渐飞研究报告 - http://bg.panlv.

net

18 March 2011

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Global Research

First Light Asia
Equity Insights, It’s all about supply!, IC substrates, GCL Poly

What’s Changed, Research Focus, Today’s Events
Ticker Up 688 HK 3800 HK Down 2409 TT 3514 TT 2882 TT Company Rating
was N(V) Currency HKD HKD TWD TWD TWD

Target

was 19.7 1.90 25.0 73.0 52.4

EPS '11 1.33 0.23 5.36 1.45

EPS '12 1.57 0.13 7.25 2.12

Return

Price 13.24 3.94 24.60 93.0 43.7

Price At Close 16 Mar 17 Mar 16 Mar 15 Mar 16 Mar

China Overseas Land GCL Poly AU Optronics Gintech Cathay FHC

OW UW(V) UW(V) UW(V) N

18.0 2.10 23.0 48.0 48.8

36.0% -46.7% -5.6% -48.4% 12.2%

Source: Bloomberg, HSBC estimates

Click on title to open reports

Research Focus
EI – Equity Insights - How markets behave after catastrophes  It’s too early to make strong calls after the Japan earthquake  But catastrophes usually have only a brief impact on stocks  In Japanese history, earthquakes often heralded big change It’s all about supply! - Key themes from HSBC’s 5th Shipping Day Trade outlook appears to be relatively good  However, excess supply concerns loom, particularly in dry bulk sector  Ports outlook remain solid, while container manufacturers are in the sweet spot

Garry Evans*

Azura Shahrim*

IC substrates - Risks to BT supply approaching crisis Disruption of BT resin – a critical component for IC packages – sending shares sharply down  Potential impact to handset supply chain significant, with a minimum of one month discontinuity likely  Given lack of concrete details, prefer playing pairs over picking a direction

Tse-yong Yao*

Shishir Singh* GCL Poly (3800 HK) - UW(V): 2011 shipment guidance too optimistic  2H10 results solid on ASP & volume gains but a tripling of shares since mid-2010 prices in continued strength ahead  But, policy changes are nudging sector into oversupply and wafer shipment guidance of 5.5GW appears too optimistic  Reiterate Underweight (V) with TP of HKD2.10 (HKD1.90 earlier)

Ticker Jiangsu Expressway China State Construction Harbin Power Equipment Asia Cement China China New Yuan Loans (CNYbn) China Actual FDI Sri Lanka GDP
Source: Bloomberg, HSBC estimates

Event Y Y Y Y Feb Feb 4Q

Rating OW OW (V) OW N

Target 10.00 7.60 8.70 4.40

Price 8.4 7.8 9.9 4.4 NIKE Inc

Ticker NKE US

Event Q3

NI Bbg 88.2

177 HK 3311 HK 1133 HK 743 HK

7.4%

Eliot Camplisson*

Global Head of Research Marketing

+852 2996 6514

eliot.camplisson@hsbc.com.hk

*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations Issuer of report: The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Research at: http://www.research.hsbc.com Disclaimer & Disclosures This report must be read with the disclosures in the Disclosure appendix, and the Disclaimer, which forms part of it

Disclosures for companies can be accessed via the hyperlinks to the original published research, which can be found in the title

渐飞研究报告 - http://bg.panlv.net
First Light Asia 18 March 2011

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Regional
Asia Display - Weak panel ASP rebound nothing to be excited about Frank Su*  Panel prices set to rebound from 2Q11 but weaker than our original forecasts. Lower EPS forecasts and target prices  Improved pricing power could be offset by cap on output due to component shortage resulting from events in Japan  Maintain bearish view on the LCD sector. A 10-15% share price rebound looks possible but not sustainable

China & Hong Kong
Hong Kong - Done it again: Unemployment rate edges down further Donna Kwok  Hong Kong's headline unemployment rate has done it again, surprising markets to the positive side in February  At 3.6%, the unemployment rate is now well below its long-term trend level of 4.2%  That said, with robust local and foreign demand continuing to support headcount expansion plans, we think there's room yet for the unemployment rate to inch down further before stabilizing in 2Q

Michelle Kwok* China Overseas Land (688 HK) - Upgrade to OW: Compelling valuation for the bellwether Stronger-than-expected FY10 results were driven by margins  YTD contracted sales is strong growing 74% y-o-y to HKD12bn; Balance sheet strength was a positive surprise  Upgrade from Neutral (V) to OW, with a lower target price of HKD18.0 (from HKD19.7)

Sonia Song* PetroChina (857 HK) - N(V): 2010 results in line; windfall profit tax cut unlikely FY10 results 3% ahead of consensus on oil & gas price recovery and lower tax; price and cost control still lacking  FY11 guidance upbeat with faster E&P output growth and 16% capex increase: we raise 2011-12 estimates by 21-30%  Windfall profit review discussed but unlikely given earnings natural hedge; Maintain N(V) rating and HKD11.5 target price

Korea
Korea Shipbuilding - Adding one more to the mix Samsung Engineering (028050) - OW(V): Sailing with a tailwind

Paul Choi* Brian Cho*

Taiwan
Gintech (3514 TT) - UW(V): 4Q10 margins slump, but likely to get worse in 1Q11 Cathay FHC (2882) - N: Still sluggish life business outlook in 2011

Shishir Singh* Sarah Hung*

ASEAN
Singapore - Non-oil domestic export growth slows in February Bank Danamon (BDMN IJ) - UW: Time to refocus on the fundamentals

Leif Eskesen Kar Weng Loo*

India
India - The Gradualist strikes again: RBI hikes rates by 25bps India: RBI review re-emphasizes elevated front-end OIS - Post RBI review update

Leif Eskesen André de Silva Seiji Shiraishi

Japan
Japanese earthquake - Two economic scenarios

Market data
Markets HSI SHCOMP TAIEX KOSPI TOPIX BSE 30
Source: Bloomberg

HSBC 25,500 3,000 11,200 2,400 850 21,000

Last 22,284 2,897 8,283 1,959 811 18,150

5d % -5.63 -2.02 -4.17 -1.14 -12.90 -0.97

Forecast US China Taiwan Korea Japan India

GDP 3.4 8.9 4.7 4.9 1.1 8.0

Int Rate USD vs CCY 0-0.25 5.81 1.75 3.25 0.50 7.50 EUR CNY TWD KRW JPY INR

HSBC 1.40 6.54 27.0 1,070.0 95.0 42.0

Last 1.40 6.58 29.56 1135 79.1 45.19

5d % 1.51 -0.04 -0.25 -1.17 4.95 0.00

Commodities Oil Gold Coal (Thermal) Steel (HRC Asia) Aluminium Copper

HSBC 82 1,450 90 713 2535.29 8708.17

Last 101.4 1404 131 730 2468 9355

5d % -1.23 -0.58 0.42 -1.68 -4.32 -2.66

渐飞研究报告 - http://bg.panlv.net
First Light Asia 18 March 2011

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Research so far this week
Ticker New Up 8277 HK 2628 HK 601601 CH 966 HK 3045 TT 052690 KS 700 HK JS SP 2603 TT 316 HK Down 272 HK 2318 HK NOL SP 3231 TT 6121 TT 941 HK Company Rating
was Currency HKD N(V) N(V) N(V) N HKD RMB HKD TWD KRW HKD USD TWD HKD OW (V) HKD HKD SGD TWD TWD HKD

