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sa- JY
Foresee another pedestrian month
• HK ETF flows deteriorated in April
• Earnings cuts, potential June Fed rate hike, UK referendum, and CNY to cap upside in 2Q
• We continue to like four themes for 2Q
April was lacklustre. Hong Kong equities were largely flat in April after a sizeable bounce in March. H-shares lagged the HSI, dragged in part by A-shares and mild CNY depreciation of 0.4%. Large rebounds in global banks during April also helped the HSI (pg 18). Meanwhile, sentiment gauges deteriorated and suggest a tough start for May. HK and H-share ETFs saw the largest outflows in a month since March 2014 (pg 3). The HK$4bn outflows seen in April were a stark contrast to March’s HK$1.6bn of inflows. Short selling activity also picked up towards the end of the month, as shorts totaled 12% of turnover last week (pg 5).
Autos shined among 1Q16 results; market earnings revisions were still negative in April. 1Q16 earnings of stocks within our radar were largely in line with estimates (pg 10). Autos reported more upbeat 1Q16 results than other sectors, thanks in part to GAC (2238.HK). Chinese banks and telecom operators reported flattish earnings, while non-bank financials and materials saw material y-o-y declines. In terms of earnings forecasts, they trended down in April 2016, albeit at a slower rate than 1Q16 (pg 9). HSI and HSCEI constituents saw 0.7-0.9% cuts to 2016-2017 estimates. Best revisions in April among index stocks have come from autos, FAI, and utilities. On the other hand, commodities, insurance, and Chinese telecom companies saw the worst revisions (pg 13-17).
Sell in May and go away? Game of Thrones spoiler alert: We do not expect HK equities will be resurrected like Jon Snow in the near term. Current valuations are still cheap, but they are already off trough levels where bottom fishing appetite was noticeably stronger. Confidence for China’s recovery remains shaky, as macro stabilization seems only possible if China reverts to a fixed asset investment model. Meanwhile, a potential June Fed rate hike and the June 23 UK referendum are overhangs. A potential Fed rate hike also dampens CNY outlook. Index futures are at large discounts in part due to the ex-dividend factor, which has dragged May market performance in the past (pg 2).
Continue to favour four themes in 2Q. We continue to recommend four investment themes for 2Q. We like fixed asset investment related plays as they benefit from latest macro trends. We also like companies that benefit from an A-share recovery, as we expect Shenzhen-HK connect to be announced in June-July. We also prefer laggard plays and SOE reform beneficiaries. Based on these four themes, we like China brokers, China banks, environmental, and railway and construction sectors. Our top picks largely come from these sectors, or they fit into our investment themes on a stock level (pg 22).
HSI: 21,067 ANALYST Alexander LEE CFA, +852 2971 1930 [email protected]
Ian CHUI [email protected] Performance of key indices
A s o fInd ic es 4 /29 1 w eek 30 day Y T D 2015A siaHSI 21,067 (1.9) 1.3 (3.9) (7.2) HSCEI 8,939 (2.0) (0.4) (7.5) (19.4) HSCCI 3,749 (2.9) 0.2 (7.5) (6.8) Shanghai Comp. 2,938 (0.7) (2.1) (17.0) 9.4 Shenzhen Comp. 1,874 0.3 (1.7) (18.8) 63.2 CSI300 3,157 (0.6) (1.9) (15.4) 5.6 NIKKEI 225 16,666 (5.2) (1.3) (12.4) 9.1 KOSPI 1,994 (1.1) (0.4) 1.7 2.4 Taiex 8,378 (1.8) (4.1) 0.5 (10.4) STI 2,839 (3.5) (1.2) (1.5) (14.3) KLCI 1,673 (2.6) (2.6) (1.2) (3.9) SET 1,405 (0.4) (0.4) 9.1 (14.0) J CI 4,839 (1.5) 0.5 5.3 (12.1) Sensex 25,607 (0.9) 1.1 (2.0) (5.0) O t hersDow J ones 17,774 (1.3) 0.3 2.0 (2.2) S&P 500 2,065 (1.3) 0.1 1.0 (0.7) Nasdaq 4,775 (2.7) (1.9) (4.6) 5.7 F TSE 100 6,242 (1.1) 0.6 (0.0) (4.9) DAX 30 10,039 (3.2) (0.1) (6.6) 9.6
% c hange
Source: Bloomberg Finance L.P., DBS Vickers
DBSV Top Ten Buy List
Closing T g t
T ic k er p ric e PBV PER y ield RO E Pric e(HK $ ) (X ) (X ) (% ) (% ) (HK $ )
Anhui Conch 914.HK 20.55 1.1 12.5 2.4 9.6 24.00CGN Power 1816.HK 2.49 1.5 12.1 2.5 13.1 3.40China Ev erbright Int'l 257.HK 8.72 2.0 15.7 2.6 13.7 10.20China Ev erbright Ltd 165.HK 15.40 0.9 4.4 24.5 17.0 23.84CH. Railway Constructio 1186.HK 9.92 0.9 8.7 1.7 11.0 11.60China CITIC Bank 998.HK 4.88 0.6 4.8 5.3 12.7 6.78China Hongqiao 1378.HK 5.69 0.8 7.1 3.0 12.2 6.50CK Property 1113.HK 53.25 0.7 10.8 3.0 7.0 57.00Haitong Securities * 6837.HK 12.90 1.0 9.5 3.1 12.1 n.a.Nexteer Automotiv e 1316.HK 8.18 2.5 10.5 1.9 26.9 9.40
F Y 16F
* consensus estimates Source: Thomson Reuters, DBS Vickers Based on closing prices on 29 April, 2016
DBS Group Research . Equity 3 May 2016
China / Hong Kong Market Focus
Monthly market pulse Refer to important disclosures at the end of this report
Market Focus
Monthly market wrap
Page 2
Monthly performance of Hang Seng Index since 2005
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2005 (3.6) 3.5 (4.8) 2.9 (0.3) 2.4 4.8 0.2 3.5 (6.8) 3.8 (0.4)
2006 5.9 1.1 (0.7) 5.4 (4.8) 2.6 4.3 2.5 0.9 4.5 3.5 5.3
2007 0.7 (2.3) 0.8 2.6 1.6 5.5 6.5 3.5 13.2 15.5 (8.6) (2.9)
2008 (15.7) 3.7 (6.1) 12.7 (4.8) (9.9) 2.9 (6.5) (15.3) (22.5) (0.6) 3.6
2009 (7.7) (3.5) 6.0 14.3 17.1 1.1 11.9 (4.1) 6.2 3.8 0.3 0.2
2010 (8.0) 2.4 3.1 (0.6) (6.4) 1.8 4.5 (2.4) 8.9 3.3 (0.4) 0.1
2011 1.8 (0.5) 0.8 0.8 (0.2) (5.4) 0.2 (8.5) (14.3) 12.9 (9.4) 2.5
2012 10.6 6.3 (5.2) 2.6 (11.7) 4.4 1.8 (1.6) 7.0 3.9 1.8 2.8
2013 4.7 (3.0) (3.1) 2.0 (1.5) (7.1) 5.2 (0.7) 5.2 1.5 2.9 (2.4)
2014 (5.5) 3.6 (3.0) (0.1) 4.3 0.5 6.8 (0.1) (7.3) 4.6 (0.0) (1.6)
2015 3.8 1.3 0.3 13.0 (2.5) (4.3) (6.2) (12.0) (3.8) 8.6 (2.8) (0.4)
2016 (10.2) (2.9) 8.7 1.4 Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 3
Global listed HK ETF flows and HSI performance
Offshore listed A-share ETF flows and SHCOMP perf.
