2010 09 09 DBS Strategy Multi Baggers Riding On China

China / Hong Kong Market Focus
Strategy
Page 1
9 September 2010
Multi-baggers riding on China’s

long-term structural changes HSI: 21,402
• Changes in next ten years may be even more amazing ANALYST

than in the past two decades Derek Cheung· (852) 2971 1703 ·
derek_cheung@hk.dbsvickers.com
• Key long-term winners: Alternative energy,
Commodity, Consumption, Construction, Education,
Key Indices
Equipment manufacturers, Financials, Healthcare, Hi-
tech manufacturers, Housing, Leisure, Airlines and
Current -1 Mth %
Railways
Hang Seng Index 21,402 -1.3%
• Short-term, Hang Seng Index will remain highly HS Large Cap 1,745 -0.9%
volatile and range bound (19,000-23,000). Stock HS Mid Cap 4,568 2.1%
valuations are no longer cheap, whilst policy risks and HS Small Cap 2,435 3.6%
uncertainty on the global macro front will continue to HS China Aff 4,163 1.5%
limit material upside. HS China Ent 11,956 -1.7%
Astonishing changes. China has evolved from a supplier

of cheap manufacturing labour to a1.3bn strong market
Market Key Data
driven by a rising middle class, rapid urbanisation,
resulting in rising demand for housing and autos etc.
Major infrastructure projects, eg high-speed railways, are (%) EPS Gth Div Yield
09E 10F 11F 09E 10F 11F
seen everywhere.
HSI 12.6 23.0 14.7 2.9 3.1 3.4
Sit tight, more to come. China is becoming an HSCCI (Red) 10.9 20.0 11.1 1.7 1.9 2.1
important consumer market for the rest of the world. It is HSCEI (H) 25.3 27.6 17.1 2.4 2.8 3.1
moving towards making the RMB an international (x) PER EV/EBITDA
currency. This will in turn create huge opportunities for 09E 10F 11F 09E 10F 11F
Hong Kong and Shanghai as its financial centres. HSI 17.4 14.1 12.3 9.0 7.4 6.7
HSCCI (Red) 19.7 16.4 14.8 n.a. n.a. n.a.
Healthcare, environmental and alternative energy sectors
HSCEI (H) 15.6 12.2 10.4 n.a. n.a. n.a.
will continue to enjoy favourable policies in view of aging
population. Rising affluence will create demand for a
Source: Bloomberg, DBS Vickers
healthier environment, better education and more leisure
options including air travel. As reflected in its strong
Based on closing prices as at 7 Sep 2010
market share on telecom equipment and high-speed trains
plus its success in the space industry, China will become
increasingly competitive on exports of hi-tech and high-
value-added products. We believe China will remain a
mega construction site for at least another decade,
meaning the commodity cycle uptrend remains intact.
Key long-term winners. Air China (753), China High
Speed Transmission (658), Brilliance (1114), Maanshan
Iron (323), China Merchant Bank (3968), Ping An
Insurance (2318), China Resource Land (1109), China
Railway Construction (1186), Golden Eagle (3308), Li Ning
(2331), China Yurun (1068), Tingyi (322), Beijing
Enterprise Water (371), China South Locomotive (1766),
Comba (2342), Jiangsu Expressway (177).
In Singapore, this research report or research analyses may only be distributed to Institutional “Recipients of this report, received from DBS Vickers Research (Singapore) Pte Ltd
Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, (“DBSVR”), are to contact DBSVR at +65 6535 9688 in respect of any matters arising from
Chapter 289 of Singapore. or in connection with this report.”
www.dbsvickers.com
Refer to important disclosures at the end of this report
ed- JS / sa- DC
46
Market Focus
China/HK Strategy update
Still a long way to go sectors will experience exponential growth, offering significant
profit making opportunities for equity investors. Key winners
Cautious six-month horizon will come from the following sectors:
We continue to believe the market will remain highly volatile • Alternative energy
on account of its high valuations, and uncertainties on the • Commodity
domestic policy and global economic fronts. Liquidity may • Consumption
remain supportive on the back of quantitative easing in the US • Construction
and speculation about relaxation in China’s tightening policies.
• Education
RMB appreciation has been disappointing to many, while
exports to western countries are expected to slow going • Equipment manufacturers
forward. Impact from one-off events, low-base, restocking and • Financial – Hong Kong / Shanghai
favourable policies etc, are dissipating. We maintain our • Healthcare
19,000-23,000 Hang Seng Index trading range. Any • Hi-tech manufacturers
breakthrough from this range within the next six months will • Housing
likely be on the downside. We would view this as an
• Leisure
opportunity to accumulate the following names at more
attractive valuations. • Transportation – Airlines, Railway
For long-only funds, we like China Construction Bank (939 China – Focus of next decade
HK), China Merchant Bank (3968 HK), Franshion (817 HK),
China Shenhua (1088 HK), China Yurun (1068 HK), China
Mengniu (2319 HK), Galaxy (27 HK), New World Department
Stores (825 HK), Cheung Kong (1 HK), Hutchison (13 HK), Link
(823 HK), Bank of China Hong Kong (2388 HK), Dah Sing
Financial (440 HK), Ping An Insurance (2318 HK), China
Railway Construction (1186 HK), China South Locomotive
(1766 HK), China Merchant (144 HK), ASM Pacific (522 HK),
Comba (2342 HK) and China Communication Services (552
HK).
For absolute return funds, we would avoid/short BYD (1211

HK), Dongfeng (489 HK), Brilliance (1114.HK), Alibaba (1688
HK), COLI (688 HK), and Agile (3383 HK). For longer term, we
also believe optimism towards airlines stocks, eg China Eastern Source: DBS Vickers
(670 HK) and Cathay Pacific (293 HK) are excessive.
Our preferred long-term winners
From teenager to adult (5-10 year multi-baggers)
We have identified the potential biggest long-term winners
By looking at the expected changes in China’s economic although some of the above-mentioned sectors do not offer a
structure in the coming decade, we believe a number of lot of choices listed in Hong Kong.
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Market Focus
Long-term top picks
Sector Stock pick Comments
Airline Air China (753 HK) 1. Relative to CX, obvious proxy for China's robust aviation growth
2. Strongest exposure to international routes so less impacted by HSR (High-Speed
Railways)
3. Premier brand and seasoned management team with sound execution track record 4.
Partnership with CX (30% rather than CX's 18% in AC)
Alternative China High Speed 1.China’s largest wind turbine gearbox maker
energy Transmission (658 HK) 2.Key beneficiary to policy driven demand of wind turbines.
Automobile Brilliance China (1114) 1. Strong product pipeline and new capacity expansion to cater to rising demand of
luxury cars in China. 2. May use China as the export base for certain products in the future
further expand the earnings stream. 3. Enhances minibus operation through technology
collaboration
Basic Materials Maanshan Iron & Steel 1. Key beneficiary from China's mega construction and investment.
(323 HK) 2. Increased capacity to flat steel products to contribute its growth and margins couple
with Chinese automobile industry's growth.
3. Its rail wheel and rhim business to grow with high speed railway project in China after
completion of current facility upgrading.
Chalco (2600 HK) 1. Key beneficiary from China's consumption market, especially Automobile, home
appliance, drinking package.
2. Active investment on natural resources in both of domestic and oversea market to
trigger higher asset value following price increase in commodities.
China Bank China Merchants Bank 1. Strong retail banking franchise in coastal areas
(3968 HK) 2. Fastest growing bank with best internal capital generation given sector high ROE
3. CMB has the least exposure to local government funding vehicle loans
China Insurance Ping A n Insurance 1. Number 2 player in both life and P&C insurance, skillfully managing premium growth
(2318 HK) and profitability
2. High agent productivity and strong presence in affluent major cities.
China Properties China Resources Land 1. With strong support from its parent, China Resources Group, and SOE background, CRL
(1109 HK) has better expansion power over its peers;
2. With a large retail portfolio and strong retail management expertise, it will benefit
from the rising consumption power in China.
Construction & China Railway 1. Flat organisation structure allows greater flexibility in a highly competitive domestic
Material Construction (1186 HK) market. 2. Wide overseas presence allows greater business potentials. 3. Proactive
management style to business transformation means company is moving ahead of pack.
Consumer Golden Eagle (3308 HK) 1. Strong regional play based in the affluent Jiangsu Province
Discretionary 2. Sound fundamentals, attractive track record and high ROE of >28%
3. Ownership of a large store portfolio to lock-up prime locations
Li Ning (2331 HK) 1. Strong market leadership with improving brand differentiation
2. Outstanding ROE of >40%
3. Clear and consistent strategy to capture long term growth
Consumer Staples China Yurun (1068 HK) 1. Favourable government policy
2. Beneficiary of industry consolidation
3. Solid upstream growth aside, expect acceleration in downstream as capacity expands
Tingyi (322 HK) 1. Clear leader in noodle and tea beverage