Target

was

EPS '11 0.48

EPS '12 0.55 5.60 6510.80 7.72 2.89 3.53 0.75 0.33 0.19 8.18 18.69 6.19

Return

Price 15.90 30.50 22.90 22.30 67.20 92800 214.00 28.00 24.7 71.8 3.56 76.70 2.1 47.70 182.00 72.25

Price At Close 10 Mar 10 Mar 10 Mar 10 Mar 11 Mar 09 Mar 15 Mar 10 Mar 10 Mar 10 Mar 15 Mar 15 Mar 10 Mar 14 Mar 14 Mar 15 Mar

Wumart Stores China Life ‘H’ China Pacific ‘A’ China Taiping ‘H’ Taiwan Mobile Co KEPCO E&C Tencent Holdings Ltd Jardine Strategic Evergreen Marine Corp Orient Overseas International Shui On Land Ltd Ping An Neptune Orient Lines Wistron Corporation Simplo Technology China Mobile LTD

UW(V) OW(V) OW(V) OW(V) OW(V) OW(V) OW(V) OW OW OW N OW(V) OW OW OW N

13.10 38 28 28 76.00 115000 262.00 32.00 27.6 82.4 3.80 106.00 2.3 60.00 220.00 78.00
38 26 29 69.00 100000 240.00 24.00 17.7 70.2 4.70 109.00 2.5 72.00 240.00 79.00

-16.2% 25.0% 22.0% 26.0% 21.8% 27.0% 22.4% 15.0% 15.0% 18.0% 10.5% 38.0% 14.0% 32.9% 24.3% 13.1%

5.40 4962.54 5.81 2.53 3.16 0.65 0.21 0.16 6.73 15.30 6.00

Source: Bloomberg, HSBC estimates

Click on title to open reports

Research Focus 17 Mar China Mobile LTD - N: FY2010 results in line, but big capex bump is positive

16 Mar

15 Mar

14 Mar Regional 14 Mar

Tencent Holdings Ltd.(700 HK) - OW(V): Growth likely to continue Li Ning (2331) - UW(V): 2010 results: First read Japan and Asia - Implications for monetary policy Shorts & Squeeze - Oversold? Simplo Technology (6121) - OW: Tablet driving growth; minimal impact from the quake Australia’s place in the world - Commodities and China are key China insurance - Mixed emotions Taiwan telecoms - Upgrade TWM on value and yield China Mobile (941 HK) - N: Bullish on TD-LTE outlook, but too early to rerate Asian Container Shipping - Rationally exuberant, lacking catalysts Asia Technology - February monthly sales and 1Q11 progress report Asian FX Focus - Improving outlook for the won; value emerging in the dong Japan: Interest risk premium still too large Shui On Land Ltd (272 HK) - Downgrade to N: Results disappoint Ruinian International (2010.HK) - OW(V): Healthy growth and undemanding valuation Peak Sport (1968) - Aggressive expansion in lower-tier cities Ping An (2318.HK) - OW(V): Capital raising fears look to continue China - Premier Wen on inflation, renminbi and property China - Feb new lending below market expectation Wumart Stores (8277) - UW(V): Changing times at the check-out counter Zhejiang Expressway (576) - N: gross margin pressure on brokerage unit China - What's PBoC's next move? China - Jan-Feb output beat expectations

Tucker Grinnan Tucker Grinnan Christopher K Leung Frederic Neumann Dodo Cheng Carrie Liu Paul Bloxham James E. Garner Neale Anderson Tucker Grinnan Azura Shahrim Steven C. Pelayo Richard Yetsenga André de Silva Michelle Kwok Robby Gu Christopher K Leung Michael Chang Qu Hongbin Qu Hongbin Lina Yan Elaine Lam Qu Hongbin Qu Hongbin

China & Hong Kong 17 Mar

16 Mar 15 Mar

14 Mar Korea

渐飞研究报告 - http://bg.panlv.net
First Light Asia 18 March 2011

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17 Mar 16 Mar 15 Mar 14 Mar Taiwan 17 Mar 16 Mar

Korean AMOLED supply chain - Implications of UDC’s 4Q10 results Neowiz Games (095660) - OW(V): Potential upside surprise from new games Korea LCD TV - Smart TV: A new business to charge USD60 per month Korea Engineering/Construction - January domestic stats: Still early to regain conviction Mirae Asset Securities Co (037620) - OW: How do investors view Mirae Asset Securities KEPCO E&C (052690) - OW(V): Better earnings and broader horizons MediaTek (2454) - UW: Ralink acquisition may prove a challenge Asia PC hardware - Update on supply constraints after Japan earthquake Wistron Corporation (3231) - OW: 2011 a slow start with back-end loaded momentum Kinsus Interconnect (3189) - OW: Qualcomm inside iPad 2

Soyun Shin Howon Rim Brian Sohn Brian Cho Kathy Park Paul Choi Yolanda Wang Jenny Lai Carrie Liu Tse-yong Yao Sherman Chan Leif Eskesen Paul Bloxham Paul Bloxham Wellian Wiranto Mark Webb Kumar Manish Leif Eskesen André de Silva Arun Kumar Singh Rahul Garg Rajiv Sharma Leif Eskesen André de Silva Stephen King David Bloom Seiji Shiraishi Seiji Shiraishi Seiji Shiraishi Antoine Belge Steven Major Nick Robins

15 Mar ASEAN 16 Mar The Philippines - Slower remittances growth in January

15 Mar 14 Mar India 17 Mar 15 Mar

Singapore - Loose purse strings: Retail sales strong in January RBA Observer Update - Minutes show RBA sitting pretty RBA Observer Update - Now expect next hike in July or August: 100bp by mid 2012 Malaysia - Central bank holds rate for now, but hints at hiking soon Jardine Strategic - OW: Strong outlook, raise target to USD32 India Petroleum Insight - Charts for March 2011 India - Sticky indeed: WPI inflation rose in February India: OIS to underperform bonds - Focus on FII-participation and bond supply India Utilities: Coal challenge - Update following Coal Trans Conference in Delhi Crompton Greaves (CRG) - OW: Management update; concerns seem overdone Bharti Airtel (BHARTI IN) - N(V): Key takeaways from call with Safaricom management India - Consumers pull up January industrial production Japan impact on Asia-Pac rates - Growth replaces inflation as primary concern Japanese earthquake - The global economic impact Japan FX special - Beware of the FX lag – BRL & AUD vulnerable Bank of Japan expanded the asset purchase fund Japanese earthquake - Economic and market implications Japan Economic Weekly - Production acceleration, oil price surge and March Tankan ‘Dislocation barometer’ for luxury goods - Richemont and Swatch appear the most oversold Global Rates Weekly – Key trades Climate Investment Update - China: setting the pace on low-carbon growth