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
(10)
(5)
-
5
10
15
20
25
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
HK and H-shr ETF flows (LHS)
HSI monthly perf. (RHS)
(%)(HK$ bn)
-30.0 -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0
(40)
(30)
(20)
(10)
-
10
20
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
Offshore A-shr ETF flows (LHS)
SHCOMP monthly perf. (RHS)(%)(HK$ bn)
Sources: Bloomberg Finance L.P., DBS Vickers
Global listed HK and H-share ETF flows and HSI
18,000
20,000
22,000
24,000
26,000
28,000
30,000
(1,500)
(500)
500
1,500
2,500
3,500
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
HK and H-share ETF flows HSI (RHS)(HK$ m)
Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 4
Offshore A-share ETF flows and SHCOMP index
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
(4,000)
(3,000)
(2,000)
(1,000)
-
1,000
2,000
3,000
4,000
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
A-share ETF flows SHCOMP (RHS)(Rmb m)
Source: Bloomberg Finance L.P., DBS Vickers
Northbound stock connect daily quota usage
Southbound stock connect daily quota usage
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
(% of daily quota of Rmb 13bn)
-20%
0%
20%
40%
60%
80%
100%
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
(% of daily quota of Rmb 10.5bn)
Sources: Bloomberg Finance L.P., DBS Vickers
*Daily quota usage = (Daily quota – daily quota balance)/(daily quota)
Market Focus
Monthly market wrap
Page 5
US 10yr treasury yield
HK$
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
08 09 10 11 12 13 14 15 16
(%)
7.747.757.767.777.787.797.807.817.827.837.84
Jan/14 Jul/14 Jan/15 Jul/15 Jan/16
Hang Seng utilities index vs. HSI
HSI troughs correspond with outperformance by utilities
0.4
0.6
0.8
1.0
1.2
1.4
05 06 07 08 09 10 11 12 13 14 15 16
HSU vs. HSI(1/1/'03 = 1.0)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
05 06 07 08 09 10 11 12 13 14 15 16
HSI
Short selling activity and HSI
Short selling activity and HSI (2007-2009)
18000
20000
22000
24000
26000
28000
30000
6%
8%
10%
12%
14%
16%
18%
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
SST as % of turnover HSI (RHS)
1000012000140001600018000200002200024000260002800030000
3%
5%
7%
9%
11%
13%
15%
17%
Jan/07 Jul/07 Jan/08 Jul/08 Jan/09 Jul/09
SST as % of turnover HSI (RHS)(%)
Sources: Bloomberg Finance L.P, DBS Vickers
Market Focus
Monthly market wrap
Page 6
HSI 1 year forward PE bands – 5yr mean and standard deviations
8,000
13,000
18,000
23,000
28,000
05 06 07 08 09 10 11 12 13 14 15 16 17
HSI 5 yr mean of 1 yr forward P/E +1 std -1 std +2 std -2 std
13.2x
11.9x
10.5x
9.2x
7.9x
Source: Bloomberg Finance L.P., DBS Vickers
HSCEI 1 year forward PE bands – 5yr mean and standard deviations
-2,000 4,000 6,000 8,000
10,000 12,000 14,000 16,000 18,000 20,000
05 06 07 08 09 10 11 12 13 14 15 16 17
HSCEI 5 yr mean of 1 yr forward P/E +1 std -1 std +2 std -2 std
6.0x
10.2x
9.1x8.1x7.1x
Source: Bloomberg Finance L.P., DBS Vickers
CSI 300 1 year forward PE bands – 5yr mean and standard deviations
-
1,000
2,000
3,000
4,000
5,000
6,000
05 06 07 08 09 10 11 12 13 14 15 16 17
CSI300 5 yr mean of 1 yr forward P/E +1 std -1 std +2 std -2 std
16.9x
14.6x
12.2x
9.9x
7.5x
Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 7
Hang Seng Index trailing price to book
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
HSI 1yr trailing P/B +2 stdev 5 yr mean -2 stdev(x)
1.10 1.10 0.94
Source: Bloomberg Finance L.P., DBS Vickers
HSCEI trailing price to book
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
HSCEI 1yr trailing P/B +2 stdev 5 yr mean -2 stdev(x)
0.86 1.050
Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 8
HSI targets
15,000
17,000
19,000
21,000
23,000
25,000
27,000
29,000
10 11 12 13 14 15 16
HSI 3M target 12M target
22,515
21,008
Tgt PE =10.7x
Tgt PE =11.2x
Source: Bloomberg Finance L.P., DBS Vickers
HSCEI targets
7,200
8,200
9,200
10,200
11,200
12,200
13,200
14,200
15,200
10 11 12 13 14 15 16
HSCEI 3M target 12M target
10,271
9,305
Tgt PE =7.9x
Tgt PE =7.3x
Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 9
Earnings forecasts and revisions
Overall earnings forecasts continued to trend down in April 2016, albeit at a slower rate than in 1Q16. HSI constituents saw negative earnings revisions of 0.7%-0.9% for 2016-2017 forecasts. HSCEI constituents saw negative earnings revisions of 0.6%-0.8% for 2016-2017 forecasts. For the HSI, the new market forecasts imply flat earnings growth in 2016 and 10.3% earnings growth in 2017. For the HSCEI, the new market forecasts imply 6% earnings decline in 2016 and 9.0% earnings growth in 2017.
Best revisions in 1Q:
- China auto companies such as GAC Group and BYD.
- Beneficiaries of stronger FAI growth including China Commmunications Construction, China Railway Group, and Anhui Conch .
- Utilities such as CLP Holdings and CGN Power.
Worst revisions in 1Q:
- Coal companies China Coal and China Shenhua
- Oil related companies CNOOC, and China Oilfield Services.
- China insurance companies China Life Insurance, CPIC
- China telecom companies China Telecom and China Unicom
- Consumer related companies Tsingtao Brewery and Belle
- Hong Kong Banks such as BEA and HSBC
Revision trends for HSI consensus earnings
Revision trends for HSCEI consensus earnings
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
2,600
2,700
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
2015 2016 2017
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
2015 2016 2017
Sources: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 10
Notable 1Q16 results
Company Ticker Profit Vs. Notesgrowth forecast
Autos Guangzhou Auto 2238 264% Above Revenue rose 88%YoY on strong sales of self ow ned brandGreat Wall Motor 2333 -6% Slight +ve ~8% revenue grow th, but margins eroded due to SUV competitionBYD 1211 603% Slight +ve Revenue increase of 33%, w ith margin increase
Consumer Tsingtao 168 2.5% In line Volume decline. Gross margin expansion on low er raw mat costs.and F&B China Modern Dairy 1117 -72% In line Subsidiary Modern Farming results. Margin decline on ASP decline.
Midea 000333 16.9% In line Revenue declined due to destocking, but margins improved.
Financials Citic Bank 998 2.5% In line Strong PPOP offset credit costs; NPL ratio declined q-o-qBank of China 3988 1.7% Slight +ve Flat NPL ratio and low er NPL formationBank of Chongqing 1963 10.0% In line Improving NIM and asset expansion drove NII grow thPing An Bank 000001 8.0% In line PPOP of 44%; NIM expanded y-o-y; NPL ratio rose 11bps q-o-qCQRCB 3618 8.0% +8% Strong fee grow th; NPL ratio fell 3bps q-o-qICBC 1398 0.6% In line NPL and NPL formation increased but <90d overdue declinedABC 1288 1.1% In line PPOP decline, NIM more sensitive to rate cuts than peersBoCom 3328 0.5% In line NPL ratio low er than peers but overdue loan ratio higherFar East Horizon 3360 10% In line Total assets expanded 5% q-o-q. NPA ratio w as stable q-o-q.Haitong Sec 6837 -57% Not rated Brokerage fees fell 35% YoY on sluggish stock marketCitic Securities 6030 -57% Not rated Brokerage fees fell 35% YoY on sluggish stock marketPing An Insurance 2318 3.5% Not rated 1Q premiums up 28.2% y-o-y; offset by claims and inv incomeCh. Life Insurance 2628 -57% Not rated 1Q premiums up 30.7% y-o-y; offset by claims and inv income
FAI and Ch. Comm Constr. 1800 18% In line Pre-tax grow th of 13%. Net gearing high at 100%.materials CR Cement 1313 -99% In line Slight volume grow th, but large decline in GP due to cement price.
Anhui Conch 914 -33% In line 15% volume grow th, but GP fell due to cement price.China Hongqiao 1378 -24% In line Subsidiary results. Volume cushioned ASP drop.China Railw ay Grp 390 10% In line Flat top line and gross profit; helped by low er interest rates.CRCC 1186 12% In line Flat top line; low er interest rates. New contracts grew 16%.
TMT China Mobile 941 0.5% Above 5% revenue grow th; ARPU dropped q-o-q.China Telecom 728 1.4% In line Tow er leasing fee increase hurt EBITDA.TCL Comm 2618 -95% In line Revenue dropped 17%; operating deleverage hurt margins.ZTE 763 16% Below Revenue only increased 4%; slight margin contraction.Yangtze Opt. Fibre 6869 2% In line Revenue grew 18% w ith margin expansion. Offset by forex loss.
Others Sinopharm 1099 14% In line 13.5% revenue grow th, ~4ppts higher than industry grow th.PetroChina 857 loss Not rated Rmb13.8bn loss vs. Rmb6.15bn profit in 1Q15.