2. Continual improvement in efficiency and strong scale translate into better margin
3. Spinoff of beverage business a possibility
Source: DBS Vickers
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Market Focus
Long-term top picks (continued)
Sector Stock pick Comments
Environmental Beijing Enterprise 1. Strong support from parent, Beijing Enterprises Holdings, in getting new projects and
Water (371 HK) financing from banks
2. Solid track record in winning projects with nationwide coverage, increasing daily
treatment capacity from 1.5m tons in FY08 to 4.3m tons by 1HFY10
3. Strong technical team and execution capability
Railway China South 1. Key beneficiary from China rapid demand for locomotive products with its fast
Equipment Locomotive (1766 HK) developing railway sector.
2. Attracting international attention for its high quality locomotive products.
3. China is becoming the largest country in the world with a massive railway network and
that helps create a strong economies of scale for locomotive companies.
Telecom Comba (2342 HK) 1. Comba has good long-term growth prospects domestically, benefiting from the
wireless enhancement requirements subsequent to the layout of 3G network
infrastructures in China, and also good opportunities to grow its revenue base in the
overseas markets; and
2. Comba is strengthening its market leading position and extending its advantages over
competitors in terms of technologies, product offerings, sales distribution networks and
production capacity.
Toll Road Jiangsu Expressway 1. The core asset - Huning Expressway between Shanghai and Nanjing is of high quality,
(177 HK) serving as an 8-lane road transport artery linking China's most urbanized city strip, which
is set to see sustained traffic growth thanks to increasing car ownership in the long term;
2. Superior defensiveness than peers, underpinned by best liquidity, strong operating cash
flow, and highest yield among the peers based on 78% payout.
Source: DBS Vickers
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Market Focus
Rising Wages in China • We like Brilliance China (1114 HK) for its production
platform and capacity expansion plus joint venture with
Rising wages is the first discussion topic in analysing the BMW.
aforementioned long-term structural changes in China.
Bank & Financial (Neutral)
In view of various serious disputes and protests, various major
• We do not foresee a decline in earnings estimates on the
cities/provinces have raised their respective minimum wages
back of this trend. Wages at Chinese banks have already
although many factories have been paying materially higher
been rising rapidly in the past few years. There is great
wages already. We believe these mark the beginning of a
demand for skilled and experienced bankers from the
structural upward shift in labour costs in China.
expansion of mid-cap banks and entry of foreign banks.
China minimum wages Thus we believe market estimates have already factored in
City Min. wage after % Rise double digit wage increases for 2010-2012.
adjustment (Rmb)
Shanghai 1,120 16.7 • Small banks are at higher risk from wage pressure. Rising
wage pressure will impact small-mid cap banks more than
Zhejiang 1,100 14.6
large-cap banks. For one, large cap banks have scale. Staff
Guangzhou 1,030 19.8
costs only amount to 18-19% of income vs. 23-24% for
Beijing 960 20.0 mid-cap banks such as CMB (3968 HK), CNCB (998 HK)
Tinjiang 920 12.0 and CMBC (1988 HK). Secondly, mid-cap banks are still
Dongguan 920 20.0 expanding their branches and headcount. But large-cap
Hainan 830 37.0 banks’ headcount additions are much milder.
Qinghai 750 28.8
• Capital substitution will create loan demand. Automation
requires funding, and we expect loan demand will
Source: HKET increase, particularly from SMEs. BoCom (3328 HK) and
CMBC (1988 HK) have larger exposure to SMEs at the
The longer term impact from rising wages on different sectors moment. However, we expect all banks will target this
are set out below: segment if loan demand spikes.
Airlines (Winner) China Property (Winner)
• The impact on airlines would be in the longer-term as • Rising wages will enhance purchasing power for
people would travel more by air when they become richer. properties.
We like Air China (753 HK) for its strongest overseas
exposure and relative resilience to competition from high- • Manufacturers moving inland will accelerate urbanization
speed trains. rates and increase housing demand in the region.
Auto (Winners and Losers) • Growing consumption, driven by rising wages, will boost
the retail sector and create more demand for retail space.
• Foreign JVs have better mechanization production
processes and therefore rising wages will have a wer Chinese retailers (Winner)
impact on earnings.
• Rising wages will lift overall purchasing power and support
• Due to different production locations, the southern region domestic demand.
will likely have a higher wage impact compared to the
central and northern regions, which have lower minimum • Cost impact on chain retailers should be minimal as most
wage requirements. staff salaries already surpass minimum wages and will
continue to adjust upwards according to market practice.
• Chinese/local brand automakers will face bigger
challenges a they have lower automation rates. • Demand for staples likely to see a greater boost in the
near-term, while discretionary merchandise should also
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Market Focus
see stronger demand over the medium-term as wages fabrics are less affected given higher automation in their
continue to rise in the coming years. manufacturing process.
• We like China Resources Land (1109 HK) for its strong • Similar to most consumer plays, we see longer-term
parental support and large retail portfolio. benefit as consumption ability picks up for apparel brands
and retailers, as well as manufacturers of products for
Coal (Minimal Impact) domestic sales.
• Average labour cost accounts for 10% of COGS. • Our top picks: Li Ning (2331 HK) and Golden Eagle (3308
HK)
• Gradual shift towards less labour usage is imminent due to
improving technology and safety concerns. Consumer – Catering (Neutral)
• Expect increase in cost to be passed on to the users. Coal • Though wages account for around 15% of sales for
price is benchmarked against international price – restaurants, we don’t expect material impact on catering
production cost in China is at c.10% discount to companies in China. Catering players have demonstrated
Australian miners but c.30% more than Indonesian relative stronger ability to pass on costs to consumers in
miners. the past and we believe they would continue to do so in
future. Meanwhile, chain restaurant-operators, based on
• Our top pick: Yanzhou Coal (1171 HK). their economies of scale, should be more competitive than
other smaller and individual operators facing the trend of
China Ports (Winner)
rising wages in China.
Benefit from the rising wages, due to:
• Geographically, restaurant location for catering players are
• Improved rail connections, inland port construction and quite diversified, thus wage pressure in certain regions
seamless intermodal transportation should facilitate the would have limited impact on total. Labor migration back
ongoing flow from the hinterland to inland regions; to inland China would effectively increase the labor supply
and stimulate consumption, and eventually benefit
• Increasing construction in inland areas is expected due to restaurants located there. We expect catering players to
the urbanization trend in that region. This needs more open more restaurants in 2nd and 3rd tier cities, as
imported raw materials and energy. In addition, already observed from Ajisen and Little Sheep.
enterprises in coastal area are likely to import more
advanced machinery to enhance productivity. • Hence, we believe the rising wage impact on catering
companies would be Neutral. In the longer term, it would
• Increasing domestic consumption led by rising wages, be positive considering the rising purchasing power of
which requires more imported raw materials and energy, Chinese consumers.
and high-end products.
Consumer - F&B (Neutral)
• Our top pick: COSCO Pacific (1199 HK) among the two
port conglomerates and Dalian Port (2880 HK) among the • The impact on F&B companies is relatively limited as
three single location operators wages account for only a small proportion of costs (5%-
8% of cost of good sold “COGS”). Moreover,
Consumer - Apparel & Textile (Winner and Loser) geographic locations for F&B plants (like Want Want (151
HK)) tend to be diversified hence wage pressure in one
• Limited impact on apparel retailers as staff salaries are particular region would have limited impact on its overall
usually performance-based. wage cost.
• Manufacturers would likely face some pressure. This is • Looking ahead, F&B companies, most of which have
especially the case for those operating in coastal areas and abundant cash, are expected to invest more to increase
involved in the more downstream garment-making the automation levels of their manufacturing operations in
business. Upstream players such as those in yarns and order to hedge against rising wages. We have already
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Market Focus
observed this in certain companies like Mengniu (2319 • Rising wages will also accelerate the adoption of
HK). And they would also shift more production to the automation, which will lead to stronger demand for
plants in inland China to further mitigate the impact of automation systems; hence it is positive for China High
rising wages. Precision Automation (591 HK).
• Hence, we think the rising wage impact on F&B Infrastructure Construction (Winner)
companies would be Neutral in general. Nevertheless, in
the longer term , rising wages would translate into • This industry requires largely low skilled workers and
stronger purchasing power, and eventually benefit the therefore they have little bargaining power for wage
F&B players in China. increase.
• We like China Yurun (1068 HK) and Tingyi (322 HK) long- • Infrastructure constructors usually outsource the manual
term. portions to subcontractors and therefore face lower wage
pressure.
Environmental (Minimal impact)
• Abundant supply of low skilled labourers.
• Water sewage treatment and waste-to-energy operations
require minimum labour but water supply operations • Our long-term top picks are China Railway Construction
require slightly more staff for administrative work. (1186 HK).
However, they are not highly skilled workers and possess
limited bargaining power. Insurance (Winner)
• At the construction stage of these water and waste-to- • China’s insurance penetration remains relatively low
energy plants, a lot of construction workers are required, compared to the rest of the world at c.3% of GDP per
but again, they have little bargaining power. capita. Increased wages will increase funds available for
insurance.
• Hence, rising wages should not have material impact on
the environmental protection sector. • Life insurers will be direct beneficiaries as excess
disposable income can be used to purchase discretionary
Macau Gaming (No impact) savings and investment type insurance products.
• Macau median wage at MOP8,500 per month and Macau • Property & casualty insurance demand is less elastic, but
gaming industry average wage at MOP15,390 per month long-term impact of wealth may increase factors such as
car ownership, which will boost demand.
• Raising the minimum wage in China should have no effect
on the Macau industry as the rise is not enough to • Our long-term top pick is Ping An Insurance (2318 HK).
encourage these band of population to gamble
Internet & Software (Winners)
• Gaming revenue is driven by VIPs that makes up c.80% of
the total gaming revenue • Rising wages should drive demand for internet usage and
prompt enterprises to increase IT spending to counter
• Our top picks: Galaxy (27 HK) and SJM (880 HK). rising wages.
Industrials (Winner and Loser) • All companies will benefit in the long run.
• Rising wages have mixed impact on the industrial sector • We think Kingdee (268 HK) is a potential multi-bagger in
three to five years.
• Impact will depend on how labour intensive the industries
are. Industries with labour cost accounting for >10% of Power (Minimal Impact)
COGS should suffer more, including manufacturers of
shoes, garments, toys, etc. Capital intensive industries • Average labour cost accounts for 9% of COGS.
should suffer less, including textile, paper, and packaging.
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Market Focus
• Growing capex to shift towards more efficient energy use efficiency improvement, considering what is required of
and better environmental protection will eventually reduce the business nature for the technology sector.
labour use.
• On the flip side, rising wages also help domestic
• Tariff adjustment holds the key for profitability, but there consumption in China and benefit demand in key
is still lack of cost pass through mechanism for the China technology end markets, such as mobile handsets,
power sector. personal PCs, game consoles, etc., therefore, the effects
of the two should even out each other to some extent.
Steel (Neutral or Structural Loser)
Toll Roads (Winner)
• Labour cost of Chinese steel companies accounts for c
3~6% of COGS and the labor production cost per ton is • Labor costs have never been an issue of China's toll road
estimated at c 30% of the global average. companies.
• Despite lower labor cost than the other regions, the total • Average monthly salary was as high as RMB7, 521 in
cost per ton of Chinese steel companies is not competitive 2009, almost 4 times of the national average, which
compared to the regional peers. means there's almost no risk of labor dispute for toll road
companies.
• The impact of rising wages may be neutral in the event
that Chinese steel producers can catch up productivity
Labor cost per head in 2009 – Toll Roads
and efficiency of its peers. However there is possibility to
become structural losers if there is no enhancement of Code Company Labor cost per
technology and productivity. head in 2009
(RMB/month)
Telecom Services (Winner) 107 HK Sichuan Expressway 9,527
177 HK Jiangsu Expressway 7,877
• Rising wages should drive demand for telecom services,
548 HK Shenzhen Expressway 6,447
especially non-voice data and applications.
576 HK Zhejiang Expressway 7,132
• All telcos will benefit. But we don’t see potential multi- 737 HK Hopewell Highway n.a.
bagger in this sector. 995 HK Anhui Expressway 6,623
Average 7,521
• We still prefer China Telecom (728 HK) on near-term
Source: Companies, DBS Vickers
earnings uplift and sustainable long-term growth.
Technology Hardware and Equipment Sector (Neutral) • Net profit has low sensitivity to labor costs due to high net
margin.
• Direct labour costs generally account for a small
proportion of overall cost of sales vs raw materials and • Toll road companies had an average net margin of 40.7%
other overheads, <10% for the industry players in most in 2009, whilst labor costs accounted for an average of
cases; therefore, wage hike for direct labour in China is an only 7.7% of toll revenue, which makes the bottom line
across-the-board theme, which would not single out a quite insensitive to any hike of labor costs. Our sensitivity
particular few names that have operations and analysis shows average net margin will only dip by 0.8ppt
manufacturing bases in China as beneficiaries or victims. for 10% increase in labor costs.
• In addition to moving production facilities to regions

further inland in China or other cost competitive operating
environment, such as southeast Asia and Indian sub-
continent to maintain the competitive edge, Industrial
Automation (“IA”) is the secular trend for tech industry
players, not only for cost saving purposes, but also for
enhancement in product quality control and production
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Market Focus
Sensitivity analysis – Toll Roads
Code Company Labor Net Net margin

costs % margin as suming
revenue 10% hike in
labor costs
107 HK Sichuan Expressway 10.3% 44.0% 43.0%

177 HK Jiangsu Expressway 6.3% 36.7% 36.1%
548 HK Shenzhen Expressway 10.1% 37.5% 36.5%
576 HK Zhejiang Expressway 7.2% 29.7% 29.0%
737 HK Hopewell Highway 5.6% 58.6% 58.0%
995 HK Anhui Expressway 6.6% 37.7% 37.0%
Average 7.7% 40.7% 39.9%
Source: Companies, DBS Vickers
• Sichuan Expressway (107 HK) and Anhui Expressway (995

HK) are the big beneficiaries. Wage pressures will not only
force some companies to move inland to benefit from
lower labour costs but will also present more geographical
options for foreign invested enterprises to choose
locations inland instead of exiting completely from China.
In 2008, there was a 42% difference in the minimum
wage between the highest paid city, Shanghai, and lower
paid provinces like Anhui and Sichuan. Such movements
are expected to underpin higher traffic, especially freight
traffic, within these two provinces over the long term.
Minimum wage differentials in China
Source: CEIC
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Market Focus
HSCEI – Past 1 year

August Review
16,000
Difficult month. Hang Seng Index (HSI) fell 6% from its peak at
HSCEI
21,802 on 9 August to 20, 537 at end-August on fears of 14,000 50-day MA
continuous deterioration in the global economic outlook. It
then rebounded 4% in early September to 21,402 when both
12,000
China and the US reported slightly better than expected PMI
data, creating a significant amount of short-covering. Buying
interest was very strong among 2nd- and 3rd-tier names. Banks 10,000
250-day MA
were the biggest losers in August falling 4%.
8,000
Sep-09 Dec-09 Mar-10 Jun-10 Sep-10
HSI Sectors Performance - 1M
Source: Bloomberg
Sector % gain
Hongs/Conglomerates 2%
Telecom 1% The major upward revisions in profit forecast came mainly from
Power, Infra & Utilities 0% Swire Pacific (19.HK), Dongfeng Motor (489.HK) and Air China
Properties -1% (753.HK).
Comm/Ind -3%
Banking and Finance -4% Earnings upgrade – Hang Seng Index constituents
Source: DBS Vickers, Bloomberg 2010F Earnings