14 Mar Japan 17 Mar 16 Mar 15 Mar 14 Mar Global 17 Mar 14 Mar

9/11. but our experience of similar catastrophic events is that hasty judgement is often wrong. the factors driving the market previously came to the fore again. for example. Russia’s default etc).渐飞研究报告 . and is not registered/qualified pursuant to FINRA regulations Issuer of The Hongkong and Shanghai report: Banking Corporation Limited 1.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc. earthquakes often heralded big change We have so far refrained from writing about the impact of Japan’s earthquake. and with the Disclaimer.45pm last Friday (Chart 1) suggests that investors would have had to be very nimble to call the turns right. Japanese stocks have fallen 16% and the world index 4%. We also ask whether this could represent a turning-point for Japan (for better or worse). The bigger-than-usual fall may be because other recent events (the Middle East and oil) have also given investors a reason to reduce risk after the recent big run-up in global (and Japanese) equities over the past nine months. though. Garry Evans* Strategist The Hongkong and Shanghai Banking Corporation Limited (HK) +852 2996 6916 garryevans@hsbc. and that global stocks fell 3% and bottomed around the same time (Chart 2). In this EI. a week on. which forms part of it 14-Mar 15-Mar 16-Mar 17-Mar Source: HSBC Affected market World . and run some numbers to see which countries and companies have the biggest exposure to Japan.com.hk View HSBC Global Research at: http://www. the market directly affected on average fell by 6% and bottomed on Day 11. After that. markets typically recovered their pre-catastrophe level.net 18 March 2011 Equity Strategy Global abc Global Research EI – Equity Insights How markets behave after catastrophes  It’s too early to make strong calls after the Japan earthquake  But catastrophes usually have only a brief impact on stocks  In Japanese history.hsbc. We find. There are still too many uncertainties – not least whether Tokyo Electric Power can succeed in preventing a big radiation fallout from the Fukushima Nuclear Plant – to make clear market calls. we look at the aftermath of previous catastrophes. Not only did we feel it inappropriate. look at history and at the facts. We can. that after previous catastrophes (major earthquakes.research. The severe volatility of the Japanese market since 2. Within about two months. But. in the light of the massive loss of life.http://bg. Stock markets around major catastrophes 150 140 130 120 110 100 90 0 20 40 60 80 100 120 140 160 180 200 220 240 260 Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix. to call which stocks are winners or losers.panlv. we feel we need at least to review the situation. This time. Intraday Topix since the earthquake 950 900 850 800 750 700 11-Mar Source: Bloomberg 2.

9 11.093 20.6 1.9 4.2 1.8 17.6 2.net Equity Strategy Global 18 March 2011 abc HSBC strategy recommendations Global market calls (benchmark: MSCI AC World Index.9 9.5 0.渐飞研究报告 .5 0.655 5.558 65 1.6 8.7 1.2 Capital Goods -3.6 0.5%) Market Americas US Canada Brazil Mexico Europe UK France Germany Switzerland Spain Italy Netherlands Sweden Russia Eurozone Pan-Europe Asia Pacific Japan Australia China Korea Taiwan Hong Kong India Singapore Other South Africa World (USD terms) Developed world Emerging world All-countries world HSBC call (last current quarter) Over Under Over Neutral Neutral Under Neutral Under Over Under Under Neutral Over Under Under Under Neutral Neutral Over Over Neutral Under Neutral Over Under Over (Neutral) (Under) (Neutral) (Over) (Neutral) (Neutral) (Neutral) (Under) (Over) (Under) (Under) (Neutral) (Over) (Under) (Under) (Under) (Over) (Neutral) (Over) (Neutral) (Over) (Under) (Over) (Over) (Under) (Over) ____ Weight (%)_____ MSCI AC HSBC Diff Blue-chip index Target current end-2011 level level 1.4 1.8 -1.096 324 1.000 43.000 380 1.500 83.4 2.100 1.3 1 1 1.4 3 3.panlv.500 21.2 10.2 3.9 1.003 35.400 11.260 1.430 14.4 8.5 2 0.4 Beverages Heath Care Equipment & Services Diversified Financials 3.300 2.200 7.5 82. Thomson Financial Datastream 2 .055 1.7 -0.6 3.8 11.5 7 3.9 100.3 100 2.697 6.4 24.7 3.0 45 3 3 0.200 25.0 14 9.http://bg.0 -1.359 2.6 8.5 3.000 6.7 100.598 3.5 0.916 2.2 1.3 8.958 8.837 343 1.750 6.5 -0.7 10.000 1.1 1.1 0.4 2.257 13. countries shown have a minimum weight of 0.3 Mobile Telecoms -1.9 2 100.4 -3.9 -0.067 818 4.5 4.325 22.800 37.7 -1.514 6.4 3 2.250 850 5.7 1.4 26.4 9.650 4.3 13.000 3.5 -1.9 Luxury Goods -4.2 0.7 3.000 22.8 9.1 0. Thomson Financial Datastream Global sector calls (benchmark: MSCI AC World Index) Sector ____ HSBC call ____ current (previous) Over Neutral Over Under Under Neutral Neutral Over Over Under (Over) (Neutral) (Over) (Under) (Under) (Neutral) (Neutral) (Neutral) (Over) (Under) __________ Weight (%) __________ MSCI AC HSBC Difference Industry preference World (%) (%) (% pts) 11.1 86.971 30.200 3.8 15 5.900 12.1 20.1 0.525 66.2 14 6 5 8.5 1.6 Source: HSBC.9 Water Utilities Energy Materials Industrials Consumer Discretionary Consumer Staples Health Care Financials IT Telecom Services Utilities Source: HSBC.701 18.400 1.3 0.8 S&P 500 S&P/TSX Bovespa Bolsa FTSE 100 CAC 40 DAX 30 SMI IBEX 35 FTSE MIB AEX OMX RTS EUROSTOXX 50 FTSE Eurofirst 300 TOPIX S&P/ASX 200 MSCI China KOSPI TAIEX Hang Seng SENSEX STI JSE All-Share MSCI DM MSCI EM MSCI AC -0.5 1.1 Tech Hardware & Equipment 1.300 72 2.7 1.1 20.7 0.4 3.022 10.0 2.6 Energy Equipment & Services Mining 3.6 0.721 1.350 365 change 14% 7% 26% 21% 19% 14% 19% 15% 19% 6% 11% 23% 15% 14% 17% 4% 16% 11% 23% 35% 12% 14% 28% 21% 11% 23% 13% 42.9 -1.3 1.612 1.