Source: HKEX, Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 11
Consensus forecasts for HSI members
HSI 2015 2016 2017 2016 2017China banks BoCom HK3328 1.11 1.03 1.06 -6.9% 2.5%
BOC HK3988 0.69 0.68 0.69 -1.7% 2.1%ICBC HK1398 0.95 0.91 0.93 -4.5% 2.8%CCB HK939 1.12 1.07 1.11 -4.3% 3.1%
HK banks BEA HK23 1.95 1.86 1.99 -4.7% 6.9%BOCHK HK2388 2.53 3.01 2.68 18.9% -11.1%Hang Seng Bank HK11 14.22 9.09 9.89 -36.1% 8.8%HSBC HK5 5.04 4.89 5.12 -2.9% 4.6%HKEX HK388 6.70 5.52 6.11 -17.7% 10.8%
Insurance China Life HK2628 1.51 1.36 1.66 -9.8% 22.1%Ping An HK2318 3.68 3.46 3.79 -5.9% 9.4%AIA HK1299 1.71 2.30 2.77 35.0% 20.4%
Telcos China Mobile HK941 6.54 6.53 7.06 -0.2% 8.1%China Unicom HK762 0.54 0.43 0.53 -21.2% 24.8%
Oil PetroChina HK857 0.23 0.04 0.32 -81.7% 646.5%CNOOC HK883 0.56 0.01 0.69 -97.8% 5666.7%
Coal China Shenhua HK1088 1.09 1.00 1.17 -9.0% 17.4%China Coal HK1898 0.75 0.75 0.84 -0.3% 11.5%
Gas Kunlun Energy HK135 0.02 0.49 0.62 2776.5% 26.6%Towngas HK3 0.63 0.65 0.68 2.8% 4.6%
Power CLP HK2 6.20 4.71 4.86 -24.1% 3.2%China Res Power HK836 2.10 2.38 2.23 13.4% -6.3%Power Assets HK6 3.62 3.70 3.72 2.2% 0.4%
HK property MTRC HK66 2.22 1.56 1.71 -29.7% 9.2%SHKP HK16 11.09 8.25 7.98 -25.6% -3.3%Henderson Land HK12 6.46 3.08 3.12 -52.4% 1.6%New World Development HK17 2.17 0.80 0.76 -63.3% -4.6%Hang Lung Properties HK101 1.13 1.12 1.13 -1.1% 1.0%Sino Land HK83 1.55 0.86 0.83 -44.3% -3.4%
China property COLI HK688 3.61 3.37 3.80 -6.8% 12.8%China Resources Land HK1109 2.59 2.44 2.78 -5.7% 13.7%
Conglomerates China Resources HK291 (1.65) 0.43 0.60 -126.3% 39.2%Citic Pacific HK267 1.58 1.61 1.74 1.6% 8.5%China Merchants HK144 1.55 1.74 1.88 12.3% 8.2%Swire Pacific A HK19 8.93 6.37 6.67 -28.7% 4.7%Wharf HK4 5.29 4.03 4.11 -23.8% 2.0%
Gaming Galaxy HK27 0.98 1.27 1.31 30.1% 2.8%Sands China HK1928 1.40 1.34 1.51 -4.5% 13.0%
Tech Lenovo HK992 0.60 0.16 0.70 -73.9% 348.4%Tencent HK700 3.82 5.22 6.71 36.6% 28.5%
Transport Cathay Pacific HK293 1.53 1.59 1.64 4.5% 2.8%Cosco Pacific HK1199 1.00 0.81 0.82 -19.7% 1.1%
Commerce Li & Fung HK494 0.39 0.34 0.35 -13.2% 2.7%Consumer Hengan HK1044 3.31 3.63 3.86 9.7% 6.2%
Belle Int'l HK1880 0.72 0.57 0.56 -21.2% -2.3%Want Want HK151 0.32 0.35 0.36 9.7% 0.9%Tingyi HK322 0.35 0.39 0.45 9.5% 16.2%
EPS (HK$) EPS growth
Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 12
Consensus forecasts for HSCEI members
2015 2016 2017 2015-16 2016-17
Banks BOC HK3988 0.69 0.68 0.69 -2.2% 2.5%
BoCom HK3328 1.11 1.03 1.06 -7.1% 2.3%
CCB HK939 1.12 1.07 1.11 -4.7% 3.5%
CMB HK3968 2.83 2.83 3.05 0.3% 7.6%
ICBC HK1398 0.95 0.90 0.93 -4.8% 3.1%
ABC HK1288 0.68 0.65 0.67 -5.0% 3.1%
Citic Bank HK998 1.09 1.03 1.07 -5.4% 3.8%
Minsheng HK1988 1.60 1.52 1.59 -5.2% 4.9%
Insurance China Life HK2628 1.51 1.37 1.66 -9.0% 21.3%
PICC Group HK1339 0.57 0.43 0.47 -24.1% 8.8%
CPIC HK2601 2.42 2.01 2.21 -16.9% 9.8%
PICC P&C HK2328 1.82 1.57 1.70 -13.8% 8.4%
Ping An HK2318 3.68 3.46 3.79 -5.9% 9.4%
Brokers and AM Citic Securities HK6030 2.11 1.65 1.98 -21.7% 20.0%
Haitong HK6837 1.83 1.34 1.54 -26.8% 15.0%
China CINDA HK1359 0.48 0.52 0.60 7.2% 17.1%
Telcos China Telecom HK728 0.31 0.29 0.32 -7.3% 12.9%
Oil and serv ices PetroChina HK857 0.23 0.04 0.32 -81.7% 644.2%
China Oilfield HK2883 0.28 0.19 0.37 -32.3% 90.6%
China property Dalian Wanda HK3699 8.17 5.38 6.19 -34.2% 15.0%
China Vanke HK2202 2.02 2.25 2.64 11.2% 17.4%
Power Huaneng Power HK902 1.16 0.99 0.90 -14.4% -9.0%
China Longyuan HK916 0.44 0.53 0.62 20.3% 17.1%
CGN Power HK1816 0.18 0.19 0.22 7.3% 13.0%
Construction and China Railway HK390 0.65 0.68 0.74 3.7% 8.8%
machinery China Comm Cons HK1800 1.18 1.29 1.45 9.1% 12.5%
Cement Anhui Conch HK914 1.75 1.64 1.85 -6.2% 12.6%
CNBM HK3323 0.23 0.30 0.33 25.8% 12.9%
Coal China Coal HK1898 (0.31) (0.29) (0.17) -7.0% -41.5%
China Shenhua HK1088 1.09 1.00 1.17 -9.0% 17.4%
Autos BYD HK1211 1.38 1.52 1.90 9.9% 25.3%
GAC Group HK2238 0.80 1.04 1.17 29.1% 13.3%
Dongfeng Motors HK489 1.65 1.75 1.84 5.9% 5.0%
Greatwall Motor HK2333 1.09 1.06 1.10 -2.3% 3.7%
Others Tsingdao HK168 1.56 1.37 1.43 -12.6% 4.5%
Sinopharm HK1099 1.68 1.89 2.21 12.6% 16.8%
Air China HK753 0.71 1.01 1.00 42.1% -0.8%
J iangxi Copper HK358 0.25 0.39 0.50 56.0% 29.4%
EPS (HK$) EPS growth
Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 13
Best EPS revisions among index stocks in 2Q in HKD terms
Consensus earnings revisions for GAC (2238.HK) Consensus earnings revisions for Air China (753.HK)
0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Consensus EPS revisions for CR Beer (291.HK) Consensus EPS revisions for BOCHK (2388.HK)
0.40
0.45
0.50
0.55
0.60
0.65
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
2.60
2.70
2.80
2.90
3.00
3.10
3.20
3.30
3.40
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Consensus earnings revisions for BYD (1211.HK) Consensus EPS revisions for Ch Comm Const (1800.HK)
0.80
1.00
1.20
1.40
1.60
1.80
2.00
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
1.10
1.20
1.30
1.40
1.50
1.60
1.70
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Sources: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 14
Consensus earnings revisions - PICC (2328.HK) Consensus earnings revisions for Anhui Conch (914.HK)
0.40 0.41 0.42 0.43 0.44 0.45 0.46 0.47 0.48 0.49 0.50
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
1.50
1.70
1.90
2.10
2.30
2.50
2.70
2.90
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Consensus earnings revisions for Ch Railway Grp (390.HK) Consensus earnings revisions for CLP (2.HK)
0.50
0.55
0.60
0.65
0.70
0.75
0.80
0.85
0.90
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
4.40 4.45 4.50 4.55 4.60 4.65 4.70 4.75 4.80 4.85 4.90
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Consensus earnings revisions for CGN Power (1816.HK)
0.18
0.19
0.20
0.21
0.22
0.23
0.24
0.25
0.26
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Sources: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 15
Worst EPS revisions among index stocks in 2Q in HKD terms
Consensus earnings revisions for China Coal (1898.HK) Consensus earnings revisions for CNOOC (883.HK)
(0.40)
(0.30)
(0.20)
(0.10)
-
0.10
0.20
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
(0.50)
-
0.50
1.00
1.50
2.00
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Consensus revisions for China Life Insurance (2628.HK) Consensus revisions for China Unicom (762.HK)
1.20
1.40
1.60
1.80
2.00
2.20
2.40
2.60
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Consensus earnings revisions for Lenovo (992.HK) Consensus revisions for China Oilfield Service (2883.HK)
-
0.20
0.40
0.60
0.80
1.00
1.20
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
-
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Sources: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 16
Consensus earnings revisions for COSCO Pacific (1199.HK) Consensus revisions for China Shenhua (1088.HK)
0.75
0.80
0.85
0.90
0.95
1.00
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
0.80
1.00
1.20
1.40
1.60
1.80
2.00
2.20
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Consensus earnings revisions for PetroChina (857.HK) Consensus earnings revision for Tsingtao (168.HK)
-
0.20
0.40
0.60
0.80
1.00
1.20
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
1.10
1.30
1.50
1.70
1.90
2.10
2.30
2.50
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Consensus earnings revisions for Belle (1880.HK)
0.50
0.55
0.60
0.65
0.70
0.75
0.80
0.85
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Sources: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 17
Consensus earnings revisions for HSBC (5.HK) Consensus revisions for Huaneng Power (902.HK)
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
0.80
0.90
1.00
1.10
1.20
1.30
1.40
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Consensus earnings revisions for CPIC (2601.HK) Consensus revisions for CITIC Securities (6030.HK)
1.90 2.00 2.10 2.20 2.30 2.40 2.50 2.60 2.70 2.80 2.90
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
1.20
1.40
1.60
1.80
2.00
2.20
2.40
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Consensus revisions for China Telecom (728.HK) Consensus revisions for Bank of East Asia (23.HK)
0.25
0.27
0.29
0.31
0.33
0.35
0.37
0.39
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
1.80
2.00
2.20
2.40
2.60
2.80
3.00
3.20
Jan/15 Apr/15 Jul/15 Oct/15 Jan/16 Apr/16
FY16 FY17(HK$)
Sources: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 18
1 month sector share price performance
-10%
-5%
0%
5%
10%
15%
20%
Pow
er -
Chi
na
Gam
ing
Alt
erna
tive
ene
rgy
Har
dwar
e &
equ
ip
Brok
ers-
Ch
ina
Tele
com
-C
hin
a
Wat
er, e
nvir
onm
enta
l
Phar
mac
euti
cals
Gas
Insu
ran
ce
Pow
er, i
nfr
a &
uti
litie
s
Ind
ust
rial
Tran
spo
rt (p
orts
)
Tran
spor
t (to
ll ro
ads)
Prop
ertie
s -C
hin
a
Ban
ks -
Chi
na
HSC
EI
Aut
os a
nd p
arts
Tele
com
-H
K
Ban
ks -
HK
Con
sum
er (h
ouse
hold
)
Con
glo
mer
