK 1.580 2.6 1.1 7.6 624.0 N/A N/A AMVIG 2300.HK 3.060 0.0 0.4 2.8 608.4 7.3 6.7 SMIC 981.HK 0.570 5.6 136.4 631.9 363.2 36.7 18.4 I.T 999.HK 3.040 (5.3) 1.0 3.8 270.8 10.7 7.7 BYD Company 1211.HK 28.150 12.2 3.8 12.9 239.5 52.2 36.8 Digital China 861.HK 9.710 0.1 4.0 13.5 234.6 7.6 6.6 BYD Electronic 285.HK 3.850 (1.3) 7.5 21.2 183.5 11.2 9.4 FIH 2038.HK 2.950 4.6 10.2 28.8 182.6 126.7 23.7 * Volume filter applies to Hang Seng Composite Index constituents only ** Average volume is for the previous 30 trading days

Most Short Sold Stocks Stock Price 1D chg. Short sell % of total % stock's FY1 FY2 Company code (HK$) (%) volume market turnover own turnover P/E (X) P/E (X) (HK$m) CCB 939.HK 6.380 0.8 508.9 8.7% 28.2% 6.2 5.8 Minsheng Bank 1988.HK 9.990 1.7 261.8 4.5% 28.5% 5.6 5.1 Anhui Conch 914.HK 27.800 0.2 206.1 3.5% 55.4% 13.3 11.6 China Life 2628.HK 20.900 1.5 173.8 3.0% 14.7% 16.1 13.7 Ping An 2318.HK 60.150 0.9 135.6 2.3% 21.9% 13.1 11.4 Tencent 700.HK 259.000 1.3 127.8 2.2% 14.6% 23.1 18.8 Yanzhou Coal 1171.HK 8.440 (6.2) 116.1 2.0% 19.7% 10.0 8.4 Sands China 1928.HK 42.650 1.4 96.7 1.7% NA 22.7 18.3 SHKP 16.HK 113.900 (0.1) 96.2 1.6% 18.6% 14.5 12.8 AIA 1299.HK 34.250 1.3 90.7 1.5% 8.3% 17.4 15.6 * Applies to Hang Seng Composite Index constituents only

Sun Hung Kai Financial 7 Investment Daily Note 29 April 2013

Treasury Yields / Interest Rates

Latest (%) 5D chg. (bps) 30D chg. (bps) Ytd chg. (bps) yoy chg. (bps) U.S. 2-year Treasury yield 0.2112 (1.86) (3.47) (2.79) (4.66) U.S. 10-year Treasury yield 1.6633 (4.16) (24.61) (21.29) (27.15) U.S. 30-year Treasury yield 2.8611 (2.36) (28.16) (3.30) (26.13) HK 1-month HIBOR 0.2071 0.00 (0.07) (13.36) (9.59) HK 3-month HIBOR 0.3771 0.00 (0.50) (0.29) (2.61) SH 1-month SHIBOR 3.4420 (86.10) 9.10 (254.80) (59.80) SH 3-month SHIBOR 3.8821 (0.23) 0.07 (159.28) (82.16)

Exchange Rates

Latest 5D % chg. 30D % chg. Ytd % chg. yoy % chg. USD/HKD 7.7635 (0.0) (0.0) (0.2) 0.1 EUR/USD 1.3041 (0.2) 1.7 (1.1) (1.6) GBP/USD 1.5486 1.3 1.9 (4.7) 0.0 USD/JPY 97.8500 (1.4) 3.9 (11.4) 21.9 AUD/USD 1.0280 0.0 (1.3) (1.1) (1.8) NZD/USD 0.8495 0.8 1.5 2.5 3.3 USD/CAD 1.0164 (0.9) (0.1) (2.4) 3.7 USD Index 82.4050 (0.3) (0.7) 3.3 4.7

Energy and Raw Material Prices

Latest 5D % chg. 30D % chg. Ytd % chg. yoy % chg. Gold (USD/oz.) 1,466.4 2.8 (8.3) (12.5) (11.8) Silver (USD/oz.) 24.2 3.1 (15.0) (20.4) (22.7) Aluminum (USD/t) 1,878.0 (0.5) (1.7) (9.4) (10.9) Copper (USD/t) 7,030.0 0.6 (7.8) (11.4) (16.5) Hot roll steel (USD/t) 540.0 (4.4) (6.5) 1.4 (16.6) Cotton (USD/lb.) 83.7 (1.0) (4.2) 10.6 (4.1) CRB Index 285.4 0.8 (3.7) (3.3) (6.6) Brent (USD/barrel) 102.3 3.4 (5.4) (7.5) (14.5) WTI (USD/barrel) 93.0 5.7 (3.5) 1.3 (11.4) Sources: Bloomberg and Sun Hung Kai Financial

Sun Hung Kai Financial 8 Investment Daily Note 29 April 2013

Companies Listed on both the A-share and H-share Markets

A-share A-share H share Price A share Price premium to H share Price A share Price premium to Company code (HK$) code (RMB) H-share (%) Company code (HK$) code (RMB) H-share (%)

Shandong Molong 568 2.920 002490 10.360 347.1 China COSCO 1919 3.410 601919 3.370 24.6