We highlight the key points from the conference.com. Separately. engine/fuel efficiency and reduction of C02 emissions on the major Asia-Europe route will compel competitors to similarly order new. including Intra-Asia.500 teu ships. Bank financing market for shipping is functioning again and credit more fundamentally driven. more than half of the liners are yet to recover 2009 losses despite a very strong 2010.渐飞研究报告 . Indeed.hk View HSBC Global Research at: http://www. terminal operators and consultants.hk Mark Webb* Analyst The Hongkong and Shanghai Banking Corporation Limited +852 2996 6574 markwebb@hsbc.g. Intra-Asian and intra-regional trade are increasingly important.net Flashnote abc Global Research Industrials Marine Equity – Global It’s all about supply! Key themes from HSBC’s 5th Shipping Day  Trade outlook appears to be relatively good  However. as well as HSBC experts from Trade and Supply Chain.research. Presenters included: container and dry bulk shipping owners/operators. 18 March 2011 Azura Shahrim* Analyst The Hongkong and Shanghai Banking Corporation Limited +852 2996 6976 azurashahrim@hsbc. Funding is available to high quality ship owners and not focused just on asset value. Trade outlook appears to be relatively good: HSBC's Trade Confidence Index indicates that trade finance clients are optimistic and expect moderate y-o-y growth. three 4. and Global banking.hsbc. Maersk’s recent order of 18. However.com. Liner operators face a tougher environment with higher fuel costs: Bunker and trucking costs are rising. high fuel costs will ensure that carriers will continue to manage effective capacity (by idling ships should demand fall/sailing ships at slower speeds) and discourage price wars experienced in 2009. and is not registered/qualified pursuant to FINRA regulations Issuer of report: The Hongkong and Shanghai Banking Corporation Limited Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix.http://bg. Ship financing from the capital markets has increased in recent years.hk Parash Jain* Analyst The Hongkong and Shanghai Banking Corporation Limited +852 2996 6717 parashjain@hsbc.000 teu ships has heightened competition: The larger ships’ lower capital cost/teu. high debt levels in the West are creating some nervousness about 2H11 and beyond. Carriers will have to employ larger ships to reduce fuel costs: a 13. particularly in dry bulk sector  Ports outlook remain solid. after being held down in 2008-10. uncertain regulatory requirement e. Basel III has resulted in a higher cost of funding.000 teu ship incurs c40% lower costs vs. ship yards. excess supply concerns loom. better designed and much bigger ships for employment in 2013 and cause the route to be dominated by big players and capacity of smaller vessels (8. Shipping Services. while container manufacturers are in the sweet spot HSBC hosted its 5th Shipping Conference on 17 March.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc. rail and port handling charges too.000 teu and less) to cascade down to other routes. greater economies of scale.panlv.com. which forms part of it . and with the Disclaimer.

Factors such as steel/scrap prices and availability of scrapping facilities. Operating conditions remain favourable for box manufacturers: Liner companies may spend more capital in 2011 on boxes vs. 2010 due to the arrival of new larger ships in addition to replacement of older boxes. HK port’s capacity can be improved without additional berths. Promising geographies include Latin America and Africa. Supply growth may be mitigated by increased scrapping of older vessels (especially for handysize where 41% are more than 25 years old). however. Port capacities in general are not fixed and rather depend on the size of ships handled and the productivity level – for instance. as they are set on monthly spot basis.http://bg. where tariffs (revenue/TEU) are high. Meanwhile.渐飞研究报告 . The nature of the fragmented market. China’s demand for commodities (especially iron and coal) is expected to remain strong but its growth is moderating. Dry bulk shipping order book is likely overstated and unrealistic due to over/misreporting. also play a part. the ordering of very large ore carriers by miners will probably push down demand and rates for Capesize ships. 2 .000 teu capacity and above. Certainly. HSBC’s estimate of USD2. with its government restricting high energy consumption/pollution and commodity prices (especially iron ore) remaining high and volatile. high proportion of fixed cost and slower sailing speed of bulkers does not provide scope for container-shipping style capacity control. older ships are more expensive to maintain. Latest box prices stand at cUSD3.panlv. Substantial deliveries in January 2011 depressed shipping rates (they fell more than 50% from the recent peak in 4Q10).000/teu (vs.800/teu and 2. typically fail to pass on fuel costs and often left idle. Most Chinese coastal ports (especially in the South) are capable of handling container ships with 8.net It’s all about supply! Marine 18 March 2011 abc Port operators looking to expand in other emerging markets with port growth in China starting to slowly taper off.400/teu in 2010) and imply that demand is still higher than supply and that capacity discipline is being maintained by the container manufacturers. New deliveries fell significantly in February and non-deliveries could reach c40% in 2011 with the ratio of order book to existing fleet (currently at 47%) expected to fall to 35% by year-end. which should increase if rates stay low.

so the potential PC-related impact is not negligible. if MGC or HC cannot quickly bring their factories back on line. Thus. and competitors are required to pay a licensing fee to MGC to produce it. as most ICs use either metal leadframes or Ajinomoto buildup film (ABF)-based packages. These potential solutions have focused on (1) alternative suppliers of BT resin and (2) alternative resins to replace BT in the IC package. JPY1.com. we would focus our attention on any licensee announcement from MGC to provide an alternative supply of BT. a supply stoppage of BT resin could bring the entire handset supply chain to a halt.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc.4. DRAM devices used BT-based packages. Given the complex physical and electrical requirements of the IC package. prefer playing pairs over picking a direction BT crisis update. and is not registered/qualified pursuant to FINRA regulations Issuer of report: HSBC Securities (Taiwan) Corporation Limited Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix. and Nanya PCB (8046 TT – TWD90. not rated) and Hitachi Chemical (HC) (4217 JP.hsbc.5). BT resin is combined with glass fibre to produce a laminate sheet that is then used to produce an IC package. JPY543.research. incoming questions have focused on alternative solutions for IC package producers. in our view. OW. Speaking with other laminate makers.渐飞研究报告 .tw View HSBC Global Research at: http://www.2.net Flashnote abc Global Research FIG Electronic Equipment Equity – Taiwan IC substrates Risks to BT supply approaching crisis Disruption of BT resin – a critical component for IC packages – sending shares sharply down Potential impact to handset supply chain significant. we believe the first of the two solutions is the more likely scenario. GE Materials (not listed) is the third supplier of BT resin. Combined.panlv. which forms part of it .2. We see less potential for impact to the PC supply chain. 17 March 2011 Tse-yong Yao* Analyst HSBC Securities (Taiwan) Corporation Limited +886 2 8725 6021 tse-yongyao@hsbc. The electronics supply chain has taken a hard hit since Mitsubishi Gas Chemical (MGC) (4182 JP. Unimicron (3037 TT – TWD47. N. a critical component used in organic IC packages. as all mobile devices rely on ICs that use BT-based packages (a smartphone such as the iPhone has over a dozen such ICs). MGC and HC continue to assess the impact and damage to their factories but. and with the Disclaimer. are IC package suppliers such as Kinsus (3189 TT – TWD80.574. with a minimum of one month discontinuity likely Given lack of concrete details. not rated) announced the cessation of bismaleimide triazine (BT) resin shipments due to factory shutdowns resulting from last Friday’s earthquake. though. Most directly exposed. in the meantime. Potential impact. MGC and HC supply 85-90% of the world’s BT resin. Potential solutions. TP: TWD127.http://bg. N(V). TP: TWD110). BT resin is a proprietary formulation of MGC. More broadly. TP: TWD62). we have come to the understanding that the actual production of BT is relatively straightforward and that the reason the supply of BT resin is concentrated at two suppliers is intellectual property (IP)-related.