ates
-H
K
HSI
Co
nsum
er (r
etai
lers
)
Con
sum
er (a
ppa
rel)
REI
T
Tran
spor
t (ai
rlin
es)
Soft
war
e &
IT
serv
ices
Prop
erti
es -
HK
Con
sum
er (l
uxu
ries
)
Cem
ent
Food
and
bev
erag
es
Rai
l & c
onst
ruct
ion
Co
nsu
mer
(sp
orts
wea
r)
Con
sum
er (p
erso
nal
)
Tran
spor
t (sh
ippi
ng)
Stee
l & a
lum
iniu
m Oil
Coa
l
Ban
ks -
Glo
bal
Source: Thomson Reuters, DBS Vickers
YTD sector share price performance
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Insu
ran
ce
Wat
er, e
nvi
ron
men
tal
Tran
spo
rt (s
hip
pin
g)
Pow
er -
Ch
ina
Pro
per
ties
-C
hin
a
Co
nsu
mer
(ret
aile
rs)
Co
nsu
mer
(ho
use
ho
ld)
Tran
spo
rt (p
ort
s)
Ban
ks -
Glo
bal
Au
tos
and
par
ts
Co
nsu
mer
(ap
par
el)
Foo
d a
nd
bev
erag
es
Tran
spo
rt (a
irlin
es)
Ban
ks -
Ch
ina
HSC
EI
Phar
mac
euti
cals
Har
dw
are
& e
qu
ip
Gas
Co
nsu
mer
(sp
ort
swea
r)
Bro
kers
-Ch
ina
Alt
ern
ativ
e en
erg
y
Soft
war
e &
IT
serv
ices HSI
Co
al
Co
ng
lom
erat
es -
HK
Tran
spo
rt (t
oll
road
s)
Ind
ust
rial
Co
nsu
mer
(lu
xuri
es)
Ban
ks -
HK
Rai
l & c
on
stru
ctio
n
Pro
per
ties
-H
K
Tele
com
-C
hin
a
Cem
ent
Pow
er, i
nfr
a &
uti
litie
s
Gam
ing
REI
T
Co
nsu
mer
(per
son
al)
Tele
com
-H
K
Stee
l & a
lum
iniu
m Oil
Source: Thomson Reuters, DBS Vickers
Market Focus
Monthly market wrap
Page 19
Moving average and RSI for HSI
Moving average and RSI for HSCEI
18,000
20,000
22,000
24,000
26,000
28,000
30,000
Jan/14 Jul/14 Jan/15 Jul/15 Jan/16
HSI 50d avg 100d avg 250d avg
20
50
80
14d RSI
7,200
8,200
9,200
10,200
11,200
12,200
13,200
14,200
Jan/14 Jul/14 Jan/15 Jul/15 Jan/16
HSCEI 50d avg 100d avg 250d avg
20
50
80
14d RSI
Moving average and RSI for CSI 300
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
Jan/14 Jul/14 Jan/15 Jul/15 Jan/16
CSI 50d avg 100d avg 250d avg
20
50
80
14d RSI
Sources: Bloomberg Finance L.P, DBS Vickers
Market Focus
Monthly market wrap
Page 20
2016F ROE vs. 2015F P/B
China banks
Insurance
China property
Environmental
Railway and construction
Apparel and footwear
China auto and parts
China IPPs
China materials
China telecom carriers HK banks
HK property
HK telecom
Pharma & Health
Textiles
China coal
China F&B
Oil
Retailers
Chinese brokers
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0
(201
5P/
B x)
(2016F ROE %)
Source: DBS Vickers
Market Focus
Monthly market wrap
Page 21
Sector recommendations Sector Weight ing Rat ionale
China banks Overweight Trough valuations and under-owned; prefer JSBs with sufficient capital
China non-bank financials Overweight SZ-HK connect can be catalyst; capital market growth is part of reform
Environmental Overweight Sector is more attractive after de-rating since mid-2015
Railway and construction Overweight Lower borrowing rates, domestic fiscal spending, and overseas contracts
Apparel and footwear Neutral Prefer sportswear companies; avoid companies with large HK exposure
China airlines Neutral Hurt by CNY depreciation but oil price declines can offset
China appliances Neutral Outlook to improve on back of expected rebound in property sales
China auto and parts Neutral Tax cuts can help sales; inventory situation has improved
China IPPs Neutral Helped by lower coal prices; prefer operators with more alternative exposure
China materials Neutral Disappointing ASP; possible rebound if property FAI can recover
China property Neutral Tightening begins for Tier 1 cities; Supply issues for smaller cities
China retailers Neutral Prefer players with strong O2O initiatives or defense against e-commerce
China telecom carriers Neutral VAT reform will no longer drag earnings in 2016; potential restructuring
China telecom equipment Neutral 4G network capex to slow; operator restructuring can be a risk
Gaming Neutral Worst seems to be over for y-o-y trend, but recovery seems slow
Hong Kong banks Neutral USD interest rate normalization is positive; HK economic outlook is negative
Hong Kong property Neutral HK retail, political pressure, and USD interest rates are key risks
Hong Kong telecom Neutral Stable operations and decent y ields are attractive in volatile market
IT, software, & e-commerce Neutral Strong top line and earnings growth; large caps were resilient during decline
Oil Neutral Oil price recovery likely a 2017 or 2018 event
Pharmaceutical + healthcare Neutral Positive long term drivers; valuations are pricey for fast growth segments
Textiles Neutral US order headwinds and near peak valuation limit near term upside
China coal Underweight Decline of energy intensive sectors; promotion of renewable energy
China F&B Underweight Sales disappointment and potential El Nino driven cost inflation; prefer dairy
HK REITs Underweight HK retail and USD interest rate normalization are key risks
HK retailers Underweight Structural change with mainland tourists; negative wealth effect for locals
Source: DBS Vickers
Market Focus
Monthly market wrap
Page 22
DBSV HK top ten BUYs
Closing DBSV TgtT icker price rat ing Price F Y15A F Y16F F Y15A F Y16F F Y15A F Y16F F Y15A F Y16F
Top pick s (HK$) (HK$) (X) (X ) (%) (%) (X) (X ) (%) (%)Anhui Conch 914.HK 20.55 BUY 24.00 12.1 12.5 11.1 9.6 1.3 1.1 2.5 2.4
CGN Power 1816.HK 2.49 BUY 3.40 14.3 12.1 11.4 13.1 1.7 1.5 2.0 2.5
China Everbright Int'l 257.HK 8.72 BUY 10.20 18.8 15.7 12.5 13.7 2.3 2.0 2.1 2.6
China Everbright Ltd 165.HK 15.40 BUY 23.84 5.1 4.4 13.8 17.0 0.7 0.9 4.9 24.5
CH. Railway Construction 1186.HK 9.92 BUY 11.60 8.8 8.7 11.9 11.0 0.9 0.9 1.7 1.7
China CITIC Bank 998.HK 4.88 BUY 6.78 4.7 4.8 14.3 12.7 0.6 0.6 5.1 5.3
China Hongqiao 1378.HK 5.69 BUY 6.50 8.2 7.1 10.8 12.2 0.8 0.8 2.6 3.0CK Property 1113.HK 53.25 BUY 57.00 13.2 10.8 8.7 7.0 0.8 0.7 2.6 3.0
Haitong Securities * 6837.HK 12.90 NR n.a. 7.3 9.5 11.1 12.1 1.2 1.0 4.2 3.1
Nexteer Automotive 1316.HK 8.18 BUY 9.40 12.8 10.5 27.2 26.9 3.2 2.5 1.6 1.9
Simple av erage 10.5 9.6 13.3 13.5 1.3 1.2 2.9 5.0
Div y ieldPBVPER ROE
*consensus estimates
Source: DBS Vickers
DBSV top picks – simple average
DBSV top picks – relative performance vs. HSI
70
80
90
100
110
120
130
140
150
160
Jan/14 Jul/14 Jan/15 Jul/15 Jan/16
DBSV top picks HSI
(28 Feb 2014 = 100)
(10.0)
(5.0)
-
5.0
10.0
15.0
20.0
25.0
30.0
Jan/14 Jul/14 Jan/15 Jul/15 Jan/16
DBSV top pick relative performance vs. HSI
(28 Feb 2014 = 0)
(%)
Sources: Bloomberg Finance L.P, DBS Vickers
Our top ten list:
Anhui Conch (914.HK)
- Fixed asset investment targets in five year plan are still respectable; FAI has been bright spot in YTD macro figures.
- Clinker prices increased twice in March 2016 in East China.
- One of the more efficient cement makers; still generated ROE of 11% in a down cycle during 2015.
CGN Power (1816.HK)
- China targets to increase its nuclear power capacity by several times from FY15’s 29GW by 2030. This is aimed to substitute for polluting thermal plants.
- FY15 earnings were above estimates; we expect FY15-17 EPS CAGR to be a healthy 14% driven by capacity expansion.
- Valuations have come off substantially since 2015, and are attractive for China’s largest nuclear power producer. An A-share market recovery can also make CGN Power attractive by widening the valuation gap against A-share nuclear peers.
Market Focus
Monthly market wrap
Page 23
China Everbright International (257.HK)
- Further increase in capital expenditures in FY16 with current order backlog amounting to >Rmb19bn
- Operating data continues to be robust in FY16: 27% growth in WTE operational capacity, >25% growth in treated waste water volume, doubling in operational capacity for hazardous solid waste.
- More attractive valuation with <16x FY16 PE
China Everbright Ltd (165.HK)
- A-share IPO resumption to help private equity business exit projects.
- Parent’s consolidation of China Everbright Securities and Everbright Bank stakes held by CEL can resume as regulators unwind A-share supportive measures which prohibited large stake changes. Restructuring should narrow CEL’s discount to NAV.
- A-share market recovery to enhance CEL’s NAV from stakes in Everbright Securities and Everbright Bank.
China Railway Construction (1186.HK)
- Chinese policy makers are helping infrastructure funding by lowering borrowing costs and project capital requirements, and this will help domestic demand.
- Decline in borrowing costs to help high gearing companies like CRCC.
- Company can win overseas contracts as part of China’s “one belt one road” strategy.
China Citic Bank (998.HK)
- Capital and dividend overhang can be lifted with expected private placement in 1Q16; dividend payment can resume after capital issue.
- Forward P/B of around 0.6x is the lowest in the sector, despite encouraging NPL formation trends compared to peers.
- Cooperation with internet companies, employee stock ownership plan, and spin-off of subsidiaries are potential catalysts.
China Hongqiao Group (1378.HK)
- YTD aluminium prices beat expectations and we believe recovery can be sustained by supportive liquidity conditions.