Current -1m Chg
Technically, HSI's trend seems to have improved, but its 50-day HK$m HK$m %
Banking and Finance 179,910 182,428 -1.4
moving average line is still below its 250-day moving average
Comm/Ind 18,251 17,336 5.3
line.
Hongs/Conglomerates 22,057 19,223 14.7
Power, Infra & Utilities 78,223 77,970 0.3
HS Index – Past 1 year Properties 40,125 38,864 3.2
Telecom 42,198 42,195 0.0
24,000 HSI Total 380,763 378,016 0.7
23,000
50-day MA Source: DBS Vickers, Bloomberg
22,000
21,000
20,000
19,000
18,000
17,000 250-day MA
16,000
15,000
Sep-09 Dec-09 Mar-10 Jun-10 Sep-10
Source: Bloomberg
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55
Market Focus
Earnings upgrade – HSCEI Index constituents Aggregate earnings for HSCEI
2010F Earnings
Current -1m Chg 09 % 10F % 11F %
HK$m 2009 Chg 2010 Chg 2011 Chg
HK$m HK$m %
Consumer 5,441 4,312 26.2 Consumer 3,615 90 5,441 51 5,531 2
Energy 48,334 47,233 2.3 Energy 39,305 18 48,334 23 53,578 11
Financials 83,819 27 102,711 23 122,292 19
Financials 102,711 99,410 3.3
Materials 1,700 -37 5,379 216 6,702 25
Materials 5,379 5,379 0.0 Pharm/Healthcare 280 44 413 48 568 37
Pharma & Healthcare 413 413 0.0 Ppty/Construction 10,239 39 12,343 21 14,652 19
Services -685 -118 2,471 -461 3,610 46
Property & Construction 12,343 12,469 -1.0
Telecom/Tech 3,371 511 4,168 24 5,271 26
Services 2,471 1,932 27.9 Utilities 2,320 -363 2,380 3 2,927 23
Telecom & Technology 4,168 4,168 0.0 HSCEI 143,964 25 183,641 28 215,132 17
Utilities 2,380 2,379 0.0
Total 183,641 177,695 3.3
Source: DBS Vickers, Bloomberg
Source: DBS Vickers, Bloomberg HSI is neither expensive nor cheap. HSI is currently trading at
~15X FY10 PER, which is consistent with the 5, 10 and 20-year
Consensus FY10 profit forecast fell 2%-3% in last quarter. average. This is probably the reason that neither deep value
Consensus profit growth forecast for FY10 has come off; in investors nor short-sellers are making heavy bets, causing low
May, expectations were for 25% and 31% earnings growth for transaction volumes.
HSI and HSCEI, respectively, declining to 23% and 28%
currently. FY11 consensus profit growth forecasts are now Hang Seng Index – PE Band
more reasonable at 15% and 17% for HSI and HSCEI,
respectively.
34,000
22x
Aggregate earnings for HSI
29,000
19x
24,000 15x
09 % 10F % 11F %
HK$m 2009 Chg 2010 Chg 2011 Chg
19,000
12x
Banking and Finance 136,674 16 179,910 32 222,559 24
Comm/Ind 11,597 -2 18,251 21 21,332 9 14,000
Hongs/Conglomerates 19,850 17 22,057 13 23,432 2 9x
Power, Infra & Utilities 64,390 211 78,223 11 85,207 6 9,000
Properties 35,376 39 40,125 57 41,068 17
Telecom 41,687 -11 42,198 1 43,302 3 4,000
HSI Total 309,573 13 380,763 23 436,899 15
Jan-99
Nov-99
Sep-00
May-02
Mar-03
Jul-01
Jan-04
Nov-04
Sep-05
May-07
Mar-08
Nov-09
Sep-10
Jul-06
Jan-09
Source: DBS Vickers, Bloomberg
Source: Datastream, DBS Vickers
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Market Focus
Hang Seng Index – PBV Band Hang Seng China Enterprises Index – PBV Band
41,000 30,500 4.5x

3.1x
36,000 25,500
31,000 2.6x 3.6x
20,500
26,000 2.6x
2.1x 15,500
21,000
1.6x 1.6x
10,500
16,000
11,000 1.1x 5,500 0.6x
6,000 500
Sep-10
Jan-99
Nov-99
Sep-00
May-02
Mar-03
Jul-01
Jan-04
Nov-04
Sep-05
May-07
Mar-08
Jul-06
Jan-09
Nov-09
Jan-01
Oct-01
Jul-02
Apr-03
Jan-04
Oct-04
Apr-06
Jan-07
Oct-07
Jul-05
Apr-09
Jan-10
Oct-10
Jul-08
Source: Datastream, DBS Vickers Source: Bloomberg, DBS Vickers
Hang Seng China Enterprises Index – PE Band Hang Seng forward PE (consensus)
x
35,500
28x 25
30,500
23x
25,500 20
20,500 18x
15
15,500 13x
10,500 10
7x
5,500
5 Average: 13.6x
500
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
0
Jan-80
Jan-82
Jan-84
Jan-86
Jan-88
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Source: Bloomberg, DBS Vickers
Source: DBS Vickers
Page 12
57
Market Focus
Hang Seng forward PBV (consensus)
(x)
3.5
3.0
+2SD
2.5 +1SD
2.0 Mean
-1SD
1.5
-2SD
1.0
0.5
0.0
1993
1995
1997
1999
2001
2003
2005
2007
2009
Source: Bloomberg
Economic Indicators
2006A 2007A 2008A 2009 2010F 2011F

China
GDP Growth (%) 11.6 13.0 9.6 9.1 10.0 9.5
FDI (US$bn) 73 84 108 94 100 100
Exports (yoy %) 27 26 17 -15.8 34 20
Retail Sales (yoy %) 13.7 16.8 21.6 15.5 18.5 17.0
CPI (yoy %) 1.5 4.8 5.9 -0.6 4.0 3.0
Hong Kong
GDP Growth (%) 7.0 6.4 2.1 -2.7 7.0 4.5
CPI (yoy %) 2.0 2.0 4.3 0.5 3.0 3.0
Source: DBS Economics Research
Valuation – HSI
Index Earnings Growth (%) PE (x) Yield (%)

7-Sep 09A 10F 11F 09A 10F 11F 09A 10F 11F
Finance 16 32 24 18.3 13.9 11.3 3.2 3.3 4.0

Power, Infrastructure & Utilities -2 21 9 15.0 12.4 11.3 3.0 3.3 3.5
Properties 17 13 2 17.5 15.5 15.1 2.1 2.2 2.3
Hongs/Conglomerates 211 11 6 18.0 16.2 15.2 2.5 2.6 2.8
Com m/Ind 39 57 17 33.4 21.2 18.2 1.4 1.8 2.2
Telecom -11 1 3 13.1 13.0 12.7 3.3 3.3 3.4
HSI 21402 13 23 15 17.4 14.1 12.3 2.9 3.1 3.4
Source: DBS Vickers
Page 13
58
Market Focus
Valuation – HSCEI
Index Earnings Growth (%) PE (x) Yield (%)

7-Sep 09A 10F 11F 09A 10F 11F 09A 10F 11F
Consumer 90 51 2 20.5 13.6 13.4 0.7 0.9 0.9

Energy 18 23 11 12.5 10.2 9.2 2.7 3.3 3.6
Financials 27 23 19 15.1 12.3 10.3 2.7 3.1 3.4
Materials -37 216 25 52.2 16.5 13.2 0.9 1.9 2.3
Pharmac eutic al & Healthcare 44 48 37 73.7 49.9 36.3 1.0 0.5 0.7
Property & Construction 39 21 19 14.2 11.8 9.9 1.4 1.8 2.1
Services -118 -461 46 -83.4 23.1 15.8 0.3 0.4 0.8
Telecom & Technology 511 24 26 21.3 17.2 13.6 1.4 1.9 2.5
Utilities -363 3 23 15.3 14.9 12.1 3.8 2.1 2.6
HSCEI 11956 25 28 17 15.6 12.2 10.4 2.4 2.8 3.1
Source: DBS Vickers
Freight traffic up m-o-m but growth is decelerating. Combined