meaning that no alternatives are likely to be ready before inventory runs out. What to do with stocks With risk clearly to the downside in the short term.http://bg. TriQuint.panlv. At the IC level (the customers of the IC package suppliers). we expect the process to take a few months. we believe producers have approximately one month of inventory on hand.渐飞研究报告 . we summarize the stock performance of key handset component suppliers since last Thursday’s close. In the table on the next page.net IC substrates Electronic Equipment 17 March 2011 abc Timeline At the IC packaging level of the supply chain. we would not advise buying on dips. Qualcomm had 46 days of inventory at the end of 4Q10 while other key suppliers (such as Skyworks. 2 . Ultimately. we now see a one-month disruption as a best case scenario. and Broadcom) had 57-70 days of inventory. Given the lack of concrete information. we find it unwise to aggressively pick a direction and believe that a pair strategy (looking at all global suppliers to the handset supply chain) makes the most sense. leaving HC as the last remaining hope for avoiding a break in the supply chain. Our checks with laminate makers suggest that MGC does not expect production to resume for another six months. With respect to qualifying alternative solutions (whether alternative suppliers for BT or alternative materials).

policy changes are nudging sector into oversupply and wafer shipment guidance of 5. and with the Disclaimer. Any outcome that could potentially slow down the Italian demand to a run-rate of 1-2GW/Yr from 8-12GW/Yr over last six months will be a big negative for the sector. Lack of clarity about solar incentives beyond May 2011 has led to project cancellations in the last two weeks. we factor in this scenario and expect a 10%YoY decline in 2011e EPS. Much like its peers.net Flashnote abc Global Research Nat Resources & Energy Independent Power Producers Equity – Hong Kong GCL Poly (3800 HK) UW(V): 2011 shipment guidance too optimistic  2H10 results solid on ASP & volume gains but a tripling of shares since mid-2010 prices in continued strength ahead  But.7 3M 43. SME.8 9. a sudden change in its solar policy reversed the momentum on 3 March 2011. 2011 shipment guidance of 5.渐飞研究报告 .821 60. and bank associations.6 HANG SENG INDEX 3800.panlv. and is not registered/qualified pursuant to FINRA regulations Issuer of report: The Hongkong and Shanghai Banking Corporation Limited Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix. in which it would strongly outperform the market to grow EPS by 50%+YoY. The demand surge in 2010 also drained generous subsidies globally and clouded future prospects. Contrary to consensus. Low brand loyalty and a lack of product differentiation are likely to turn oversupply into a price-war yet again. which forms part of it . 2011e EPS moves up by 13% on lower costs.425 38 2H10 results solid but stock price factors in a lot more: GCL’s 2H10 EPS was 32% ahead of our estimate on 18% higher wafer shipments as well as higher ASP and lower production costs for polysilicon.10 (HKD1.6 12M 102.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc. the current share price assumes a bumper year for GCL.94 -46.5GW appears too optimistic  Reiterate Underweight (V) with TP of HKD2.hk oversupply and heated competition are visible now. reiterate UW (V): GCL expects wafer ASP to fall by 25-30%YoY by 4Q11. However. Oversupply taking hold. View HSBC Global Research at: http://www. The two parties are due to meet today alongside local consumer. up from 9% in 2010. Watch the Italian decision for catalysts: Italy has contributed significantly to a surge in global solar demand over last six months.com.research. as witnessed in last downcycle (2008-09). Local solar lobbyists want a revival of incentives.6 1M 4.5GW (HSBCe: 2. which is inline with our expectations.90 earlier) Underweight (V) Target price (HKD) Share price (HKD) Potential return (%) Performance Absolute (%) Relative^ (%) Index^ RIC Bloomberg Market cap (USDm) Market cap (HKDm) Enterprise value (HKDm) Free float (%) Note: (V) = volatile (please see disclosure appendix) 2. However. News flow of order cancellations and price declines are accompanied by announcements of land-grabs in the form of contracts. but the government wants to balance its interests with those of consumers. lack of differentiation not factored in: The first signs of 18 March 2010 Shishir Singh* Analyst The Hongkong and Shanghai Banking Corporation (HK) Limited +852 2822 4292 shishirkumarsingh@hsbc. GCL benefited from a heady 140%+YoY growth in solar demand during 2010.10 3. This assumes a complete annihilation of many of its competitors and rapid consolidation in the sector – a scenario which may be too rosy. which helped it almost quadruple sales compared to 2009. which foot the bill.8GW) assumes a very aggressive market share of 40%. But.983 73. contracts in the solar sector are an unreliable indicator of future sales or customer stickiness.8 46. particularly those of poly-Si competitors.http://bg.1 90.hsbc.HK 3800 HK 7. given the robust balance sheets in the sector. But.