- Global ex-China AI market to remain in supply deficit by 1.5mt, and the global supply shock of Chinese export dumping should be at its tail end.
- The company’s rights issue in Feb 2016 strengthened Hongqiao’s balance sheet.
Market Focus
Monthly market wrap
Page 24
Cheung Kong Property (1113.HK)
- The stock’s >40% discount to NAV should have priced in residential and retail market risk; more clarity on NAV change can help re-rate to smaller discount to NAV.
- Balance sheet is strong with only a small net debt position; well positioned for new acquisitions.
- Large hotel portfolio is a risk, but office segment should be strong given limited new supply in Central.
Haitong Securities (6837.HK)
- Order is returning to the A-share market as supportive measures are unwinding.
- Lower interest rates and wealth management product yields to usher savings towards equity markets. Shenzhen-HK connect and potential MSCI inclusion can be a catalyst.
- Haitong Sec should be more resilient than smaller brokers against gradual entrance of Chinese banks into the retail brokerage space.
Nexteer (1316.HK)
- Order backlog of US$11bn to support earnings growth. Electric power steering (EPS) products make up 76% of order book compared to 65% before.
- EPS products should remain in demand due to better fuel efficiency than hydraulic systems.
- Diversified global client base; China orders are fast growing thanks to SUVs and MPVs, but contributes 22% of total revenue.
Market Focus
Monthly market wrap
Page 25
Hang Seng Index and select news
17,500
19,500
21,500
23,500
25,500
27,500
29,500
Jul/15 Oct/15 Jan/16 Apr/16 Jul/16 Oct/16 Jan/17
13-16
1-2
3‐89-11
12
17-19
41
42
29-32
25-28 33-40
43,44
45-49
21,22
2023, 24
50-52 5354-56
# Da te
1 7/1/20152 7/3/20153 7/6/20154 7/7/20155 7/9/20156 7/10/20157 7/13/20158 7/14/20159 7/15/2015
10 7/27/201511 8/4/201512 8/11/201513 8/12/201514 8/24/201515 8/25/201516 8/31/201517 9/2/201518 9/3/201519 9/4/201520 9/7/201521 9/17/201522 9/23/201523 9/29/201524 9/30/201525 10/1/201526 10/19/201527 10/23/201528 10/28/201529 10/29/201530 11/6/201531 11/12/201532 11/13/201533 11/19/2015
CSRC announced a 30% transaction fee cut; flexibility given to margin callsCSRC said it will reduce IPOs; China Securities Finance capital boost from 24 to 100bnNSF reportedly asked outsourced fund managers to not sell equities
Ne ws or da ta point
China Ramps Up Policy Response, CSF increase buying of stocks, PBOC promised liquiditySASAC forbids SOE's to sell public shares, will monitor SOE equity holdings daily366 companies (40% of listed companies) apply to resume trading of their A-sharesChina clamps down on off-market leveraged stock tradingCSF subscribes Rmb80bn to mutual fundsCSRC Probes Violations in Margin Trading Via Non-Brokers Caixin PMI dropped to 47.8 in JulyLargest Rmb devaluation since US$ peg removal, Rmb reference rate down 1.9%PBOC intervened to prop up Rmb China will allow pension funds to invest up to 30% of assets in equitiesPBOC cuts interest rate by 25bps and RRR by 50bpsNational People's Congress voted to remove China's loan-to-deposit cap Brokers allocate additional investments into CSFC account to support stocks CFFEX steps up measures to tackle speculation in stock index future trading China to introduce circuit-breaker for stock market China to cut dividend taxes for long-term shareholdersFederal Reserve keeps policy interest rate unchanged China Caixin-Markit PMI 47.0, a 6.5 year low Janet Yellen Expects Interest Rate Increase This Year PBOC Cuts Mortgage Down payment Requirement to 25% from 30%Purchase tax on small cars (<1.6L capacity) will be halved to 5% until end of 2016China's 6.9% 3Q GDP slightly beat estimate of 6.8%PBOC announced benchmark rate and RRR cuts after markets closedFed keeps interest rate unchanged5th plenum outlines new growth initiatives; one child policy canceledBetter than expected US non-farm payrolls boosted Dec Fed rate hike expectationsChina new loans and TSF figures disappointOver the weekend, CBRC announced A-share IPOs will resumePBOC to cut overnight and 7-day SLF rates to 2.75% and 3.25%
Brokers temporarily suspended lending stocks to clients for short selling
Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 26
Index and select news (con’t)
34 11/20/201535 11/24/201536 11/26/201537 11/27/201538 11/30/201539 12/1/201540 12/4/201541 12/16/201542 1/7/201643 1/27/201644 2/5/201645 2/15/201646 2/18/201647 2/19/201648 2/26/201649 2/29/201650 3/14/201651 3/16/201652 3/17/201653 3/30/201654 4/19/201655 4/21/201656 4/27/2016
CSRC bans derivatives funding for stock trades IMF approved RMB in SDR with weighting 10.92% Official China Manufacturing PMI weakened to 49.6China announced circuit-breaking system will start on Jan 1, 2016
CSRC restarts IPOs for 10 approved companies
US Fed chair Janet Yellen urges caution in raising ratesHSBC mulls share buyback upon meeting CAR requirements
US Fed raise target rate to 0.25% from 0%China End-Dec. FX Reserves US$3.33tn, missing estimate of US$3.42tn US Federal Reserve keeps rates steady at 0.25% to 0.5%China end-2015 FX reserves down 13% yoyShenzhen HK stock connect delayed
CSRC eases net stock purchase requirement for brokersCSRC announced investigations in China's largest brokerage firms
Fed minutes show FOMC reluctant to raise ratesPBOC announces it will conduct OMO every dayChina reveals 10 detailed SOE reform pilotPBOC announce 50bps RRR cut for all financial institutions
CSRC says SZ HK stock connect feasible in 2H2016 US Federal Reserve keeps rates unchanged at 0.25% to 0.5%
Moody's cut HK sovereign credit outlook to negative
News of SZ-HK link may start in July US Federal Reserve keeps rates unchanged at 0.25% to 0.5%
Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 27
CSI300 Index and select news
2,500
3,000
3,500
4,000
4,500
5,000
Jul/15 Oct/15 Jan/16 Apr/16 Jul/16 Oct/16 Jan/17
1
2-4
6-9
5
12,13
1421-23
10,1124-26
15
27-31
32-33
16-20
34
40,41
35,36
45-47
37
48,4942-44
39
38
50-52
53-56 57-59
# Da te
1 7/1/20152 7/3/2015
3 7/6/20154 7/7/2015
5 7/8/20156 7/9/2015
7 7/14/2015
8 7/15/20159 7/17/2015
10 7/27/2015
11 8/3/2015
12 8/10/2015
13 8/11/2015
14 8/24/201515 8/25/201516 8/28/2015
17 9/2/2015
18 9/4/201519 9/7/2015
20 9/14/201521 9/23/201522 9/30/201523 10/1/201524 10/19/201525 10/23/2015
Purchase tax on small cars (<1.6L capacity) will be halved to 5% until end of 2016China's 6.9% 3Q GDP slightly beat estimate of 6.8%
China unveils details of SOE reform
Largest Rmb devaluation since US$ peg removal, Rmb reference rate down 1.9%
CSRC says IPO freeze necessary but market rescue operations to be short term
CSRC stabilization measures: regulate margin financing, info system, algo trading
China will allow pension funds to invest up to 30% of assets in equitiesPBOC cuts interest rate by 25bps and RRR by 50bps
CSRC required 50 brokerage firms to provide rescue funds to CSFC
China to cut dividend taxes for long-term shareholders
CSRC said it will reduce IPOs; CSF capital boost from 24 to 100bn
Ne ws or da ta point
PBOC announced benchmark rate and RRR cuts after markets closed
CSRC announced a 30% transaction fee cut; flexibility given to margin calls
CSFC invests another Rmb80bn in mutual funds
NSF reportedly asked outsourced fund managers to not sell equities
Over 1400 A-shares suspended trading, a rise from 460 a week ago
Brokers and futures brokerages stop short selling; NSSF ordered not to sellCIRC raised equity limits for insurers; CSRC encourages buying and not selling
Roughly half of suspended shares resume trading; 777 A-shares remain suspended
CSFC said to have up to Rmb2tn on tap; SSE loosens margin rules
China Caixin-Markit PMI 47.0, a 6.5 year low
CSRC Probes Violations in Margin Trading Via Non-Brokers
Brokers allocate additional investments into CSFC account to support stocks China to introduce circuit-breaker for stock market
PBOC Cuts Mortgage Down payment Requirement to 25% from 30%
Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 28
Index and select news (con’t)
# Da te26 10/29/201527 11/13/2015
28 11/16/201529 11/20/201530 11/24/201531 11/26/201532 11/27/2015
33 11/30/2015
34 12/3/201535 12/10/201536 12/11/201537 12/21/201538 1/1/201639 1/4/201640 1/7/201641 1/12/201642 1/29/2016
43 2/2/2016
44 2/5/201645 2/18/201646 2/22/2016
47 2/24/201648 2/26/201649 2/29/2016
50 3/4/201651 3/7/2016
52 3/9/2016
53 3/15/201654 3/21/201655 3/23/201656 3/29/201657 4/14/2016
58 4/18/201659 4/21/2016
Strong M2 growth at 13.7% and new RMB loans rebounded to RMB709bn in Nov
China steps up intervention in CNH , O/N CNH HIBOR spikes to 66.8%
China to replace business tax with VAT in MayChina reveals 10 detailed SOE reform pilot
PBOC announce 50bps RRR cut for all FI
Shanghai, Shenzhen, Nanjing unveil property market cooling measures
Liu Shiyu Replaces Xiaogang as Head of CSRC
China end-2015 FX reserves down 13% yoyPBOC announces it will conduct OMO every day
China Mar-16 loans to property up 22%
China scraps IPO upfront paymentsCSI300 trading suspended after falling 7% and triggering circuit breaker
PBOC Made Largest Cash Injection in Three Years
CSRC suspends circuit breaker after it was triggered the 2nd time in a week
PBOC cut downpayment requirement on mortgages to historical low (20%)
5th plenum outlines new growth initiatives; one child policy canceled
Over the weekend, CBRC announced A-share IPOs will resumeSSE and SZSE raise guarantee deposit ratio to 100% for margin financing
Fund companies are required to report off-exchange financing
China concludes central economic work conference: focus on overcapacity cut and
China Mar-16 GDP up 6.7% YoY, in line
VAT reforms announced to start on May 1, 2016. Fixed asset tax deductible
China end Feb FX reserve fall US$28.6bn to US$3.20tn vs. consensus of US$3.19tnNPC and CPPCC meetingCSF to restart lending to brokers
IMF approved RMB in SDR with weighting 10.92%
CSRC bans derivatives funding for stock trades
Ne ws or da ta point
CSRC announced investigations in China's largest brokerage firmsCSRC eases net stock purchase requirement for brokersCSRC restarts IPOs for 10 approved companies
PBOC stops RQDII new quota application.