Sector Strategy – 6-month horizon
freight traffic saw a 6% m-o-m overall growth in July but
results were mixed among carriers. The growth was largely
For long-only funds, we like China Construction Bank (939
driven by CSA as its freight traffic benefited from the opening
HK), China Merchant Bank (3968 HK), Franshion (817 HK),
of a new route in July between Guangzhou and Amsterdam as
China Shenhua (1088 HK), China Yurun (1068 HK), China
well as CX, whose freight traffic grew by 9.5%. However, AC’s
Mengniu (2319 HK), Galaxy (27 HK), New World Development
freight traffic was relatively flat with a 1% increase m-o-m and
Stores (825 HK), Cheung Kong (1 HK), Hutchison (13 HK), Link
CEA’s even declined 6% m-o-m. Despite the m-o-m growth,
(823 HK), Bank of China Hong Kong (2388 HK), Dah Sing
freight traffic growth is decelerating; YTD in July, combined
Financial (440 HK), Ping An Insurance (2318 HK), China
traffic is up 45.4%, compared to YTD increase of 46.6% in
Railway Construction (1186 HK), China South Locomotive
June.
(1766 HK), China Merchant (144 HK), ASM Pacific (522 HK),
Comba (2342 HK) and China Communication Services (552 Record Passenger Load Factor. Passenger Load Factor (PLF)
HK). inched up 2.5 ppt m-o-m in July to 83.7% led by record PLFs
from all carriers as demand stayed firm heading into the peak
For absolute return funds, we would avoid/short BYD (1211
summer season; the 14.3% increase in overall passenger traffic
HK), Dong Feng (489 HK), Alibaba (1688 HK), COLI (688 HK),
in July outstripped the 10.9% increase in capacity. CX, CEA
and Agile (3383 HK). For longer term, we believe optimism
and CSA set all-time record PLFs at 87.5%, 83.2% and 81.5%
towards airlines stocks, eg China Eastern (670 HK) and Cathay
respectively while Air China recorded its best July PLF ever with
Pacific (293 HK) is excessive.
83.1%. Freight Load Factor (FLF) declined 0.8 ppt m-o-m to
63.1% as freight traffic increased 6% in July compared to a
Airlines - Passenger traffic growth accelerates. Combined
capacity increase of 7.3%.
passenger traffic for the four carriers accelerated in July,
growing 14.3% m-o-m as airlines entered into the traditionally
Air China (753.HK) is our top pick. As 2H kicked off with a
stronger second half. In July, all four carriers recorded double-
strong start with PLFs at a record high, we are optimistic the
digit m-o-m growths in passenger traffic, with China Eastern
momentum will last well into the end of the year. A seasonally
Airlines (670.HK) (CEA) leading the pack with a 17.5% m-o-m
stronger 2H, coupled with the ending of the Shanghai World
increase in passenger traffic as it continues to benefit from the
Expo as well as the Guangzhou Asian Games, should allow
Shanghai World Expo; China Southern Airlines (1055.HK)
demand to stay intact and give rise to higher yields. Our top
(CSA) was second with a 16.6% increase; Air China (753.HK)
picks within the sector are Cathay Pacific (293 HK) and Air
(AC) and Cathay Pacific (293.HK) (CX) saw growth of 12.6%
China (753 HK).
and 10.3%, respectively. Overall passenger traffic for the four
carriers is up 23% YTD in July from a year ago.
Page 14
59
Market Focus
Banking – Solid 1H10 results. China Minsheng Bank (1988 HK) (3900.HK), Sino-Ocean (3377.HK), SPG Land (337.HK), and
kicked off the 1H10 results season with a bang, by posting a Shimao (813.HK) recorded largest increase in net gearing ratio.
better-than-expected 146% yoy gain in core net profit. Two SOHO China (410.HK) remained in net cash position. Only
other mid-cap banks, China Merchants Bank (3968 HK, CMB) Franshion (817.HK) and Shenzhen Investment (604.HK)
and China CITIC Bank (998 HK, CNCB), also followed with witnessed de-leverage.
upbeat 2Q10 results. However, the larger banks, Bank of
Communications (3328 HK, BoCom) and China Construction Gross margin improved but still lower than FY08. The 16
Bank (939 HK, CCB), reported 2Q10 numbers that were only in companies reported average gross margin of 38% in 1H10, an
line. A key trend is mild NIM improvement for the sector due to improvement from 36% in FY09 or 35% in 1H09, while still
liability re-pricing. However, individual banks have been able to below 41% in FY08. Companies with the highest gross
boost their risk-weighted assets (hence yield) after raising new margins were SOHO China, Franshion, and Agile.
capital. We are also seeing a pickup in operating cost inflation
but better-than-expected asset quality, leading to lower credit Commercial plays will continue to outperform. Outlook for
costs than forecast. residential market continues to be clouded by policy headwinds
and new supply in the last four months of this year. We believe
Positive on a twelve month view; but overhang still lingers in commercial plays will continue to outperform. Our top picks
near term. We are confident on an eventual re-rating of the remain CR Land (1109 HK), SOHO China (410 HK) and
Chinese banks on a twelve month horizon. We expect there Franshion (817 HK).
will be more clarity on monetary policy and asset quality by
that time, eliminating the uncertainty that is dampening Consumer – Worries on rising agricultural prices escalated
sentiment in 2010. Moreover, liquidity will no longer be following the recent drought in Russia and floods in China.
constrained by capital raising after 2010. Thus we expect the International wheat prices surged as much as 60%+ since late
banking sector can still do well in 2H10 due to already cheap June while corn prices rose 15%+. Lately, cotton prices have
valuations, but the real gains will likely be in 2011 once capital also been on an uptrend, rising over 13% rise since mid-July.
raising and asset quality overhangs ease.
While cost inflationary pressures are definitely looming,
We continue to recommend CCB as our top large cap pick, domestic prices in China have been relatively immune from the
premised on its upcoming rights issue as a re-rating catalyst. sharp volatility seen in the international market. With most of
We also like CCB as it is the largest beneficiary of a Rmb its agricultural production being self-sufficient (with the
appreciation in the sector. CCB’s ROE would also offer more exception of soybean), we expect more moderate price
upside than other large cap banks when policy interest rates movement in China relatively to international prices. Having
are raised. Meanwhile, CMB is our favored mid-cap pick due to said that, margin pressure for agricultural product users such as
its sector-low exposure to local government funding vehicle F&B players should likely continue, especially for those using
loans, and fastest book value growth outlook. imported materials such as palm oil and barley.
China Property - Sector consensus view: supply-driven Interim results released so far have been largely in line, with
transactions to pick up with ASP correction. Developers F&B players showing margin erosion as effect of higher raw
announced interim results last month. Generally, management material cost kick in while retail chains reported decent
foresee policies to remain tight with implementation details to growth.
be out piecemeal. Supply should pick up in the coming months
Within the sector, we like China Yurun (1068 HK) which
as a large number of projects commenced construction 10 to
should see strong topline growth with margin upside. We also
12 months ago. Besides, developers may cut prices to ease
like China Foods (506 HK) and China Mengniu (2319 HK) on
cash flow. Developers with strong balance sheets will deem
valuations. For consumer discretionary, we prefer New World
2H10 as an opportune time to purchase land. On the other
Dept. Store (825 HK), a laggard in the recent rally. Our other
hand, others may slow down expansion to improve their
picks include Li Ning (2331 HK) and Lianhua Supermarket (980
balance sheets.
HK).
Balance sheet worsened. We tracked 16 companies that
HK Property - Market rallied as buying interest was revived.
announced 1H10 results. The average net gearing ratio has
After the Ho Man Tin luxury site fetched better-than-expected
worsened to 64% from 44% as at end-09 and is only 7ppts
prices in early June, buying interest in the residential market
lower than the 71% reported as at end-08. Greentown
has recovered remarkably, with speculative activities spilling
Page 15
60
Market Focus
over to suburban areas. Home prices rose 2.2% m-o-m in July accelerating network upgrades to 3G and fibre; 2) inroads into
following a 1.2% rise in June. Favourable market fundamentals the European market in system products; and 3) inroads into
such as strong housing affordability and a benign interest rate the US market in terminals sales. Comba’s (2342 HK) current
environment remain intact, and inevitably contributed to the price has priced in the negatives, and we see a promising
physical market rally. outlook from 2H10. Comba is our sector top pick, and we
suggest also accumulating ZTE and CCS (552 HK).
High home prices, heightened policy risk. The two land
auctions will be in the spotlight of the property market in Toll Road - 7M2010 nationwide highway traffic up 17% and
August, but investors should not ignore the next Policy Address 22% for passenger and freight, respectively. In July 2010,
due in October. Last October, the government first voiced its passenger traffic and freight traffic grew 8% and 16% y-o-y
concern over rising home prices in its Policy Address, but respectively. Although the growth momentum seems to be
residential prices have risen another 11% since then. With losing steam, we are not concerned with the decelerating
residential property prices still rising, the expectation is that the growth. In our opinion, traffic growth is historically in line with
government may be under greater public/political pressure to the growth in economy, and annual growth rate around or
introduce more measures to cool down the market. above 10% is considered healthy. Assuming traffic volumes
remain sequentially stable for the rest of 2010, we project
Multiple catalysts for Cheung Kong (1 HK). The government 2010 full year growth rates will be 11% and 14% for China’s
should at least continue with bumper land sales that will lead highway passenger and freight traffic, respectively.
to normal home supply after 3-4 years. With its strong balance
sheet with low gearing of 6.8% as at Jun 10, Cheung Kong is Duo drivers - auto sales & foreign trade gaining strength.
poised to gear up for value-accretive acquisitions. This should According to latest statistics from China Passenger Car
prompt NAV growth and support upside to the share price. Association, Aug auto sales rebounded from Jul and ended the