3 1.8 174.052 13.6 25.02 0.10 0.8 300.948 15.922 -883 5.116 20.8 40.327 12.039 -1.923 -3.0 12/2010e 4.8 2.4 0.5 74.0 80.976 1.509 479 45.006 0 3.7 5.2 28.814 0 -648 679 4.481 0 8.173 36.6 9.185 0 104 4.805 8.13 0.23 0.923 21.00 1.464 6.631 15.938 1.7 1.5 36.989 20.9 11.046 Valuation data Year to EV/sales EV/EBITDA EV/IC PE* P/NAV FCF yield (%) Dividend yield (%) 12/2009a 14.528 16.804 480 48.593 3.0 1.6 9.26 0.7 1.514 7.3 33.3 -2.0 Note: * = Based on HSBC EPS (fully diluted) Balance sheet summary (HKDm) Intangible fixed assets Tangible fixed assets Current assets Cash & others Total assets Operating liabilities Gross debt Net debt Shareholders funds Invested capital 586 15.3 3.00 1.4 14.8 2.943 1.panlv.1 0.5 -0.6 9.562 8.456 1.0 3.989 3.732 Price relative 6 5 4 3 2 1 0 2009 2010 2011 Rel to HANG SENG INDEX 6 5 4 3 2 1 0 2012 GCL Poly Energy Holdings Ratio.6 19.9 0.283 4.03 0.26 0.0 271.8 -4.263 5.700 8.593 22.9 -8.1 0.159 5.481 -14.0 35.9 2.0 12/2012e 3.7 4.9 -39.377 7.0 0.0 -13.207 36.008 -10.8 180.149 3.176 37.0 27.0 9.028 -621 2.355 -2.039 5.0 40.934 -8.3 26.413 39.00 0.346 6.23 0.6 10.4 375.901 7.9 3.864 6.384 8.307 26.123 34.9 10.5 33.00 1.4 17.028 3.566 3.9 63.672 5.net GCL Poly (3800 HK) Independent Power Producers 18 March 2010 abc Financials & valuation Financial statements Year to 12/2009a 12/2010e 12/2011e 12/2012e Key forecast drivers Year to Poly-silicon ASP ($/Kg) Poly-Si Unit CoGS ($/Kg) Wafer ASP (US Cents/W) Wafer Unit CoGS (US Cents/W) Electricity unit price (RMB/MW Steam unit price (RMB/tonne) 12/2009a 69 41 83 81 445 172 12/2010e 52 29 79 58 479 184 12/2011e 43 24 67 54 485 172 12/2012e 34 24 56 47 492 175 Profit & loss summary (HKDm) Revenue EBITDA Depreciation & amortisation Operating profit/EBIT Net interest PBT HSBC PBT Taxation Net profit HSBC net profit Cash flow summary (HKDm) Cash flow from operations Capex Cash flow from investment Dividends Change in net debt FCF equity 5.6 12.7 166.4 28.679 -1.130 23.4 15.468 22.1 12.79 0.520 5.281 -349 -51 939 -93 -193 797 18.298 3.595 7.30 0.0 40. growth and per share analysis Year to Y-o-y % change 12/2009a 12/2010e 12/2011e 12/2012e Source: HSBC Note: price at close of 17 Mar 2011 Revenue EBITDA Operating profit PBT HSBC EPS Ratios (%) Revenue/IC (x) ROIC ROE ROA EBITDA margin Operating profit margin EBITDA/net interest (x) Net debt/equity Net debt/EBITDA (x) CF from operations/net debt Per share data (HKD) EPS reported (fully diluted) HSBC EPS (fully diluted) DPS NAV 26.250 5.1 0.http://bg.9 37.3 41.8 19.182 15.0 37.500 5.9 5.771 -9.209 13.0 9.559 5.2 12.046 3.779 9.0 6.326 -1.441 -1.9 -43.096 -606 5.6 -39.9 1.渐飞研究报告 .259 12.433 5.820 -14.9 8.44 2 .814 -4.7 16.2 29.13 0.9 0.8 -8.609 -3.595 16.858 -577 1.493 -4.9 36.7 150.4 5.7 7.181 -6.9 -26.8 2.2 -121.4 -9.2 5.0 12/2011e 4.046 2.500 -1.

22.渐飞研究报告 . Cutting 2011e EPS for LGD.12/0. even with undemanding valuation. AUO.30 -0.09 1. Based on past experience.69 3.465 23.000 820 29 -1.22 -270% -30% -39% 0% -166% -55% -55% -156% View HSBC Global Research at: http://www.net Flashnote abc Global Research Telecoms. and is not registered/qualified pursuant to FINRA regulations Issuer of report: HSBC Securities (Taiwan) Corporation Limited Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix. Our losses per share of TWD1.69/1. We nevertheless reiterate our Underweight ratings on all the panel makers in our coverage as we believe any rally is unsustainable due to our expectation of limited panel ASP recovery and lack of catalysts.panlv. We reduce the target multiple for Sharp to trough level (TP now JPY600 from JYP820) as it is also exposed to risks in its Japanese TV sales. and reduce our TP to TWD23 (from TWD25). which make up 60% of its LCD TV set revenue.hsbc.68 for AUO/CMI are significantly below consensus profit per share of TWD1. raw material shortages for components. Summary of target price and EPS changes Company AUO LGD Sharp CMI RIC 2409 TT 034220 KS 6753 JP 3009 TT Ccy TWD KRW JPY TWD ___Target price ____ ________ 2011e EPS _________ 2011e EPS difference New Old New Old Con Old Con 23 32.000 600 29 25 32.tw Jerry Tsai* Analyst HSBC Securities (Taiwan) Corporation Limited +8862 8725 6025 jerrycytsai@hsbc. AUO swings to loss in 2011 as we lower our panel price assumption. and with the Disclaimer. While the earthquake in Japan could boost panel makers’ ability to regain pricing power in the coming two quarters. the recent panel price trend suggests the magnitude of rebound could be weaker than our previous expectation.12 1.68 0.66 2. Too early to assess overall impact on supply chain of events in Japan. could put a cap on output. meeting our expectation that LCD panel prices (both IT and TV) will start to rebound from 2Q11 to mid-3Q11. Risks still on downside. the valuations of panel makers appear undemanding.80 -0.http://bg.research. At book or below book value. We thus cut our panel ASP assumption by 0.com.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc.com. Lower EPS forecasts and target prices  Improved pricing power could be offset by cap on output due to component shortage resulting from events in Japan  Maintain bearish view on the LCD sector. However. unexpected supply chain shocks normally enhance panel makers’ bargaining power with customers. such as ACF adhesive for attaching PCB boards to panels. We continue to expect panel makers to succeed in their bid to raise TV panel prices.565 10. which forms part of it Source: HSBC estimates . but weaker than our original forecasts. Sharp. We now expect AUO to make a loss in 2011. Media & Technology Asia Display Equity – Asia Asia Display Weak panel ASP rebound nothing to be excited about  Panel prices set to rebound from 2Q11 but weaker than our original forecasts.5% for 2011.tw Panel price rebound likely from 2Q11.68 1.221 16. A 10-15% share price rebound looks possible but not sustainable 17 March 2011 Frank Su* Analyst HSBC Securities (Taiwan) Corporation Limited +8862 8725 6025 frankkssu@hsbc.