China Securities Finance Cut at Least 30 Co. Stakes in 4Q
China Mar-16 exports up 11.5% YoY, beat consensus
SAFE says China may adopt Tobin tax to curb short term FX speculation
Source: Bloomberg Finance L.P., DBS Vickers
Market Focus
Monthly market wrap
Page 29
DBSV universe comparison table
St oc kcode St ock name
M k tCap
(US$m)
SharePric e
(HK $ )
T argetPric e
(HK $)upside
(% ) RemdPE (x )
15FPE (x )
16FPB (x )
15FY ld (% )
15FRO E (% )
15FA ut o manuf ac t u rers & dealers
1114 Brilliance China 4,993 7.69 9.10 18 B 9.3 8.3 1.6 1.4 17.81728 China ZhengTong 906 3.18 3.60 13 B 9.5 7.1 0.7 3.1 9.21828 Dah Chong Hong 760 3.22 3.70 15 B 10.3 8.6 0.7 3.9 7.4
489 Dongfeng Motor Group 9,463 8.52 12.70 49 B 5.3 4.7 0.7 2.8 14.5175 Geely Automobile 4,391 3.87 3.60 -7 H 12.6 9.8 1.5 1.0 14.0
2333 Great Wall Motor 6,918 5.88 6.70 14 H 5.6 5.3 1.2 5.5 20.6601633 Great Wall Motor-A @@@ 9,965 8.47 8.90 5 H 9.6 9.1 2.0 3.8 20.6
2238 Guangzhou Automobile 7,490 9.03 10.60 17 B 11.6 9.2 1.3 2.6 12.7601238 Guangzhou Automobile-A @@@ 18,580 22.40 19.00 -15 FV 34.2 27.3 3.7 0.9 12.7
425 Minth Group 2,906 20.30 18.10 -11 B 14.8 12.3 2.0 2.7 15.71316 Nexteer Automotive Group 2,634 8.18 9.40 15 B 12.8 10.5 3.2 1.6 26.91148 Xinchen China Power Hldgs 202 1.22 1.60 31 B 5.9 5.3 0.5 0.0 8.9
881 ZhongSheng 1,104 3.99 4.20 5 B 15.4 10.1 0.6 1.3 6.1Bank ing and F inance (Ch ina- A ) @ @ @
601288 Agricultural Bank of China-A 141,624 3.12 3.47 11 H 5.6 5.6 0.9 5.4 15.3601988 Bank of China-A 152,236 3.35 4.06 21 B 5.9 5.9 0.8 6.1 13.1601328 Bank of Comm-A 61,674 5.38 6.76 26 H 6.1 6.0 0.8 3.8 12.3601998 China CITIC Bank-A 44,341 5.87 6.05 3 H 6.7 6.7 0.9 3.5 12.7601939 China Construction Bank-A 181,002 4.69 6.50 39 H 5.1 5.2 0.8 4.4 15.3600036 China Merchants Bank-A 69,102 17.75 21.51 21 B 7.6 7.2 1.2 4.0 16.1600016 China Minsheng Bank-A 52,379 9.30 8.87 -5 H 6.9 6.7 1.1 2.1 15.4601398 ICBC-A 234,372 4.26 5.55 30 B 5.5 5.5 0.9 5.5 15.4
Bank ing and F inance (Ch ina)1288 Agricultural Bank of China 117,644 2.81 3.82 36 B 4.2 4.3 0.7 7.3 15.33988 Bank of China 120,292 3.17 4.55 44 B 4.7 4.8 0.6 6.6 13.13328 Bank of Communications 47,001 4.91 7.44 52 B 4.6 4.7 0.6 6.8 12.3
998 China CITIC Bank 30,782 4.88 6.78 39 B 4.7 4.8 0.6 5.1 12.7939 China Construction Bank 160,811 4.99 7.15 43 B 4.5 4.7 0.7 6.7 15.3605 China F inancial Serv ices 342 0.69 0.92 33 B 7.0 6.2 0.8 3.6 12.7
3968 China Merchants Bank 55,460 17.06 23.68 39 B 6.0 5.8 1.0 5.0 16.11988 China Minsheng Bank 34,379 7.31 9.76 34 B 4.5 4.5 0.7 3.2 15.43618 Chongqing Rural Bank 4,903 4.09 5.95 45 B 4.3 4.4 0.7 5.9 14.81398 ICBC 193,412 4.21 6.11 45 B 4.5 4.6 0.7 6.8 15.4
Bank ing and F inance (HK )165 China Ev erbright Ltd 3,345 15.40 23.84 55 B 5.1 4.4 0.7 4.9 17.0
3360 Far East Horizon 3,147 6.18 7.75 25 B 7.2 7.5 0.9 3.5 12.3Cement
914 Anhui Conch Cement 14,037 20.55 24.00 17 B 12.1 12.5 1.3 2.5 9.6600585 Anhui Conch Cement-A @@@ 11,045 16.17 19.26 19 B 11.4 11.7 1.2 3.2 9.6
3323 China Nat'l Bldg Mat 2,798 4.02 2.70 -33 FV 17.8 16.4 0.3 1.1 2.11313 China Resources Cement 2,156 2.56 3.35 31 B 16.4 11.8 0.6 0.8 5.2
Chemic als2283 T K Group 225 2.11 2.80 33 B 9.3 8.2 2.9 4.7 31.7
Source: DBS Vickers
@@@ denominated in RMB
Market Focus
Monthly market wrap
Page 30
DBSV universe comparison table (con’t)
St ockc ode St oc k name
M k tCap
(US$m)
SharePric e
(HK $)
T argetPric e
(HK $)upside
(% ) RemdPE (x )
15FPE (x )
16FPB (x )
15FY ld (% )
15FRO E (% )
15FCong lomerat es- HK
4 Wharf Holdings # 16,449 42.10 44.15 5 H 11.6 10.8 0.0 4.5 3.820 Wheelock # 9,429 36.00 35.45 -2 B 6.9 7.0 0.0 3.2 5.1
F ood and Bev erages600597 Bright Dairy & F ood@@@ 2,247 11.83 14.50 23 H 38.2 28.5 3.7 1.6 12.7
506 China F oods 1,031 2.86 3.00 5 H 101.1 14.2 1.5 0.3 9.72319 China Mengniu 6,658 13.18 13.10 -1 B 18.3 17.0 2.0 1.3 11.01117 China Modern Dairy 978 1.43 1.56 9 H 7.6 7.9 0.8 0.0 9.3
322 Tingy i Holding 6,550 9.07 7.60 -16 H 25.6 21.6 2.3 2.0 10.1168 Tsingtao Brewery 5,120 29.40 27.20 -7 F V 19.4 25.3 2.0 1.6 7.8
600600 Tsingtao Brewery -A @@@ 5,059 29.05 22.80 -22 F V 22.9 29.9 2.4 1.3 7.8220 Uni-President China 4,031 7.24 7.50 4 B 31.3 27.2 2.3 0.6 8.0345 V itasoy 1,963 14.54 14.10 -3 H 40.5 30.9 7.9 1.7 24.1151 Want Want China 9,818 5.98 5.30 -11 H 18.6 17.1 5.4 2.4 29.6
Hardw are & Equ ipment552 China Comm Serv ices 3,276 3.67 4.50 23 B 9.1 8.4 0.9 3.6 9.8
600498 F iberHome Telecom 3,230 23.94 20.00 -16 F V 35.6 29.4 3.4 1.1 11.02618 TCL Communication 824 5.04 4.90 -3 H 6.0 6.2 1.6 6.7 24.61300 Trigiant Group 266 1.32 2.00 52 B 5.7 5.2 0.7 7.9 12.5
856 V ST Holdings 334 1.78 3.00 69 B 5.9 4.2 0.7 7.0 14.3763 ZTE 6,485 12.12 17.00 40 B 13.1 10.5 1.1 1.9 9.8
000063 ZTE -A @@@ 7,614 14.23 18.00 26 B 18.4 14.8 1.5 1.4 9.8Househo ld /Personal (Ch ina/HK )
1880 Belle Int'l 5,175 4.76 6.25 31 B 7.1 8.0 1.3 14.8 16.42111 Best Pacific Int'l Hldgs 606 4.60 4.90 7 B 13.7 12.1 2.7 2.9 20.86388 Coach @ ^^^ 1,020 28.50 24.47 -14 H 28.3 25.6 4.6 3.3 17.7
210 Daphne International 249 1.17 1.00 -15 H nm nm 0.4 0.0 -1.21169 Haier Electronics 4,716 13.10 17.38 33 B 11.2 10.9 2.0 0.9 17.21044 Hengan 10,929 69.80 72.00 3 H 21.2 19.7 4.9 3.0 23.7
600612 Lao Feng Xiang@@@ 2,074 42.37 42.21 0 H 20.7 18.1 4.9 2.4 25.6494 Li & F ung 5,218 4.81 11.30 135 B 8.5 7.4 2.0 8.3 25.8
2331 Li Ning 821 3.38 4.80 42 B 425.8 18.1 1.7 0.0 10.2311 Luen Thai 171 1.28 1.55 21 B 13.4 7.3 0.4 2.3 6.0
000333 Midea Group Co Ltd@@@ 21,143 32.10 35.97 12 B 10.7 9.3 2.8 3.7 27.81382 Pacific Textile 1,864 10.00 13.00 30 B 13.5 12.1 4.1 8.0 33.91913 Prada 8,675 26.30 24.67 -6 H 16.9 23.0 2.5 3.7 10.9
600690 Qingdao Haier@@@ 7,850 8.33 8.55 3 H 11.2 10.2 2.0 2.7 18.5531 Samson Holding 349 0.89 1.24 39 B 14.1 13.1 0.7 13.5 5.7
1910 Samsonite Int'l ^^ 4,554 25.05 27.65 10 H 23.0 19.9 3.3 2.0 16.11023 Sitoy Group 364 2.82 3.20 13 H 6.9 7.1 1.3 8.2 17.91836 Stella International 2,007 19.60 19.20 -2 H 16.5 15.0 2.0 4.3 13.32678 Texhong Textile Group 867 7.60 8.00 5 B 9.5 7.1 1.4 3.1 18.7