Valuation is also attractive with ex-Hutchison stub trading at declining trend since Apr, recording 9% m-o-m expansion and
26% discount. Elsewhere, the market is turning more positive 18.5% y-o-y growth in Aug. We expect the sales growth
towards Hutchison Whampoa (13 HK) after its 3G operation momentum to remain for the rest of the year. We believe that
losses narrowed noticeably in 1H10. This should add to China's automobile fleet size is still expanding at this level of
Cheung Kong’s appeal as it derives an estimated 42% of gross monthly auto sales, driving demand for road facilities. On the
worth from its stake in HW. other hand, China's foreign trade is gaining strength, up 31%
y-o-y in Jul in terms of trading value, underpinning YTD growth
Telecoms – Despite China Mobile (CM) (941 HK)’s above- at 41%. The increased foreign trade activities provide support
consensus 1H10 results, management gave no assurance on to freight traffic.
ARPU and growth outlook. We maintained our Hold
recommendation. Looking ahead, we believe CM should Our top picks: Jiangsu Expressway (177 HK) and Anhui
manage to maintain low-single digit growth in revenue and Expressway (995 HK). We raised Jiangsu Expressway’s FY10
profit in the coming two years. However, downside risk is that and FY11 earnings by 21% and 4%, respectively post its
the intensifying competition might 1) accelerate ARPU decline; above-consensus 1H10 results. The revised projection implies a
and 2) result in losing high-end customers market share. China current yield at 5.5% based on 76% payout. We like the
Unicom’s (CU) (762 HK) July subscriber (subs) figures came as counter for its defensive earnings from its key assets between
no surprise to us, moderating the high market expectation on Shanghai and Nanjing, good trading liquidity and highest yield
its 3G business. China Telecom (CT) (728 HK) remains our top among the peers. We also like Anhui Expressway for its
pick; CT is expected to be the only telco to enjoy double-digit attractive valuation, underpinned by 12% FY09-11 earnings
earnings growth in the coming two years. CAGR. Although headline earnings is affected by higher
depreciation & amortization charges after the completion of
The telecom equipment sector has been under selling pressure major reconstruction projects, operating cash flow remains
for the last few months, partly due to cessation of sales to strong, warranting DCF value at HK$7.59, implying close to
India and China telcos’3G capex reduction. ZTE (763 HK)’s 50% upside.
1H10 results was in line with our expectation. With India
market reopening to ZTE and strong momentum in other
overseas markets, we expect growth to improve in 2H10. In
the long run, we believe ZTE should sustain decent double-digit
growth underpinned by 1) telcos in emerging markets
Page 16
61
DBSV HK UNIVERSE: EARNINGS GUIDE
Stock Mkt Mkt price 12-m Av 6m Net Profit EPS CAGR EV/EBITDA P/BV # (Disc) P/Sales Div Yield Latest
Code Company Cap Cap (HK$) target % % chng daily T/O (HK$m) (HK$) 09-11 PER (x) (x) (x) Prem to (x) (%) Reported Data (%) Disclosure
FYE HK$bn US$m 7-Sep (HK$) upside Rcmd 3m 6m 12m (HKm ) 10F 11F 10F 11F (%) 10F 11F 10F 11F 10F NAV 10F 10F 11F Gear ROA ROE Analyst Legend
Banking and Finance (China)
3988 Bank of China Dec 309 39,816 4.07 4.02 (1.2) H 4 0 (3) 1,090.3 110,181 120,340 0.43 0.47 14 9.4 8.6 n.a. n.a. 1.6 n.a. n.a. 4.3 4.7 n.a. 1.0% 16.6% Alexander Lee
3328 Bank of Communications Dec 225 28,910 8.47 9.09 7.3 review 4 1 (10) 357.0 43,921 53,763 0.84 0.98 18 10.1 8.7 n.a. n.a. 1.9 n.a. n.a. 2.7 3.5 n.a. 1.0% 19% Alexander Lee
998 China CITIC Bank Dec 66 8,474 5.31 6.08 14.5 B 7 (12) 2 213.6 22,001 25,760 0.56 0.67 26 9.4 7.9 n.a. n.a. 1.5 n.a. n.a. 2.7 3.2 n.a. 0.9% 13% Alexander Lee
939 China Construction Bank Dec 1,478 190,255 6.58 8.12 23.4 B 6 5 5 1,630.6 153,706 185,222 0.66 0.81 24 10.0 8.1 n.a. n.a. 2.1 n.a. n.a. 4.4 5.4 n.a. 1.2% 21% Alexander Lee
3968 China Merchants Bank Dec 80 10,316 20.50 22.40 9.3 B 13 3 20 477.0 30,055 39,303 1.44 1.86 31 14.2 11.0 n.a. n.a. 2.8 n.a. n.a. 1.7 2.3 n.a. 1.1% 21% Alexander Lee
1988 China Minsheng Bank Dec 29 3,781 7.12 8.52 19.7 B 11 4 n.a. 163.8 17,556 20,906 0.66 0.80 16 10.8 8.9 n.a. n.a. 1.6 n.a. n.a. 1.4 1.7 n.a. 1.0% 17% Alexander Lee
1398 ICBC Dec 485 62,419 5.84 6.67 14.2 B 2 (2) (0) 1,411.1 183,988 215,246 0.55 0.64 21 10.6 9.1 n.a. n.a. 2.2 n.a. n.a. 3.8 4.4 n.a. 1.2% 20% Alexander Lee
Sector 2,673 343,972 561,409 660,541 10.1 8.4
Banking and Finance (HK)
2388 Bank of China HK Dec 236 30,341 22.30 24.60 10.3 B 32 26 36 282.3 15,379 18,846 1.45 1.78 17 15.3 12.5 n.a. n.a. 2.1 n.a. n.a. 4.1 5.0 n.a. 1.2% 15% Alexander Lee
23 Bank of East Asia Dec 64 8,257 31.55 34.65 9.8 B 10 6 13 85.9 3,163 3,725 1.54 1.79 13 20.4 17.6 n.a. n.a. 1.5 n.a. n.a. 2.9 3.4 n.a. 0.0% 0.1% HK Team
440 Dah Sing Financial Dec 14 1,738 51.90 53.00 2.1 review 18 37 15 11.2 1,163 1,436 4.47 5.52 51 11.6 9.4 n.a. n.a. 1.1 n.a. n.a. 0.0 0.0 n.a. 0.7% 6% HK Team
11 Hang Seng Bank Dec 212 27,309 111.00 123.60 11.4 B 7 (1) (3) 186.4 14,251 16,207 7.45 8.48 11 14.9 13.1 n.a. n.a. 3.1 n.a. n.a. 4.7 5.7 n.a. 1.7% 24% Alexander Lee
388 HK Exchanges & Clearing Dec 143 18,368 132.40 95.00 (28.2) FV 11 (2) (9) 541.0 4,367 4,462 4.05 4.12 -3 32.7 32.1 n.a. n.a. 17.6 n.a. n.a. 2.8 2.8 n.a. 8.7% 61% Alexander Lee
5 HSBC Holdings Dec 1,395 179,575 79.25 91.00 14.8 review 9 (5) (6) 1,754.5 82,002 115,205 4.68 6.51 57 16.9 12.2 n.a. n.a. 1.3 n.a. n.a. 3.0 4.1 n.a. 0.2% 5% HK Team
349 ICBC Asia Dec 39 4,959 28.50 22.20 (22.1) review 49 67 74 42.5 2,244 2,657 1.71 1.94 0 16.7 14.7 n.a. n.a. 1.9 n.a. n.a. 2.9 3.7 n.a. 1% 16% HK Team
302 Wing Hang Dec 25 3,271 86.15 81.50 (5.4) review 20 25 16 32.7 1,596 2,067 5.36 6.95 31 16.1 12.4 n.a. n.a. 1.8 n.a. n.a. 1.1 3.7 n.a. 1% 10% HK Team
Sector 1,892 243,477 124,165 164,606 17.1 13.0
Basic Materials
347 Angang Steel Dec 14 1,819 13.02 14.30 9.8 review 36 (15) (23) 216.2 5,594 7,212 0.77 1.00 190 16.8 13.1 4.0 3.1 1.4 n.a. 0.8 3.0 3.9 57% 1% 1% E Y Lee / P H Ho
3983 China BlueChem Dec 10 1,253 5.50 6.40 16.4 B 19 3 28 28.0 1,493 1,988 0.32 0.43 33 17.0 12.8 8.5 6.3 2.1 n.a. 3.3 1.7 2.3 cash 8% 10% Rachel Miu
1898 China Coal Energy Dec 48.459 6,236 11.80 12.00 1.7 H 16 (8) 9 327.9 11,621 13,559 0.88 1.02 23 13.5 11.5 7.7 6.6 1.9 n.a. 2.0 1.1 1.5 cash 8% 13% P H Ho / J Ng
1088 China Shenhua Energy Dec 103 13,208 30.20 41.00 35.8 B 1 (16) (12) 609.1 41,149 49,922 2.07 2.51 18 14.6 12.0 8.0 6.5 2.7 n.a. 3.9 2.4 2.9 5% 11% 20% J Ng / P H Ho
323 Maanshan I & S Dec 8 1,077 4.83 5.01 3.7 review 39 (3) (9) 100.8 1,909 2,313 0.25 0.30 127 19.5 16.1 2.4 1.8 1.2 n.a. 0.5 2.6 3.1 36% 1% 1% E Y Lee / P H Ho
1171 Yanzhou Coal Dec 34 4,320 17.14 23.20 35.4 B 4 (3) 45 333.7 7,186 8,490 1.71 1.73 34 10.0 9.9 6.5 5.2 2.2 n.a. 2.4 2.6 3.0 cash 22% 27% J Ng / P H Ho
Sector 26,094 63,358 76,272 13.8 11.8
Conglomerates-HK
19 Swire Pacific # ^ Dec 89 11,479 98.50 115.10 16.9 B 16 7 13 185.3 13,685 10,601 9.10 7.05 12 10.8 14.0 14.8 19.5 0.8 -24.4% 3.5 3.2 3.6 21% 4% 6% Jeff Yau
4 Wharf Holdings # Dec 123 15,841 44.70 48.00 7.4 review 17 9 20 17.0 7,807 7,488 2.83 2.72 -2 15.8 16.4 13.8 12.9 0.8 -22.5% 6.3 2.2 2.2 19% 4% 7% Jeff Yau
20 Wheelock # Dec 49 6,288 24.05 29.70 23.5 B 11 6 5 17.0 5,004 5,578 2.46 2.75 12 9.8 8.8 7.3 6.4 0.7 -34.8% 2.0 0.5 0.5 27% 1% 4% Jeff Yau
Sector 261 33608 26,495 23,667 12.4 13.4
Consumer Goods
Automobiles and Parts
1114 Brilliance China Dec 19 2,442 3.80 4.00 5.3 review 54 86 279 64.6 1,264 1,603 0.25 0.32 n.a. 15.0 11.8 7.5 6.5 2.7 n.a. 6.5 0.0 0.0 cash -11% -30% Rachel Miu
489 Dongfeng Motor Group Dec 38 4,917 13.38 14.00 4.6 review 69 15 59 328.8 12,140 11,393 1.41 1.32 26 9.5 10.1 4.3 4.1 2.7 n.a. 0.9 1.1 1.0 cash 9% 25% Rachel Miu
175 Geely Automobile Dec 21 2,672 2.81 2.90 3.2 H 10 (29) 35 176.2 1,827 2,156 0.25 0.29 23 11.2 9.5 6.8 5.1 2.3 n.a. 7.1 1.6 2.1 cash 8% 22% Rachel Miu
Sector 78 10031 15,231 15,152 10.9 10.3
Food and Beverages
506 China Foods Dec 16 2,052 5.71 6.70 17.3 B 33 (16) 12 28.8 509 829 0.18 0.30 21 31.4 19.2 14.4 10.2 2.7 n.a. 0.8 1.1 2.0 cash 5% 11% T Wu / A Hui
904 China Green % Apr 6 4,850 7.19 9.56 33.0 review 9 (19) (1) 31.7 584 685 0.59 0.70 15 12.1 10.3 6.5 5.3 1.9 n.a. 2.9 2.3 2.3 cash 13% 19% Rachel Miu
2319 China Mengniu % Dec 41 5,220 23.35 24.90 6.6 review 1 (9) 11 143.3 1,475 1,878 0.85 1.08 18 27.5 21.6 13.9 11.0 3.7 n.a. 1.2 0.7 0.9 cash 8% 17% A Hui / T Wu
1068 China Yurun Dec 50 6,391 28.15 30.40 8.0 review 29 13 104 194.0 2,348 2,684 1.37 1.52 18 20.6 18.5 15.6 13.5 4.1 n.a. 2.6 1.3 1.5 cash 16% 26% A Hui / T Wu
124 Kingway Brewery Dec 4 485 2.20 1.45 (34.1) review 47 37 66 1.8 69 95 0.04 0.06 76 54.4 39.5 11.7 9.9 1.2 n.a. 2.2 0.0 0.0 6% -1% -1% Alice Hui
322 Tingyi Holding Dec 112 14,415 20.05 18.00 (10.2) H 14 (2) 38 90.7 3,333 4,016 0.60 0.72 16 33.6 27.9 15.6 12.9 8.5 n.a. 2.3 1.5 1.8 cash 12% 29% Alice Hui
168 Tsingtao Brewery Dec 29 3,684 43.70 40.00 (8.5) H 19 8 44 60.0 1,763 1,976 1.30 1.46 16 33.5 29.9 16.8 14.8 5.4 n.a. 2.6 0.5 0.6 cash 18% 18% Titus Wu / Alice Hui
345 Vitasoy Mar 6 806 6.15 5.20 (15.4) review 5 16 39 5.8 280 315 0.28 0.31 20 22.3 19.8 11.9 10.6 4.6 n.a. 2.1 4.0 4.2 cash 11% 17% Alice Hui
151 Want Want China Dec 82 10,592 6.23 6.30 1.1 H 1 3 49 110.1 2,793 3,453 0.21 0.26 19 29.4 23.8 21.1 16.6 10.3 n.a. 4.8 2.9 3.6 cash 21% 33% A Hui / T Wu
Sector 346 48494 13,155 15,932 28.0 23.1
DBSV Universe 1 of 5
62
Household/Personal
1044 Hengan Dec 89 11,406 72.40 75.00 3.6 H 22 21 58 126.8 2,437 3,043 2.00 2.50 19 36.2 29.0 25.3 20.3 8.7 n.a. 6.7 1.8 2.2 3% 13% 21% Patricia Yeung
494 Li & Fung Dec 154 19,854 40.45 45.00 11.2 B 12 0 38 304.4 5,037 6,635 1.33 1.67 35 30.3 24.3 25.0 20.2 7.9 n.a. 0.1 2.6 3.3 13% 8% 22% Patricia Yeung
2331 Li Ning Dec 26 3,286 24.30 34.65 42.6 B (3) (4) 7 119.9 1,313 1,602 1.25 1.53 21 19.4 15.9 11.5 9.2 6.6 n.a. 0.2 2.1 2.5 cash 20% 40% Alice Hui
3828 Ming Fai Dec 2 220 2.85 3.50 22.8 B (0) 65 132 8.4 109 186 0.18 0.29 34 16.2 9.9 8.7 5.2 1.9 n.a. 1.5 2.5 4.0 cash 9% 12% Patricia Yeung
1868 Neo-Neon Dec 5 604 5.13 8.39 63.5 B 17 (16) 48 19.9 240 324 0.26 0.35 35 19.5 14.5 12.4 8.9 1.4 n.a. 2.9 1.3 1.7 cash 4% 6% Patricia Yeung
321 Texwinca * Mar 11 1,386 8.07 8.45 4.7 review 5 3 23 13.5 1,007 1,166 0.76 0.87 16 10.6 9.2 7.3 5.8 2.4 n.a. 1.0 6.0 7.0 11% 15% 26% Alice Hui
1386 Walker Group Mar 1 116 1.45 0.72 (50.3) review 3 16 104 0.4 1 38 0.002 0.061 n.a. 694.7 23.6 14.1 9.0 1.3 n.a. 0.8 0.0 1.1 cash 14% 20% Alice Hui
551 Yue Yuen Sep 41 5,273 24.85 27.10 9.1 B 8 5 13 76.5 3,954 4,456 2.40 2.70 11 10.4 9.2 7.5 6.8 1.6 n.a. 1.0 4.3 4.9 23% 9% 17% Patricia Yeung
Sector 328 42145 14,099 17,449 22.7 18.8
Consumer Services
Gambling