352 30.1% Source: HSBC estimates.774 -9.330 16.506 30.0% 5.net Asia Display Asia Display 17 March 2011 abc HSBC estimates versus consensus HSBC estimates versus consensus.840 551.8% 0.0% 13.1% 1Q11e 6.465 25 7.876 9.7% 3.107 -10.512 3.632 6.876 1.186 5.586 124.2% 21.319 26.403 21.483 394 -387 346 -268 -729 30.270 13.237 789 1.5% 5.56 8.009 -1.3% 26.0% 2. HSBC estimates LGD quarterly earnings model (KRWbn) Sales Gross profit Operating profit EBITDA Net income FD EPS (KRW) BVPS (KRW) Margin (%) Gross margin Operating margin EDITDA margin Net margin 1Q10e 5.7% 2.75 31.0% 2Q10e 6.270 8.8% 19.330 28.794 -8.7% 14.3% -3.1% -0.0% Source: Company report.819 2.7% 2.121 577 1.4% 2011e 467.0% 22.3% -4.19 33.0% 0.0% 13.0% 17.4% -10.2% 3Q11e 132.31 31.1% 2010e 467.454 1.776 3.618 0.3% 4Q10e 6.971 597.774 603 -7 1.926 1.5% 2.1% -6.98 -4.537 -11.6% -2.580 -1.698 771 182 986 224 608 31.98 7.渐飞研究报告 .9% 0.542 3.623 14.148 29.2% 11.6% 3Q10e 6.9% 8.8% 4Q11e 127.2% 1Q11e 96.556 -9.2% 3Q11e 7.1% 0.0% 16.761 29.1% 15.30 15.6% -1.2% -0.79 -4.5% 6.2% 8.942 -11.695 0.459 8.970 3.005 11.6% 0.614 22.panlv.913 6.842 7.483 -5.129 30.329 726 1. in KRWbn for LGD. HSBC estimates 2 .6% 5.158 36.218 736 5.215 232 34.2% 2Q11e 6.8% 2011e 28.496 99.565 32.731 1.42 30.3% 2.310 4.241 13.776 4.1% 128.0% -11.8% 10.005 13.7% 14.3% 1.7% -11.5% 2.741 0.0% 0.14 0.165 10.3% -10.080 10.707 513 1.421 649 1.12 30.538 -1.319 91.5% 4Q11e 7.31 30. and in JPYbn for Sharp.4% 24.433 2.80 32.689 4.8% 10.261 587 1.http://bg.01 33. 2011** RIC AUO LGD Sharp CMI 2409 TT 034220 KS 6753 JP 3481 TT Ccy __________ HSBC___________ Rev* Net profit* OPM TWD KRW JPY TWD 467.4% ___Bloomberg consensus____ _________Difference_________ Rev* Net profit* OPM Rev Net profit OPM 482. **Refer to FY 12 for Sharp Quarterly forecasts: TFT-LCD panel makers AUO quarterly earnings model (TWDmn) Revenue Gross profit Operating profit EBITDA Net income FD EPS (TWD) BVPS (TWD) Margin (%) Gross margin Operating margin EBITDA margin Net margin 1Q10 111.8% 2.129 304 -248 807 -256 -694 31.300 -4.403 20.0% 20.03 12.051 2.1% 5.5% 0.20 30.2% 17.103 0.057 1.8% 2.323 29.4% 2010e 25.565 12 -5.605 -4.8% 7.520 19.433 555 1.9% 4.7% -3% 6% -4% -8% -166% -55% -51% -164% -5.732 15.1% 4.1% Source: Company report.9% 0.9% -3.64 3.235 3.977 20.6% 18.433 3.082 -15 -42 31.392 31.64 7.603 1.564 14.913 14.6% -5.912 -1.912 1.0% 22.2% -4.298 10.8% 0.768 -0.464 -10.4% 2Q10 3Q10 4Q10 102.0% -0.957 98 1.0% 21.5% 2.6% 2.6% 6.543 670 -5.525 335 909 32.24 0.612 10.0% 2Q11e 110.6% 11.3% 27.2% 22.65 30. Bloomberg consensus * In TWDmn for AUO and CMI.551 11.324 6.050 404 1.

g. A contraction in Hong Kong's employment levels and the size of the labour force can be attributed to the passing of the Chinese New Year (first week of February).6% for the December 2010 . At 3. That said. unless the economic recoveries of the US and core European economies are fundamentally derailed for any reason (e. beating both market and our expectations (3. As we believe (1) softer Japanese consumption in the months to come will be offset by greater government and private reconstruction efforts and (2) fears of a major disruption to Japanese component production operations and supply lines are premature . That is.7 million.February 2011 period. we currently do not expect the unfolding crisis in Japan to derail Hong Kong's job market recovery or overall economic condition.http://bg.there have been no reports of direct damage to Japanese manufacturing sites (See Japan and Asia: Implications for monetary policy. Implications Although Hong Kong's unemployment rate is now sitting well below its long-term trend of 4.58 million in the same period. surprising markets to the positive side in February. Japan accounts for 4% and 10% of Hong Kong's total exports and imports respectively. 16 March 2011)).6k to just under 3. an escalation of global oil price speculation) or if the ongoing radiation leakage crisis cannot be effectively contained in the coming days/weeks.research. Facts Hong Kong's unemployment (seasonally adjusted) rate fell to 3.2%.7%). as did total employment which fell by 6.渐飞研究报告 .panlv.2% (1990-2010).net Economics . with the latest HSBC PMI sub-index for employment hitting a 38-month high in February.HK View HSBC Global Research at:http://www. when business activities and labour demand typically peak.6k to 3. Both total unemployment and the unemployment rate (sa) still managed to fall however as the contraction in the size of the labour force outstripped that of total employment. The labour force shrank by 13.6%. the continued tightness of productive capacity (backlogs of work built up for the seventh straight month in February's PMI) suggests that businesses likely remain upbeat. and retail. we think there's room yet for the unemployment rate to inch down further before stabilizing in 2Q.hsbc. the private sector is still showing signs of solid improvement.com Issuer of report: The Hongkong and Shanghai Banking Corporation Limited . food and beverage service activities. Moreover. with robust local and foreign demand continuing to support headcount expansion plans. the unemployment rate is now well below its long-term trend level of 4. The improvement in the unemployment rate was concentrated in sectors including insurance. Donna Kwok | +85229966621 | DONNAHJKWOK@HSBC.Data Reactions 17 March 2011 Hong Kong Done it again: Unemployment rate edges down further Hong Kong's headline unemployment rate has done it again.COM.

tightening labour market conditions to further fuel wage inflation.Economist.2%) and for wage inflation to continue stoking inflationary pressures for headline CPI to average at least 4.Data Reactions 17 March 2011 For now. averaging 4. We expect CPI inflation to continue edging up for the rest of this year before peaking out in Q3 or Q4.http://bg.4% this year.4% in 2011.panlv.net HSBC Global Research Economics .渐飞研究报告 . Bottom-line: Strong local and foreign demand are keeping businesses hiring. Donna Kwok . the tightness of labour market conditions and wage increases continues to underscore our buoyant outlook for consumer spending and GDP growth (+5. Greater China 2 .