321 Texwinca 1,346 7.56 8.55 13 B 13.5 12.4 1.7 7.4 13.8
Source: DBS Vickers
# P/NAV ; '@ denominated in USD ; @@@ denominated in RMB; ^^^ Valuation based on US-listed share; ^^ Core profit and EPS
Market Focus
Monthly market wrap
Page 31
DBSV universe comparison table (con’t)
St ockc ode St oc k name
M k tCap
(US$m)
SharePric e
(HK $)
T argetPric e
(HK $)upside
(% ) RemdPE (x )
15FPE (x )
16FPB (x )
15FY ld (% )
15FRO E (% )
15FIndust rials
1 CK Hutchison # 46,265 93.00 123.00 32 B 11.3 10.7 0.0 3.1 8.0517 Cosco International 826 4.18 5.20 24 B 19.1 19.5 0.8 3.8 4.2
1366 J iangnan Group 689 1.31 2.00 53 B 5.8 5.5 0.9 4.3 15.62314 Lee and Man Paper 2,990 5.09 5.90 16 B 10.1 8.9 1.4 3.5 14.52689 Nine Dragons 3,362 5.59 6.50 16 B 15.5 16.4 1.0 1.5 5.23393 Wasion Group 566 4.32 5.00 9 H 8.5 8.1 0.9 5.6 10.8
In f rast ruc t u re152 Shenzhen International 3,109 12.70 14.36 13 B 11.9 11.2 1.3 2.5 10.9
Inv est ment Serv ic es (Ch ina / HK )806 V alue Partners Group 1,775 7.45 7.66 3 H 50.2 33.2 3.6 2.1 10.9
M ed ia 752 Pico F ar East 334 2.12 2.56 21 B 9.4 8.5 1.5 6.6 17.3511 TV B 1,637 29.00 28.00 -3 H 15.5 17.4 1.7 9.0 9.2
Pharmac eut ic al & Healt h Care2877 China Shineway 948 8.89 9.00 1 H 9.3 9.2 1.2 4.5 12.1
570 China Traditional Chinese Medicine 2,109 3.65 6.70 84 B 18.1 13.6 1.2 0.0 8.71681 Consun Pharmaceutical 485 3.81 5.20 36 B 12.5 10.9 1.9 0.0 16.4
000999 CR Sanjiu Medical & Pharm@@@ 3,258 21.55 26.40 23 B 16.9 16.7 2.8 0.7 15.5853 Microport Scientific 745 4.04 2.20 -46 F V n.a. 82.3 2.4 0.0 2.8
1498 PuraPharm Corporation 101 3.49 4.20 20 B 24.0 14.4 1.7 0.0 11.21066 Shandong Weigao 2,694 4.67 5.10 9 H 15.7 14.0 1.6 1.9 11.31099 Sinopharm Group 11,877 33.30 32.00 -4 H 20.5 17.4 2.6 1.3 14.0
600535 Tasly Pharmaceutical Group 5,876 35.21 32.00 -9 H 21.7 19.3 6.0 1.6 28.0300026 Tianjin Chase Sun Pharm@@@ 2,158 13.91 21.40 54 H 22.8 18.5 2.7 0.5 13.8
2393 Yestar International 872 3.11 4.00 29 B 34.5 24.5 4.9 1.3 18.72120 Wenzhou Kangning Hospital 395 42.00 50.00 19 B 34.1 31.2 2.7 0.7 8.3
002603 Yiling Pharmaceutical 2,679 15.38 14.20 -8 H 38.9 31.9 3.5 0.5 10.5Propert ies (Ch ina) (2 )
3383 Agile Property # 2,232 4.42 3.67 -17 H 10.4 6.5 0.0 8.8 5.6832 Central China # 469 1.49 1.52 2 B 3.8 4.6 0.0 7.9 9.4
1224 CC Land # 754 2.26 2.06 -9 H 5.2 24.9 0.0 3.9 1.581 China Overseas Grand Oceans # 730 2.48 3.00 21 B 6.6 3.5 0.0 0.0 13.6
688 China Overseas # 31,456 24.75 30.30 22 B 7.3 7.7 0.0 2.5 15.51109 China Resources Land # 17,116 19.16 27.40 43 B 7.4 8.3 0.0 3.0 13.22202 China V anke 27,660 19.44 19.60 1 H 10.5 9.0 0.0 3.3 18.6
000002 China V anke-A @@@ 34,760 24.43 19.31 -21 B 15.8 13.6 0.0 2.2 18.62007 Country Garden # 8,859 3.07 3.70 21 B 5.6 6.9 0.0 5.0 14.33333 Ev ergrande Real Estate # 10,153 5.76 6.45 12 H 9.9 8.4 0.0 5.0 13.1
fsg sp F irst Sponsor Group @@ 1 1.19 1.57 32 B 13.0 11.5 0.0 1.4 6.4817 China J inmao Holdings # 3,067 2.23 2.66 19 B 6.4 7.0 0.0 3.6 9.0813 Shimao Property # 4,816 10.76 12.39 15 B 5.1 6.3 0.0 6.4 9.5272 Shui On Land # 2,100 2.03 2.18 7 H 17.3 15.2 0.0 2.5 2.4
3377 Sino-Ocean Land # 3,390 3.50 4.40 26 H 10.1 6.3 0.0 3.6 8.0410 Soho China # 2,620 3.91 3.60 -8 H 31.6 105.4 0.0 21.3 0.4337 Greenland (Hong Kong) % # 990 2.75 4.97 81 B 15.8 7.7 0.0 0.0 10.9
Yllg sp Yanlord Land # @@ 1,774 1.22 1.35 11 B 7.6 8.5 0.0 1.2 6.2123 Yuexiu Property # 1,806 1.13 1.00 -12 H 11.6 10.9 0.0 4.2 3.6
Source: DBS Vickers
@@ denominated in SGD; # P/NAV; @@@ denominated in RMB
Market Focus
Monthly market wrap
Page 32
DBSV universe comparison table (con’t)
Stockcode Stock name
MktCap
(US$m)
SharePrice
(HK$)
TargetPrice
(HK$)upside
(%) RemdPE (x )
15FPE (x )
16FPB (x )
15FY ld (%)
15FROE (%)
15FPropert ies (HK) #
1113 CK Property 26,398 53.25 57.00 7 B 13.2 10.8 0.0 2.6 7.041 Great Eagle 2,704 31.50 24.50 -22 H 11.8 12.7 0.0 8.7 3.0
101 Hang Lung Properties 8,973 15.48 15.45 0 H 15.8 15.6 0.0 4.8 3.412 Henderson Land 20,671 48.50 52.00 7 B 14.5 16.2 0.0 3.0 3.9
HKL SP Hongkong Land @ 15,011 6.38 8.16 28 B 16.6 17.5 0.0 3.0 2.914 Hysan Development 4,639 34.35 36.15 5 B 16.0 15.6 0.0 3.8 3.4
173 K. Wah Intl 1,376 3.76 3.47 -8 B 8.1 8.0 0.0 4.5 6.0683 Kerry Properties 3,934 21.15 24.60 16 B 8.8 8.3 0.0 4.3 4.5488 Lai Sun Development 451 0.12 0.15 28 B 8.0 11.8 0.0 2.2 1.366 MTR 29,023 38.40 39.15 2 B 20.6 25.9 0.0 2.8 5.217 New World Dev 9,245 7.74 7.80 1 B 10.0 10.1 0.0 5.4 3.916 SHK Properties 36,566 98.05 115.90 18 B 14.3 12.6 0.0 3.4 4.983 Sino Land 9,712 12.22 12.54 3 B 13.9 15.0 0.0 4.1 4.2
1972 Swire Properties 15,231 20.20 26.00 29 B 16.7 17.9 0.0 3.5 3.088 Tai Cheung 473 5.94 7.51 26 B 6.6 9.5 0.0 5.1 5.5
369 Wing Tai Properties 813 4.70 5.46 16 B 5.7 15.4 0.0 3.2 1.7Railway & Const ruct ion
1800 China Comm Construction 19,513 9.36 7.10 -24 H 8.6 8.0 1.0 2.7 11.9601800 China Comm Construction-A @@@ 23,766 11.40 10.70 -6 H 12.4 11.5 1.4 2.2 11.9
1186 China Railway Construction 17,363 9.92 11.60 17 B 8.8 8.7 0.9 1.7 11.0601186 China Railway Construction-A @@@ 18,290 10.45 10.50 0 H 11.0 10.9 1.2 1.6 11.0
390 China Railway Group 18,197 6.18 7.60 23 B 10.0 9.4 1.1 1.5 11.3601390 China Railway Group-A@@@ 22,024 7.48 7.90 6 H 14.3 13.4 1.5 1.2 11.3
1766 CRRC Corp 26,626 7.57 9.25 22 B 14.4 12.8 1.5 2.1 11.5601766 CRRC Corp-A @@@ 33,238 9.45 11.15 18 H 21.3 19.0 2.2 1.7 11.5
3311 China State Construction 6,337 12.12 12.20 1 H 11.7 9.8 2.3 2.7 21.9Real Estate Inv estment T rust
2778 Champion REIT 3,102 4.16 4.59 10 B nmf nmf 0.5 4.8 2.4778 Fortune REIT 2,096 8.59 9.21 7 B nmf nmf 0.7 5.5 3.1
6139 J inmao Investment 1,132 4.39 4.93 12 H nmf nmf 1.1 9.9 4.8808 Prosperity REIT 561 3.02 3.12 3 B nmf nmf 0.6 5.9 2.6435 Sunlight REIT 861 4.09 4.38 7 B nmf nmf 0.5 5.4 3.4823 Link REIT 13,632 47.15 48.50 3 B nmf nmf 0.9 3.9 4.1
Restaurants341 Café de Coral 1,764 23.45 25.00 7 H 23.0 26.7 3.7 3.3 13.8