27 Galaxy^ Dec 24 3,031 5.97 7.40 24.0 B 59 82 96 30.9 1,197 1,721 0.29 0.42 281 20.6 14.4 16.1 10.7 2.7 n.a. 1.3 0.0 0.0 15% 5% 12% Ken Chen
1928 Sands China Dec 97 12,531 12.10 13.20 9.1 H 12 11 n.a. 121.6 4,172 4,333 0.52 0.54 61 23.3 22.5 12.1 10.6 3.0 n.a. 3.2 0.0 0.0 52% 3% 9% Ken Chen Note 2
880 SJM Dec 39 4,959 7.43 9.40 26.5 B 30 68 94 97.5 3,670 3,999 0.67 0.73 110 11.0 10.1 5.6 4.8 3.9 n.a. 0.7 4.5 4.9 cash 4% 12% Ken Chen
1128 Wynn Macau Dec 72 9,292 13.92 16.50 18.5 B 9 33 n.a. 129.8 3,890 4,198 0.75 0.81 42 18.6 17.2 12.6 10.7 9.4 n.a. 3.3 0.0 0.0 74% 15% 92% Ken Chen
Sector 232 29814 12,929 14,250 18.3 16.6
Retailers
984 Aeon Stores Dec 4 469 14.02 15.96 13.8 B 25 9 11 0.4 273 282 0.86 1.08 25 16.3 12.9 8.8 7.0 2.8 n.a. 0.4 3.0 3.8 cash 7% 20% Mavis Hui
814 Beijing Jingkelong % Dec 2 226 9.62 10.84 12.7 B 22 22 92 3.7 218 256 0.49 0.48 8 19.5 20.0 9.5 8.4 2.3 n.a. 0.2 2.8 2.5 73% 3% 11% Mavis Hui Note 2
330 Esprit Holdings * Jun 53 6,822 41.15 41.60 1.1 H (5) (29) (19) 295.0 4,226 4,119 3.35 3.20 -8 12.3 12.9 10.3 8.0 3.3 n.a. 1.6 3.4 4.7 Cash 52% 28% Alice Hui
709 Giordano Dec 7 893 4.65 5.00 7.5 review 40 85 106 10.5 482 538 0.32 0.36 37 14.4 12.9 8.0 7.2 2.9 n.a. 1.5 5.6 6.2 cash 11% 14% Alice Hui
393 Glorious Sun Dec 3 414 3.04 3.06 0.7 H 0 6 11 3.1 264 294 0.25 0.28 7 12.2 10.9 4.1 n.a. 1.5 n.a. 0.5 5.7 6.4 cash 27% 4% Alice Hui
3308 Golden Eagle % Dec 40.594 5,224 20.90 18.36 (12.2) review 33 41 96 47.2 1,018 1,308 0.53 0.68 27 39.4 30.6 23.1 17.8 11.3 n.a. 14.9 0.7 1.0 cash 14% 41% Mavis Hui
493 Gome Elec Appliances % Dec 35 4,534 2.34 2.64 12.8 review (5) (13) 5 248.2 2,257 2,930 0.13 0.16 18 18.5 14.2 5.7 3.5 2.3 n.a. 0.6 1.3 1.7 cash 4% 14% Mavis Hui
980 Lianhua Supermarket Dec 6.5 840 31.55 36.85 16.8 B 11 24 79 20.1 720 857 1.16 1.38 21 27.3 22.9 9.5 7.2 6.0 n.a. 0.6 1.3 1.5 cash 3% 20% Mavis Hui
1212 Lifestyle Dec 30 3,897 18.04 16.80 (6.9) H 23 33 66 18.0 1,135 1,311 0.68 0.79 17 26.5 23.0 16.6 13.3 4.4 n.a. 0.8 1.5 1.8 cash 10% 20% Mavis Hui
825 New World Dept Stores Jun 12.4 1,595 7.35 8.80 19.7 B 16 6 28 10.3 570 707 0.34 0.42 14 21.8 17.5 9.8 8.7 2.5 n.a. 6.2 2.1 2.6 cash 12% 19% Mavis Hui
398 Oriental Watch * Mar 1 149 2.97 2.51 (15.5) review 69 90 96 2.7 113 141 0.30 0.38 11 9.8 7.8 7.8 6.5 0.8 n.a. 0.2 1.6 2.3 6% 6% 9% Mavis Hui
3368 Parkson Dec 39 4,958 13.72 14.60 6.4 H 11 4 21 57.1 1,206 1,576 0.43 0.56 23 31.9 24.4 18.3 14.0 7.5 n.a. 7.6 1.4 1.8 cash 9% 27% Mavis Hui
178 Sa Sa Mar 8 1,076 5.99 6.41 7.0 review 6 0 79 20.0 375 451 0.27 0.33 19 22.1 18.3 14.9 12.5 7.1 n.a. 0.7 4.1 4.9 cash 21% 28% Mavis Hui
8277 Wumart Dec 9 1,193 17.28 17.01 (1.6) H 20 22 39 16.9 650 833 0.51 0.65 26 34.1 26.6 17.1 13.3 5.1 n.a. 1.4 1.2 1.5 cash 7% 19% Mavis Hui
Sector 251 32,290 13,506 15,603 20.4 17.5
Media
282 Next Media Mar 3 329 1.06 1.48 39.6 review (12) (6) 5 1.9 270 284 0.11 0.14 16 9.5 7.4 3.7 4.4 0.7 n.a. 0.8 0.0 0.0 cash 11% 15% Mavis Hui
752 Pico Far East Oct 2 214 1.38 2.04 47.8 B 6 (7) 22 2.1 177 216 0.15 0.18 32 9.3 7.6 3.9 3.1 1.6 n.a. 0.6 5.3 6.5 cash 6% 14% Mavis Hui
511 TVB Dec 17 2,218 39.35 45.17 14.8 B 7 4 17 21.8 1,097 1,233 2.51 2.82 17 15.7 14.0 8.5 7.6 2.8 n.a. 3.8 4.1 4.7 cash 13% 16% Mavis Hui
Sector 21 2761 1,544 1,733 13.3 12.0
Travel & Leisure
538 Ajisen China Dec 12 1,576 11.44 11.00 (3.8) review 46 60 123 14.8 416 530 0.39 0.50 30 29.4 23.0 15.5 11.8 4.6 n.a. 4.5 1.5 2.0 cash 12% 14% T Wu / A Hui
753 Air China Dec 41 5,244 9.25 10.70 15.7 B 19 34 92 160.8 9,484 10,249 0.73 0.79 32 12.7 11.7 7.8 7.3 2.7 n.a. 1.4 0.0 0.0 251% 5% 22% P Yong / T Hsu
341 Cafe de Coral * Mar 12 1,537 21.25 19.00 (10.6) H 13 16 31 9.3 513 589 0.92 1.06 15 23.1 20.1 13.5 11.7 4.1 n.a. 2.4 2.9 3.4 cash 18% 20% Alice Hui
293 Cathay Pacific Dec 79 10,150 20.05 20.00 (0.2) review 32 40 75 102.0 10,503 9,317 2.67 2.37 41 7.5 8.5 5.9 5.5 1.5 n.a. 1.0 3.5 3.5 62% 4% 12% Paul Yong
670 China Eastern Airline Dec 14 1,862 4.14 4.78 15.5 B 27 29 72 74.8 5,527 2,302 0.58 0.24 199 7.2 17.2 6.5 7.8 5.7 n.a. 0.5 0.0 0.0 2563% 0% -3% P Yong / T Hsu
1055 China Southern Airlines Dec 9 1,220 3.82 4.78 25.1 B 17 19 51 81.4 3,631 2,722 0.36 0.27 139 10.6 14.2 7.0 6.3 1.4 n.a. 0.4 0.0 0.0 409% 0.4% 4% Paul Yong
45 HK & Shanghai Hotels Dec 19 2,462 12.96 12.90 (0.5) H 1 15 45 8.3 445 593 0.30 0.40 37 42.8 32.1 n.a. n.a. 0.6 n.a. 4.4 0.7 0.8 9% 1% 11% Ken Chen
968 Little Sheep Dec 5 682 5.14 5.30 3.1 review 25 22 38 6.9 222 286 0.21 0.28 27 23.9 18.5 13.2 10.3 4.0 n.a. 2.4 1.7 2.2 cash 13% 16% T Wu / A Hui
Sector 192 24732 30,740 26,588 10.5 11.7
63
Construction and Materials
1800 China Comm Construction Dec 33 4,188 7.35 8.00 8.8 B 7 (3) (21) 125.7 10,349 12,206 0.70 0.82 22 10.5 8.9 7.1 5.5 1.5 n.a. 0.3 1.9 2.2 55% 3% 15% Rachel Miu
1186 China Railway Construction Dec 22 2,843 10.64 14.12 32.7 B 13 10 (11) 103.9 9,456 11,576 0.77 0.94 24 13.9 11.3 4.5 3.0 1.9 n.a. 0.3 1.8 2.0 Cash 3% 13% Rachel Miu
390 China Railway Group Dec 25 3,178 5.87 7.77 32.4 B 16 (1) (20) 101.7 9,518 11,534 0.45 0.54 21 13.1 10.8 7.0 5.9 1.6 n.a. 0.3 1.5 1.8 6% 2% 12% Rachel Miu
1766 China South Locomotive Dec 14 1,795 6.89 7.45 8.1 review 28 22 50 48.5 2,913 3,430 0.25 0.29 34 28.1 23.8 14.2 11.8 3.7 n.a. 0.9 1.0 1.2 cash 3% 10% Rachel Miu
3311 China State Construction Dec 12 1,588 4.17 4.50 7.9 review 80 29 21 25.6 799 989 0.27 0.33 22 15.4 12.5 8.5 6.6 2.5 n.a. 0.8 1.9 2.4 cash 6% 18% Rachel Miu
Sector 106 13,591 33,035 39,734 13.4 11.2
Industrial
2300 AMVIG Dec 5 651 5.48 5.50 0.4 H 11 51 (2) 12.1 551 564 0.60 0.61 35 9.2 9.0 4.6 3.7 1.1 n.a. 1.8 3.3 3.3 1% 4% 7% Patricia Yeung
569 China Automation Dec 6 727 5.54 7.20 30.0 B 2 (3) 36 9.9 334 459 0.33 0.46 35 16.7 12.1 11.4 8.3 3.2 n.a. 3.1 1.4 2.1 cash 12% 19% Rachel Miu
591 China High Precision Automation Jun 5 581 4.35 6.70 54.0 B (2) (20) n.a. 7.2 265 387 0.30 0.37 11 14.6 11.7 9.6 8.4 2.6 n.a. 5.4 1.0 1.3 cash 32% 53% Patricia Yeung
658 China High Speed Dec 22 2,884 18.00 21.00 16.7 B 8 4 1 113.5 1,609 1,893 1.29 1.52 31 13.9 11.8 10.9 8.9 3.5 n.a. 2.6 2.0 2.4 74% 10% 24% Dennis Lam
517 Cosco International Dec 7 890 4.58 5.96 30.1 B 21 17 33 26.8 772 916 0.51 0.61 4 9.0 7.6 6.8 5.8 1.0 n.a. 1.5 2.2 2.6 cash 11% 14% HK Team
336 Huabao * Mar 36 4,687 11.58 10.90 (5.9) review 22 30 40 55.6 1,340 1,603 0.43 0.51 19 26.8 22.6 22.1 17.6 9.6 n.a. 15.4 1.8 1.3 cash 31% 40% Patricia Yeung
2314 Lee and Man Paper * Mar 27 3,514 6.00 7.40 23.3 B 8 (0) 62 80.2 1,833 2,213 0.40 0.49 171 14.9 12.3 12.2 10.5 2.7 n.a. 2.5 2.3 2.0 64% 11% 20% Patricia Yeung
2689 Nine Dragons Jun 53 6,846 11.44 14.20 24.1 B 10 (6) 18 139.9 2,428 3,260 0.54 0.71 27 21.2 16.1 14.8 12.3 2.4 n.a. 2.6 0.5 0.6 83% 5% 12% Patricia Yeung
757 Solargiga Energy Dec 3 391 1.68 2.10 25.0 B 35 (7) (26) 4.3 117 261 0.07 0.15 n.a. 25.6 11.5 17.7 9.6 1.8 n.a. 1.5 1.4 3.1 9% -5% -7% Dennis Lam
Sector 165 21,171 9248 11557 16.0 13.0
Infrastructure, Environmental
371 Beijing Enterprises Water % Dec 11 1,468 2.51 3.70 47.4 B (6) (6) 60 16.8 407 816 0.09 0.18 110 26.7 14.0 20.3 14.6 3.1 n.a. 1.9 0.0 0.0 77% 3% 9% Patricia Yeung Note 2
257 China Everbright Intl Dec 13 1,664 3.55 4.90 38.0 B 17 (15) 17 23.3 539 768 0.15 0.21 36 24.0 16.8 16.7 13.4 2.5 n.a. 4.7 0.6 0.9 25% 5% 10% Patricia Yeung
3989 New Environmental Energy % Dec 0 52 0.48 2.10 337.5 B (39) (76) (48) 8.0 238 377 0.10 0.13 n.a. 4.8 3.6 5.2 5.7 0.2 n.a. 0.5 0.0 0.0 95% -4% -10% Patricia Yeung
1065 Tianjin Cap Environmental Dec 0.8 108 2.47 2.61 5.7 H 15 (16) 22 4.0 299 271 0.21 0.19 -1 11.8 13.0 4.1 3.6 0.8 n.a. 0.8 1.3 1.2 78% 3% 8% Patricia Yeung
Sector 26 3,292 1,482 2,233 22.8 14.5
Insurance
2628 China Life Dec 228 29,349 30.65 34.20 11.6 review (11) (17) (13) 1,383.5 36,451 46,132 1.47 1.87 18 20.8 16.4 2.5 ** 2.3 ** 3.8 n.a. 2.8 2.5 1.6 n.a. 21% 9% Dennis Lam
2601 China Pacific Insurance Dec 66 8,529 28.65 40.43 41.1 B (3) (12) n.a. 257.5 8,645 10,201 1.01 1.19 12 28.5 24.1 2.0 ** 1.8 ** 2.4 n.a. 2.7 1.1 1.2 n.a. 2% 10% Dennis Lam
2328 PICC Dec 33 4,238 9.53 12.40 30.1 B 35 22 79 166.4 5,597 7,535 0.50 0.68 92 19.0 14.1 n.a. n.a. 4.3 n.a. 33.1 0.0 0.0. n.a. 1% 9% Dennis Lam
2318 Ping An Dec 201 25,834 70.25 84.00 19.6 B 12 9 10 646.6 21,456 27,298 2.92 3.72 31 24.0 18.9 2.4 ** 2.1 ** 4.6 n.a. -44.5 1.0 1.3 n.a. 2% 17% Dennis Lam
Sector 528 67,951 72,150 91,166 22.6 17.8
Oil & Gas
883 CNOOC Dec 605 77,832 13.54 13.95 3.0 H 9 7 27 866.8 48,668 52,831 1.09 1.18 25 12.4 11.4 6.6 6.1 2.6 n.a. 3.6 3.0 3.0 cash 13% 18% HK Team
857 PetroChina Dec 183 23,594 8.69 11.10 27.7 B 0 (8) (7) 732.7 155,160 163,720 0.85 0.89 18 10.3 9.7 5.3 5.0 1.5 n.a. 1.1 4.4 4.6 9% 21% 15% HK Team
386 Sinopec Dec 106 13,691 6.34 7.60 19.9 B 5 2 (7) 548.3 78,299 88,711 0.90 1.02 12 7.0 6.2 4.4 3.7 1.1 n.a. 0.3 3.6 4.0 35% 7% 18% HK Team
Sector 895 115,116 282,127 305,262 10.9 10.1
Pharmaceuticals & Healthcare
1093 China Pharmaceutical Dec 6 806 4.08 5.25 28.7 review (7) (3) (18) 31.1 739 670 0.48 0.44 -17 8.5 9.4 4.0 3.9 1.1 n.a. 0.9 4.7 4.3 2% 12% 20% HK Team
2877 China Shineway Dec 18 2,299 21.60 27.50 27.3 B (9) 19 165 75.7 920 1,152 1.11 1.39 14 19.4 15.5 13.2 10.2 5.0 n.a. 7.5 2.6 3.2 cash 27% 32% HK Team
874 Guangzhou Pharm Dec 2 228 8.05 8.80 9.3 review 13 9 96 13.8 302 375 0.37 0.46 24 21.6 17.4 10.0 8.2 1.6 n.a. 1.4 0.9 1.4 cash 3% 6% HK Team
233 Mingyuan Medicare Dec 3 437 0.91 1.19 30.8 B 6 (30) 4 23.0 191 256 0.05 0.07 69 16.7 12.9 9.7 7.6 1.9 n.a. 6.7 1.2 2.3 cash 5% 6% HK Team
1066 Shandong Weigao Dec 18 2,358 21.40 26.50 23.8 review 28 42 87 26.7 925 1,158 0.86 1.08 26 24.9 19.9 19.6 15.4 5.7 n.a. 6.5 1.0 1.3 cash 17% 23% HK Team
1177 Sino Biopharmaceutical Dec 15 1,869 2.93 3.80 29.7 B (11) 1 160 88.5 524 708 0.11 0.14 27 27.1 20.6 10.4 8.0 3.8 n.a. 3.4 1.8 2.4 cash 11% 17% HK Team
1099 Sinopharm Group Dec 22 2,794 31.45 30.50 (3.0) H 5 (11) n.a. 184.6 1,428 1,960 0.63 0.87 42 49.9 36.3 21.8 16.3 5.3 n.a. 0.3 0.5 0.7 cash 4% 30% HK Team
Sector 84 10,790 1,428 1,960 23.0 19.0
Power (China)
836 China Resources Power Dec 79 10,189 16.82 19.80 17.7 B 7 3 (10) 105.5 5,781 6,429 1.30 1.44 10 13.0 11.7 10.3 9.8 1.8 n.a. 1.8 2.3 2.6 111% 5% 16% June Ng
991 Datang Intl Dec 11 1,365 3.20 2.95 (7.8) H 5 (15) (28) 58.9 2,141 2,904 0.18 0.25 25 17.6 13.0 11.3 10.9 1.2 n.a. 0.6 2.9 3.9 398% 1% 6% June Ng
902 Huaneng Power Dec 14 1,797 4.57 4.80 5.0 H 8 (4) (20) 112.5 5,104 5,558 0.42 0.46 -1 10.8 9.9 9.6 9.4 1.1 n.a. 0.5 2.8 3.0 244% 3% 12% June Ng
Sector 104 13,351 13,026 14,890 13.0 11.5
Power, Infra & Utilities
2 CLP Holdings Dec 144 18,563 59.95 52.80 (11.9) H 9 11 15 154.3 8,449 8,737 3.51 3.63 8 17.1 16.5 9.1 8.9 2.0 n.a. 2.8 4.1 4.1 41% 8% 16% June Ng
3 HK & China Gas Dec 140 18,042 19.52 18.50 (5.2) H 10 17 13 114.5 4,976 5,376 0.69 0.75 -2 28.2 26.1 25.0 23.3 3.9 n.a. 9.3 1.8 1.9 19% 9% 16% W K Lee / J Ng