Yizheng Chem 1033 1.810 600871 5.770 301.8 Minsheng Bank 1988 9.990 600016 9.820 23.9

Nanjing Panda 553 3.160 600775 9.480 278.1 Maanshan Iron 323 1.930 600808 1.880 22.8

Tianjin Capital 1065 2.780 600874 8.300 276.3 CEA 670 3.240 600115 3.060 19.0

Luoyang Glass 1108 1.700 600876 4.940 266.2 Anhui Expressway 995 4.210 600012 3.970 18.8

NE Electric 42 1.000 000585 2.880 263.0 Zoomlion 1157 8.070 000157 7.570 18.2

Beiren Printing 187 2.360 600860 6.460 245.0 ZTE 763 12.400 000063 11.340 15.3

Kunming Machine 300 2.090 600806 4.880 194.3 Guangzhou Automobile 2238 6.370 601238 5.730 13.4

Chongqing Iron 1053 1.150 601005 2.680 193.7 BYD Company 1211 28.150 002594 24.550 9.9

Shandong Xinhua 719 2.100 000756 4.610 176.7 PetroChina 857 9.880 601857 8.480 8.2

Shanghai Petrochem 338 2.650 600688 5.670 169.7 CSA 1055 4.080 600029 3.450 6.6

Jingwei Textile 350 5.140 000666 9.370 129.7 Air China 753 6.210 601111 5.230 6.1

Yanzhou Coal 1171 8.440 600188 15.170 126.5 A-H PREMIUM ------1.8

Hisense Kelon 921 4.990 000921 8.450 113.4 China Life 2628 20.900 601628 16.760 1.1

Beijing N Star 588 1.850 601588 2.910 98.2 Bank of China 3988 3.580 601988 2.870 1.0

Guangzhou Ship 317 6.940 600685 10.840 96.9 Sinopec 386 8.470 600028 6.730 0.1

Dalian Port 2880 1.700 601880 2.590 92.0 Weichai Power 2338 28.250 000338 21.960 (2.0)

CHALCO 2600 2.870 601600 3.980 74.8 CSR 1766 5.140 601766 3.980 (2.4)

Jiangxi Copper 358 15.580 600362 20.840 68.6 BoComm 3328 6.080 601328 4.630 (4.0)

Zijin Mining 2899 2.340 601899 3.130 68.6 China Shenhua 1088 27.050 601088 20.490 (4.5)

SH Electric 2727 2.820 601727 3.730 66.7 CM Bank 3968 16.140 600036 12.150 (5.1)

Sichuan Expressway 107 2.400 601107 3.160 65.9 Sh Pharma 2607 16.000 601607 11.990 (5.6)

MCC 1618 1.560 601618 2.040 64.8 ICBC 1398 5.410 601398 4.050 (5.7)

Chenming Paper 1812 3.060 000488 3.960 63.1 Huaneng Power 902 8.710 600011 6.370 (7.8)

Guangzhou Phar 874 27.250 600332 35.050 62.1 ABC 1288 3.690 601288 2.690 (8.1)

Datang Power 991 3.390 601991 4.350 61.7 CCB 939 6.380 601939 4.650 (8.1)

Xinjiang Goldwind 2208 4.380 002202 5.400 55.4 Angang Steel 347 4.670 000898 3.350 (9.6)

China Ship Dev 1138 3.470 600026 4.230 53.6 Tsingtao Brewery 168 52.850 600600 37.780 (9.9)

CSCL 2866 1.900 601866 2.170 43.9 Guangshen Railway 525 3.850 601333 2.740 (10.3)

China Coal 1898 6.300 601898 6.810 36.2 China Railway 390 3.950 601390 2.790 (11.0)

Dongfang Electric 1072 11.000 600875 11.730 34.4 CPIC 2601 27.900 601601 18.760 (15.3)

BBMG 2009 6.230 601992 6.490 31.3 Jiangsu Expressway 177 8.210 600377 5.440 (16.5)

SZ Expressway 548 3.160 600548 3.250 29.6 Ping An 2318 60.150 601318 39.810 (16.6)

CITIC Bank 998 4.240 601998 4.270 26.9 China Rail Cons 1186 7.900 601186 5.140 (18.0)

Huadian Power 1071 4.160 600027 4.150 25.7 Anhui Conch 914 27.800 600585 17.610 (20.2) Sources: Bloomberg and Sun Hung Kai Financial

Sun Hung Kai Financial 9 Investment Daily Note 29 April 2013

Address: 42/F, The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong

Phone: (852) 3920 2888

Fax: (852) 3920 2789

Web: http://www.shkfg.com

Analysts

Hannah Li, CAIA

Minnie Li

Disclosure of Interests Research Analyst Certification The views about any and all of the subject securities and issuers expressed in this report accurately reflect the personal views of the research analyst(s) primarily responsible for this report; and the analysts are paid in part based on the profitability of Sun Hung Kai Investment Services Limited ("SHKIS") and its affiliates (collectively called "SHKF") which includes revenue from investment banking activities.

Research Analyst Conflicts Financial Interests: The research analyst(s) who prepared this report and/or his/her/their associates has/have no financial interests in relation to listed corporation(s) covered in this report.

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Sun Hung Kai Financial 10