Retailers814 Beijing J ingkelong 94 1.76 1.48 -16 H 24.4 18.5 0.4 3.4 2.0653 Bonjour Holdings 141 0.32 0.33 3 FV 2.5 22.2 1.0 0.6 4.5116 Chow Sang Sang 1,099 12.60 14.01 11 B 7.5 9.4 0.9 4.9 9.7330 Esprit Holdings 1,704 6.80 6.10 -10 FV nm nm 1.1 0.0 -3.8709 Giordano 710 3.51 3.45 -2 H 12.9 12.3 2.0 7.7 16.1
3308 Golden Eagle % 1,935 8.94 8.17 -9 H 13.0 14.8 2.5 3.1 16.3493 Gome Elec Appliances % 2,895 1.00 1.26 26 H 11.7 9.7 0.8 3.4 10.2980 Lianhua Supermarket 431 2.99 2.41 -19 H n.a. n.a. 1.0 0.0 -2.2
Source: DBS Vickers
^ EPS and Net Profit exclude fair value changes on investment properties; % - Fully Diluted EPS; # P/NAV; '@ denominated in USD ; @@@ denominated in RMB
Market Focus
Monthly market wrap
Page 33
DBSV universe comparison table (con’t)
St oc kc ode St oc k name
M k tCap
(US$m)
SharePric e
(HK $)
T argetPric e
(HK $)upside
(% ) RemdPE (x )
15FPE (x )
16FPB (x )
15FY ld (% )
15FRO E (% )
15FRet ailers ( con t 'd )
1212 Lifesty le 2,657 12.86 8.72 -32 H 11.1 11.8 1.9 4.9 15.7590 Luk F ook 1,340 17.70 21.34 21 B 6.5 10.8 1.2 6.2 11.1
1438 Nirvana Asia Ltd 762 2.19 2.85 30 B 8.8 13.9 2.0 5.7 14.1178 Sa Sa 887 2.38 2.71 14 H 8.1 16.4 2.7 9.9 17.0
1700 Springland Int'l 440 1.41 1.40 -1 H 6.1 6.8 0.6 7.6 8.46808 Sun Art Retail Group 7,157 5.82 5.20 -11 H 19.1 18.4 2.3 3.3 11.9
Sof t w are & Comput er Serv ic es1310 HKBN Ltd. 1,239 9.56 12.50 31 B 92.1 27.2 6.3 2.1 22.2
268 Kingdee 956 2.53 3.90 54 B 55.2 30.8 1.9 0.0 6.0600588 Yonyou Network Tech@@@ 4,320 19.11 14.00 -27 F V 86.5 57.8 5.1 0.8 8.6
St eel, alumin ium & copper347 Angang Steel 3,432 3.68 3.33 -10 H nm nm 0.5 0.0 -4.7
000898 Angang Steel-A @@@ 3,870 4.15 2.77 -33 F V nm nm 0.7 0.0 -4.7600019 Baoshan Iron & Steel Co-A@@@ 14,159 5.57 7.14 28 B 33.2 41.4 0.8 1.5 1.9
1378 China Hongqiao Group 5,325 5.69 6.50 14 B 8.2 7.1 0.8 2.6 12.2323 Maanshan I & S 1,777 1.79 1.20 -33 F V nm nm 0.6 0.0 -25.1
600808 Maanshan I & S-A @@@ 2,740 2.76 1.70 -38 F V nm nm 1.2 0.0 -25.1486 United Co RUSAL PLC 5,288 2.70 4.06 50 B 11.4 19.1 16.0 0.0 58.9
T elecom Serv ic es (Ch ina)941 China Mobile 234,766 88.95 124.00 39 B 14.1 13.0 1.7 3.0 12.3762 China Unicom 28,275 9.16 10.40 14 B 17.5 15.9 0.8 2.2 4.9728 China Telecom 40,268 3.86 4.50 17 B 13.0 12.9 0.9 2.5 6.6
T elecom Serv ic es (HK )1883 CITIC Telecom 1,409 3.23 3.70 15 B 13.6 13.0 1.6 3.9 11.76823 HKT Trust 10,970 11.24 10.30 -8 H 21.6 22.3 2.3 4.8 10.2
215 Hutchison Telecom 1,690 2.72 2.70 -1 H 14.3 14.9 1.1 5.2 7.6315 SmarTone 1,780 12.84 12.40 -3 H 14.4 15.5 3.5 4.7 21.9
T ransport at ion - Po rt s & A irport s694 Beijing Capital Intl A irport 4,661 8.35 10.10 21 B 18.4 16.6 1.7 2.2 9.7144 China Merchants Hldgs 7,738 23.10 31.00 34 B 12.4 12.3 0.9 3.3 7.0
1199 COSCO Pacific 3,159 8.26 10.50 27 B 8.2 9.2 0.6 4.9 7.2Ut it il ies
1816 CGN Power 14,587 2.49 3.40 37 B 14.3 12.1 1.7 2.0 13.1Warehouse
925 Beijing Properties 471 0.54 0.67 24 B n.a. n.a. 0.8 0.0 -0.3600340 China F ortune Land Dev@@@ 11,486 25.18 31.60 25 B 14.0 11.2 4.9 2.1 37.8
1668 China South City 1,536 1.49 1.94 30 H 3.1 16.6 0.5 9.8 2.9200053 Shenzhen Chiwan Petroleum 741 16.43 20.39 24 B 30.2 35.1 1.8 0.3 4.9
Source: DBS Vickers
@@@ denominated in RMB
Market Focus
Monthly market wrap
Page 34
DBSV universe comparison table (con’t)
St o c kc o de St oc k name
M k tCap
(US$ m)
SharePric e
(HK $ )
T argetPric e
(HK $ )ups ide
(% ) RemdPE ( x )
15 FPE (x )
1 6FPB ( x )
15 FY ld (% )
15FRO E (% )
15FW at er In f rast ruc t u re, En v iro nment al
371 Beijing Enterprises Water % 5,218 4.65 5.90 27 B 16.4 13.1 2.5 2.0 17.7300070 Beijing Originwater@@@ 7,864 40.45 56.30 39 B 36.5 21.6 3.7 0.2 15.8
1381 Canv est Env ironment Protection 933 3.62 4.20 16 B 26.6 18.7 3.1 0.0 15.3257 China Ev erbright Intl 5,040 8.72 10.20 17 B 18.8 15.7 2.3 2.1 13.7
CEWL SP China Ev erbright Water @@ 1,237 0.64 0.69 8 B 23.4 19.0 1.4 0.5 7.01363 CT Env ironmental Group 1,848 2.27 2.75 21 B 19.3 17.7 4.2 1.2 21.26136 Kangda International 469 1.76 1.65 -6 H 8.0 7.5 0.9 0.0 11.9
SIIC SP SIIC Env ironment @@ 1,149 0.69 0.69 1 H 18.6 15.6 1.3 0.0 8.01065 Tianjin Cap Env ironmental 798 4.34 4.30 -1 H 15.7 13.0 1.2 1.9 8.8
600874 Tianjin Cap Env ironmental-A @@@ 1,483 8.06 6.50 -19 S 34.8 28.7 2.6 0.9 8.8CEL SP CITIC Env irotech @@ 1,170 1.40 1.55 11 H 38.1 25.8 1.8 0.3 6.9
Source: DBS Vickers
@@ denominated in SGD; @@@ denominated in RMB
% - Fully Diluted EPS
Market Focus
Monthly market wrap
Page 35
DBSV 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 GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers (Hong Kong) Limited (“DBSVHK”) This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd and DBSVHK, 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 DBSVHK. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVHK, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document 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 and it may not contain all material information concerning the company (or companies) referred to in this report. 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. 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. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-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. 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 this report. As of 3 May 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBSVHK and its subsidiaries do not have a proprietary position in the securities recommended in this report as of 27 Apr 2016.
2. Compensation for investment banking services: DBS Bank Ltd., DBSVS, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from Beijing Properties Holdings Limited (925 HK), Nirvana Asia Limited (1438 HK) and Purapharm Corporation Limited (1498 HK) as of 31 Mar 2016. DBS Bank Ltd., DBSVS, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for Nirvana Asia Limited (1438 HK) and Purapharm Corporation Limited (1498 HK) in the past 12 months, as of 29 Feb 2016. 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.
China / Hong Kong Daily Focus Summary
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