6 HK Electric Dec 103 13,265 48.30 48.30 0.0 H 4 5 12 134.9 7,343 7,523 3.44 3.52 6 14.0 13.7 16.3 15.4 1.9 n.a. 9.9 4.6 4.7 4% 12% 17% J Ng / W K Lee
1038 Cheung Kong Infrastructure Dec 68.979 8,877 30.60 34.50 12.7 B 10 1 10 36.6 4,617 4,863 2.05 2.16 -7 14.9 14.2 121.3 144.4 1.6 n.a. 29.9 4.2 4.6 6% 9% 12% J Ng
Sector 457 58,746 25,386 26,499 18.0 17.2
64
Properties-China
1224 CC Land # Dec 8 1,081 3.28 2.31 (29.6) FV 33 (7) (32) 17.2 27 412 0.01 0.16 n.a. 307.1 20.4 184.6 51.4 0.7 -29.2% 4.5 0.0 1.0 4% -0.3% -1% Carol Wu
688 China Overseas # Dec 142 18,299 17.40 17.28 (0.7) H 16 (2) (5) 449.3 8,533 8,129 1.04 1.00 4 16.7 17.5 9.4 11.4 1.1 10.8% 2.9 1.2 1.1 23% 7% 20% Carol Wu
1109 China Resources Land # Dec 81 10,385 16.02 18.78 17.2 B 9 (8) (12) 237.0 4,173 5,074 0.83 1.01 6 19.3 15.9 12.4 12.4 0.8 -23.3% 3.8 1.0 1.3 20% 5% 13% Carol Wu
817 Franshion Properties # Dec 21 2,723 2.31 3.05 32.0 B 2 (15) (5) 20.3 972 815 0.11 0.09 -22 21.8 26.0 12.9 15.4 0.5 -47.0% 3.0 0.9 0.7 40% 3% 8% Carol Wu
813 Shimao Property # Dec 48 6,178 13.54 13.94 3.0 H 13 (7) (7) 227.9 4,311 3,929 1.20 1.10 -1 11.3 12.4 9.6 11.4 0.7 -32.0% 1.8 2.7 2.6 65% 2% 5% Carol Wu
272 Shui On Land # Dec 18 2,368 3.57 3.84 7.6 H 9 (11) (25) 52.1 1,277 1,099 0.25 0.22 -41 14.0 16.3 14.4 19.0 0.6 -44.1% 2.6 1.5 1.6 34% 7% 14% Carol Wu
3377 Sino-Ocean Land # Dec 31 4,012 5.53 5.49 (0.7) H (4) (28) (32) 142.5 2,311 2,282 0.41 0.40 12 13.5 13.7 12.6 11.1 0.8 -19.4% 2.2 1.9 1.8 18% 3% 8% Carol Wu
410 Soho China # Dec 28 3,578 5.36 5.39 0.6 review 29 30 18 38.2 4,053 3,092 0.75 0.39 -27 7.2 13.7 4.6 8.2 0.7 -30.4% 1.6 4.2 2.2 Cash 10% 21% Carol Wu
337 SPG Land # Dec 4 517 3.82 3.14 (17.8) review 23 (17) 5 3.7 407 1,367 0.40 1.33 33 9.6 2.9 8.1 5.9 0.5 -51.3% 0.9 3.1 10.5 18% 5% 19% Carol Wu
Sector 369 47542 25,628 24,420 14.7 15.2
Properties-HK
1 Cheung Kong # Dec 239 30,730 103.10 113.70 9.3 B 16 4 6 404.7 22,251 23,898 9.61 10.32 10 10.7 10.0 17.0 14.7 0.9 -11.8% 6.2 2.6 2.7 9% 7% 8% Jeff Yau
41 Great Eagle # Dec 14 1,775 22.15 26.60 18.1 B 11 (3) 24 13.8 1,351 1,329 2.17 2.13 2 10.2 10.4 10.6 10.4 0.5 -52.2% 2.8 2.4 2.4 12% 5% 6% Jeff Yau
10 Hang Lung Group # ^ Jun 66 8,430 48.70 42.90 (10.7) review 22 17 27 37.9 3,695 2,999 2.76 2.24 43 17.6 21.7 7.4 9.0 0.9 -9.1% 5.2 1.6 1.6 5% 2% 4% Jeff Yau
101 Hang Lung Properties # ^ Jun 150 19,303 36.00 30.20 (14.5) review 23 12 30 178.7 6,674 5,375 1.61 1.29 50 22.4 27.9 17.6 21.7 1.1 7.1% 12.4 2.0 2.0 Cash 7% 8% Jeff Yau
12 Henderson Land # ^ Dec 107 13,765 49.40 51.10 3.1 H 4 (11) (3) 220.8 4,024 5,086 1.86 2.35 -9 26.6 21.0 102.9 42.2 0.6 -36.7% 17.8 2.0 2.0 19% 3% 5% Jeff Yau
HKL SP Hongkong Land ^ # @ Dec 98 12,641 5.62 6.25 10.1 review 13 15 40 10.4 801 588 0.36 0.26 -13 15.8 21.5 18.2 21.0 0.9 -12.7% 9.0 2.8 2.8 19% 4% 6% Jeff Yau
14 Hysan Development # Dec 29 3,756 27.75 27.40 (1.1) review 30 20 40 29.7 1,157 1,201 1.10 1.14 4 25.2 24.3 23.6 22.7 0.7 -27.2% 16.5 2.5 2.5 6% 3% 3% Jeff Yau
173 K Wah Intl Dec 7 906 2.76 3.42 21.5 B 12 1 (4) 17.9 789 1,525 0.32 0.62 29 8.6 4.5 10.1 5.6 0.5 -54.8% 2.1 4.0 5.1 37% 6% 11% Jeff Yau
683 Kerry Properties # Dec 58 7,478 40.50 45.65 11.4 B 25 (0) 2 96.8 2,914 4,057 2.03 2.83 37 19.9 14.3 18.4 29.4 0.7 -25.6% 2.8 2.2 3.0 18% 3% 4% Jeff Yau
66 MTR ^ # Dec 166 21,303 28.70 34.30 19.5 B 9 (0) 5 87.0 8,578 8,462 1.49 1.47 7 19.3 19.6 17.4 17.4 0.8 -17.1% 5.8 2.0 2.0 16% 4% 7% Jeff Yau
17 New World Dev # Jun 52 6,675 13.24 13.48 1.6 H 8 (14) (23) 120.8 9,403 4,941 2.41 1.27 52 5.5 10.5 13.8 16.4 0.5 -51.0% 1.6 2.6 2.6 46% 1% 3% Jeff Yau
16 SHK Properties # ^ Jun 299 38,430 116.20 123.20 5.4 H 10 0 1 622.8 15,150 16,674 5.91 6.50 16 19.7 17.9 23.1 17.8 0.8 -15.1% 9.2 2.4 2.6 15% 4% 6% Jeff Yau
83 Sino Land #* Jun 70 9,057 14.36 16.30 12.2 B 11 (6) (7) 100.3 3,506 4,086 0.72 0.83 6 19.9 17.2 20.1 28.6 0.7 -25.2% 9.1 2.8 2.8 16% 4% 6% Jeff Yau
88 Tai Cheung * # Mar 3 396 4.98 5.05 1.3 H 15 9 24 1.6 275 331 0.45 0.54 25 11.2 9.3 10.6 8.6 0.4 -55.1% 5.5 5.4 5.8 Cash 9% 10% Jeff Yau
Sector 1,354 174,250 80,295 80,221 16.2 15.6
Transportation - Marine
1919 China COSCO Holdings Dec 23 2,899 8.73 7.80 (10.7) FV 8 (20) (16) 247.9 583 3,942 0.06 0.39 n.a. 153.1 22.6 14.5 10.7 1.8 n.a. 0.5 0.0 0.8 cash 10% 24% HK Team
2866 China Shipping Container Dec 11 1,390 2.88 2.88 0.0 review 12 (16) (10) 132.9 (1,032) 1,499 -0.09 0.13 n.a. nm 22.5 42.5 9.6 1.2 n.a. 1.1 0.0 0.0 25% -13.8% -22.8% HK Team
1138 China Shipping Dev Dec 14 1,838 11.02 9.80 (11.1) review 14 (24) 3 98.6 1,882 2,304 0.55 0.68 38 19.9 16.3 11.8 10.5 1.5 n.a. 3.0 1.5 1.8 36% 3% 5% HK Team
316 Orient Overseas Dec 37 4,727 58.70 69.00 17.5 B 25 1 41 87.1 9,099 2,414 14.54 3.86 n.a. 4.0 15.2 9.7 6.0 0.9 n.a. 0.9 1.5 1.5 1% -5% -10% HK Team
2343 Pacific Basin Shipping Dec 11 1,424 5.73 5.68 (0.9) review 16 (14) 1 73.9 655 729 0.34 0.38 -9 16.8 15.1 8.8 8.0 1.0 n.a. 1.8 3.0 3.3 cash cash 14% HK Team
Sector 95 12,278 11,187 10,888 6.5 11.2
Transportation - Toll Road
995 Anhui Expressway Dec 3 325 5.12 7.59 48.2 B 14 (2) 10 8.8 859 958 0.52 0.58 12 9.9 8.9 5.5 4.7 1.3 n.a. 2.2 5.0 5.6 34% 7% 13% P Yong / P Xu
177 Jiangsu Expressway Dec 9 1,212 7.71 9.32 20.9 B 7 6 20 30.7 2,877 2,948 0.57 0.59 12 13.5 13.2 8.5 8.1 2.1 n.a. 5.3 5.6 5.8 45% 9% 14% P Yong / P Xu
737 Hopewell Highway* Jun 17 2,233 5.86 5.96 1.7 H 14 14 24 6.3 956 824 0.32 0.28 -12 18.2 21.1 12.4 13.3 2.1 n.a. 9.0 5.5 4.7 cash 11% 18% P Yong / P Xu
548 Shenzhen Expressway Dec 3 385 4.00 5.02 25.5 B 15 (8) (1) 10.4 715 811 0.33 0.37 15 12.2 10.8 11.7 10.4 0.9 n.a. 1.8 4.0 4.5 108% 3% 7% P Yong / P Xu
107 Sichuan Expressway Dec 5 638 5.54 5.84 5.4 H 34 22 61 10.1 1,336 1,794 0.44 0.59 31 12.7 9.4 7.6 7.7 1.8 n.a. 5.4 3.2 4.2 26% 7% 10% P Yong / P Xu
576 Zhejiang Expressway Dec 10 1,257 6.81 7.32 7.5 H (6) (2) (12) 54.5 1,946 2,036 0.45 0.47 8 15.2 14.5 6.5 5.9 1.8 n.a. 4.1 4.6 4.8 cash 7% 14% P Yong / P Xu
Sector 47 6,050 8,690 9,371 15.1 14.1
Transportation - Services
144 China Merchants Hldgs Dec 68 8,697 27.70 33.03 19.2 B 17 (8) 1 138.9 3,552 4,089 1.46 1.68 22 19.0 16.5 14.5 13.0 1.9 n.a. 16.4 2.3 2.6 32% 6% 10% Ken He /P Yong
1199 COSCO Pacific Dec 29 3,671 10.52 12.89 22.5 B 19 (20) (15) 178.7 2,624 2,653 1.02 0.98 28 10.3 10.8 11.7 10.0 1.0 n.a. 6.6 3.7 3.7 41% 4% 7% Ken He /P Yong
2880 Dalian Port Dec 3 424 3.10 4.18 34.8 B (0) (10) (6) 9.9 764 902 0.26 0.31 14 11.9 10.1 9.1 7.6 1.2 n.a. 4.2 3.4 4.0 30% 6% 9% Ken He /P Yong
3382 Tianjin Port Dec 11 1,418 1.79 1.84 2.8 H 12 (29) (42) 14.2 560 683 0.09 0.11 n.a. 19.7 16.1 9.4 8.5 1.2 n.a. 0.2 2.0 2.5 18% -1% -1% Ken He /P Yong
3378 Xiamen Int'l Port Dec 1 185 1.46 1.61 10.3 review 15 (5) (3) 3.3 288 324 0.11 0.12 17 13.8 12.3 6.1 5.5 0.9 n.a. 1.7 4.8 5.4 cash 3% 5% Ken He /P Yong
Sector 112 14,396 7,788 8,650 15.4 14.2
65
Technology
Software & Computer Services
1688 Alibaba.com Ltd Dec 78 10,037 15.46 15.60 0.9 H 0 (13) (24) 151.6 1,596 1,856 0.315 0.367 27 49.0 42.2 32.6 27.3 10.6 n.a. 31.5 0.0 0.0 cash 12% 20% HK Team
354 Chinasoft Intl % Dec 2 277 2.00 2.10 5.0 review 38 62 137 5.2 97 154 0.08 0.13 n.a. 25.0 15.7 8.9 6.1 2.1 n.a. 1.2 0.0 1.5 cash -9% -16% HK Team
268 Kingdee Dec 6.4 826 3.09 3.50 13.3 H 15 25 135 22.9 291 343 0.14 0.16 16 22.0 18.9 16.0 12.9 3.8 n.a. 4.6 0.9 1.1 cash 14% 20% HK Team
700 Tencent % Dec 276 35,474 150.80 172.00 14.1 B 9 (7) 16 899.7 9,005 11,699 4.83 6.26 40 31.2 24.1 22.3 16.4 12.6 n.a. 13.4 0.4 0.5 cash 38% 54% HK Team
596 Inspur % Dec 2 315 0.65 1.81 178.5 B (4) (42) (28) 21.7 418 551 0.09 0.12 27 7.2 5.5 1.9 0.8 1.2 n.a. 0.8 2.8 5.0 cash 14% 22% HK Team
3888 Kingsoft Dec 4 567 3.95 4.90 24.1 review (5) (40) (55) 37.0 472 595 0.44 0.55 15 9.0 7.2 4.7 3.2 2.0 n.a. 3.6 4.2 5.1 cash 20% 27% HK Team
Sector 369 47496 11,879 15,198 31.7 24.9
Hardware & Equipment
2018 AAC Acoustics Dec 18 2,342 14.82 17.70 19.4 B 34 8 95 47.2 1,155 1,282 0.94 1.04 35 15.8 14.2 10.7 9.1 3.7 n.a. 8.2 2.5 2.8 Cash 15% 19% Steven Zhang
522 ASM Pacific Dec 27 3,471 68.40 91.20 33.3 B 8 (10) 37 63.8 3,270 4,641 8.29 11.77 123 8.2 5.8 6.2 4.2 5.0 n.a. 5.0 6.7 9.5 cash 22% 30% S Zhang /D Lam
552 China Comservice Dec 8 1,080 4.21 6.00 42.5 B 24 3 (10) 40.0 2,080 2,486 0.36 0.43 17 11.7 9.8 4.3 3.6 1.5 n.a. 0.3 3.4 4.1 cash 6% 13% HK Team
2342 Comba Dec 11 1,382 9.03 10.80 19.6 B (3) 11 40 63.9 619 765 0.52 0.62 12 17.3 14.5 11.9 9.8 3.4 n.a. 2.0 1.8 2.3 7% 13% 25% HK Team
861 Digital China * Mar 12 1,579 12.02 13.00 8.2 H 2 (16) 70 52.0 824 564 0.83 0.57 -8 14.5 21.1 14.5 12.1 3.2 n.a. 0.2 2.4 1.9 cash 7% 24% HK Team
992 Lenovo Group * Mar 46 5,923 4.74 4.43 (6.5) review 13 (12) 35 240.5 1,005 1,821 0.11 0.19 n.a. 43.0 24.9 9.2 7.2 3.7 n.a. 0.4 1.2 1.6 cash 2% 9% Steven Zhang
903 TPV Technology Dec 11 1,428 4.73 5.10 7.8 H 2 (10) 8 25.5 1,184 1,323 0.50 0.56 4 9.4 8.4 5.4 4.5 0.9 n.a. 0.2 3.2 3.6 cash 4% 10% Steven Zhang
763 ZTE % Dec 15 1,971 29.20 36.00 23.3 B 16 (11) 19 182.7 2,868 3,726 1.19 1.35 12 24.6 21.6 12.5 11.4 3.3 n.a. 1.0 0.9 1.1 26% 4% 16% HK Team
Sector 149 19177 13,005 16,606 15.1 11.9
Telecom
941 China Mobile Dec 1,645 211,720 82.00 85.00 3.7 H 4 7 1 2,037.8 134,090 136,785 6.68 6.81 2 12.3 12.0 4.8 4.4 2.5 n.a. 0.6 3.5 3.6 cash 16% 24% HK Team
728 China Telecom Dec 56 7,268 4.07 4.40 8.1 B 14 12 (1) 289.6 20,681 26,612 0.26 0.33 27 15.9 12.4 4.2 3.5 1.2 n.a. 1.3 2.2 2.9 32% 3.3% 6.6% HK Team
762 China Unicom Dec 273 35,112 11.58 8.30 (28.3) FV 18 17 4 362.5 9,888 11,494 0.42 0.49 3 27.6 23.7 4.8 4.5 1.2 n.a. 0.3 1.4 1.7 23% 2% 5% HK Team
1883 CITIC 1616 Dec 5.649 727 2.37 2.90 22.4 B 8 (10) 14 6.1 506 628 0.22 0.26 18 10.9 9.0 6.8 5.5 2.7 n.a. 1.4 4.6 5.6 cash 15% 23% HK Team
Sector 1,980 254,826 165,165 175,518 13.4 12.9
Real Estate Investment Trust **
2778 Champion REIT Dec 19 2,443 3.85 3.86 0.3 H 8 7 32 19.4 1,068 1,036 n.a. n.a. n.a. nmf nmf nmf nmf 0.7 n.a. 10.0 5.9 5.5 32% 9% 15% Jeff Yau
778 Fortune REIT Dec 6 813 3.79 4.15 9.5 B 11 11 28 7.4 391 417 n.a. n.a. n.a. nmf nmf nmf nmf 0.6 n.a. 7.7 6.2 6.5 26% 3% 4% Jeff Yau Note 2, 3, 4, 5
808 Prosperity REIT Dec 2 276 1.60 1.70 6.3 review 17 16 26 2.3 147 154 n.a. n.a. n.a. nmf nmf nmf nmf 0.6 n.a. 8.0 6.9 7.1 36% 2% 6% Jeff Yau
823 The Link REIT * Mar 51 6,563 23.00 22.50 (2.2) review 16 19 34 127.2 2,134 2,399 n.a. n.a. n.a. nmf nmf nmf nmf 1.3 n.a. 10.2 4.2 4.7 24% n.a. n.a. Jeff Yau
Sector 78 10,094 3,740 4,005 nmf nmf
@ denominated in USD ^ underlying profit ~ Core profit and EPS # P/NAV *10 Actual % - Fully Diluted EPS ** P/EV
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Note 5: Dual listing in Singapore under FRT SP
66
Market Focus
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Market Focus
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2010 09 09 DBS Strategy Multi Baggers Riding On China

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2010 09 09 DBS Strategy Multi Baggers Riding On China

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China / Hong Kong Market Focus

Multi-baggers riding on China’s

• Changes in next ten years may be even more amazing ANALYST

Astonishing changes. China has evolved from a supplier

For absolute return funds, we would avoid/short BYD (1211

Long-term top picks

Sector Stock pick Comments

Tingyi (322 HK) 1. Clear leader in noodle and tea beverage

Source: DBS Vickers

Long-term top picks (continued)

Sector Stock pick Comments

Source: DBS Vickers

Airlines (Winner) China Property (Winner)

• In addition to moving production facilities to regions

Sensitivity analysis – Toll Roads

Code Company Labor Net Net margin

107 HK Sichuan Expressway 10.3% 44.0% 43.0%

Source: Companies, DBS Vickers

• Sichuan Expressway (107 HK) and Anhui Expressway (995

Minimum wage differentials in China

HSCEI – Past 1 year

Source: DBS Vickers, Bloomberg 2010F Earnings

Earnings upgrade – HSCEI Index constituents Aggregate earnings for HSCEI

Source: DBS Vickers, Bloomberg

Source: Datastream, DBS Vickers

41,000 30,500 4.5x

Source: Bloomberg, DBS Vickers

Source: DBS Vickers

Hang Seng forward PBV (consensus)

2006A 2007A 2008A 2009 2010F 2011F

Source: DBS Economics Research

Index Earnings Growth (%) PE (x) Yield (%)

Finance 16 32 24 18.3 13.9 11.3 3.2 3.3 4.0

HSI 21402 13 23 15 17.4 14.1 12.3 2.9 3.1 3.4

Source: DBS Vickers

Index Earnings Growth (%) PE (x) Yield (%)

Consumer 90 51 2 20.5 13.6 13.4 0.7 0.9 0.9

HSCEI 11956 25 28 17 15.6 12.2 10.4 2.4 2.8 3.1

Source: DBS Vickers

Freight traffic up m-o-m but growth is decelerating. Combined

Share price appreciation + dividends

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

4. Compensation for investment banking services:

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