Balance sheet strength was a positive surprise  Upgrade from Neutral (V) to OW. Prudent balance sheet management with gearing level comfortably at 23% as at end10 which we think is particularly impressive amid COLI’s efforts to expand the scale of its property development business off an already high base.5 22. With HKD23bn new land acquisition in its 2011 budget. As at Feb-11.24 36. COLI has spent HKD10. of which HKD38bn is sales brought forward from before 2011 and HKD12bn is contracted sales achieved during the first two months of this year.4 12M -21.2 -10.net Flashnote abc Global Research FIG Real Estate Equity – China China Overseas Land (688 HK) 18.0 (from HKD19. With estimated property development revenue of HKD55bn in 2011.HK 688 HK 13.hk Stanley Cheung* Associate The Hongkong and Shanghai Banking Corporation Limited +852 2882 4395 stanleyyccheung@hsbc. and with the Disclaimer.8 Overweight Target price (HKD) Share price (HKD) Potential return (%) Performance Absolute (%) Relative^ (%) Index^ RIC Bloomberg Market cap (USDm) Market cap (HKDm) Enterprise value (HKDm) Free float (%) Note: (V) = volatile (please see disclosure appendix) Upgrade to OW: Compelling valuation for the bellwether despite challenging industry outlook  Stronger-than-expected FY10 results were driven by margins  YTD contracted sales is strong growing 74% y-o-y to HKD12bn.914 48 18 March 2011 Michelle Kwok* Analyst The Hongkong and Shanghai Banking Corporation Limited +852 2996 6918 michellekwok@hsbc.65 1.hk Ganesh Siva* Associate.com. Bangalore View HSBC Global Research at: http://www.渐飞研究报告 . continuous landbank geographical diversification and balance sheet strength are key differentiation factors that will set it apart from its peers. COLI’s landbank is sufficient for ~8 years of development.com.7).hk Derek Kwong* Analyst The Hongkong and Shanghai Banking Corporation Limited +852 2996 6629 derekkwong@hsbc.204 115.27.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc. and remain hopeful that COLI will be able to achieve its 2011 delivery target of 7mn sqm GFA.33 -2.research.4 Hang Seng China Enterprises Index 0688. The full-year dividend was HKD0.2 -23.7bn for the balance of the year. respectively.8% FY11e EPS 1. with turnover and core profit up 19% y-o-y and 51% y-o-y to HKD44. we believe its strong balance sheet position is a boon amid the tight credit environment.2bn in land bank acquisition.8bn.panlv.9% 12M fwd NAVe 21. Land acquisitions largely done.7) 2011 earnings largely secured.7mn sqm GFA fell short of the 6mn sq m target slightly by 5%. FY10 results were above both our and consensus estimate.http://bg. Assuming growth of 10%/year in terms of GFA delivery. YTD. The key discrepancy versus our forecast was attributable to higher than expected property development margin of 39%.00 3M -9.00 13.com.57 -4.3 3. it appears that the company would only spend HKD12.9 3. COLI’s strong execution (reflected in robust contracted sales). COLI should have aggregate unbooked sales of ~HKD50bn. with a lower target price of HKD18.36 1. That said.3bn and HKD9. we are widening our NAV target discount from par to the historical mean of 20% to reflect demand-side uncertainties as well as negative external events.2/share. financial resources concentrated on construction of existing landbank. up 35% y-o-y from HKD0.4% .877 108. and is not registered/qualified pursuant to FINRA regulations Issuer of The Hongkong and Shanghai report: Banking Corporation Limited Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix. which improved 10ppt y-o-y. Upgrade to OW with new target of HKD18 (from HKD19. more than 90% of this year’s revenue has been locked in. Summary of changes in EPS and NAV (HKD/sh) Old New %change Source: HSBC estimates 1M 3.hsbc. which forms part of it FY10e EPS 1. While 2010 completion of 5.

806 -1.200 0.567 -4.373 -1.渐飞研究报告 .096 -1.287 -135 7.774 1.476 160 16 1.320 10 -1.214 32.702 6. net of tax Gain on ex-ordinary activities.http://bg.203 9.799 0.171 2010 34.962 294 1.024 -3.panlv.989 1.874 -296 12.054 -3.153 2009 16.2 8.383 195 744 37.093 22% 59% Improved GP margin of projects booked 67% n/a n/a 51% 115% 51% n/a 44% 1350% 102% 71% Rental growth and expanded IP GFA Disposals of 4 projects and acquisition of COGO Stable SG&A to property sales ratio at 4% Profit in JCE up 15x to HKD317mn Issuance of 10-yr USD1bn bond at 5.778 479 1.031 1.469 -955 0 6.327 23 -228 12.515 54.514 0.964 14.net China Overseas Land (688 HK) Real Estate 18 March 2011 abc COLI results review: FY09 vs FY10 (HKDm) Turnover Property Development Property Investment Others Total Turnover Operating Income Property Development Property Investment (net of reval gain) Others Unallocated income/(expenses) Gross Profit Other income Fair value gain on IP Gain on extra-ordinary activities SG&A Share of results of associates & JCE Finance cost Profit before taxation Income tax (ex LAT) LAT Less: Minority Interests Net Profit Revaluation gain on IP.313 2009 % change Remarks 36.463 42.000 sqm to IP n/a 19% 16.125 11.057 44.470 9.27 8.907 335 -461 20.324 10.807 1. net of tax Core Profit Reported EPS (HKD) Core EPS (HKD) Full year DPS (HKD) Weighted number of shares (m) Liquidity Long-term borrowings Short-term borrowings Cash (ex-restricted cash) Net Debt (ex-restricted cash) Shareholder's equity Net gearing (ex-restricted cash) Margins SG&A to property sales ratio Development margin Reported NP margin Core profit margin LAT to Property sales revenue Source: Company data 2010 42.916 0.5% in Nov-10 27% 201% Improvement in sales margin leads to higher LAT n/a 66% 15% n/a 51% 65% 50% 35% 0% 4% 39% 28% 22% 9% 4% 29% 20% 17% 4% 2 .322 18% ASP growth drives revenue from property sales 51% BJ China Overseas Property Plaza add 90.697 268 170 640 17.162 -1.735 23% 10.514 1.023 12.

HSBC Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix.com.56 y-o-y 44% 31% 35% 36% 2H10 780.research. With refining barely breakeven at USD90/bbl oil price and import gas loss potentially quadrupling.hsbc.40 1H10 684.5 Neutral (V) Target price (HKD) Share price (HKD) Potential return (%) Performance Absolute (%) Relative^ (%) Index^ RIC Bloomberg Market cap (USDm) Market cap (HKDm) Enterprise value (CNYm) Free float (%) Note: (V) = volatile (please see disclosure appendix)  FY10 results 3% ahead of consensus on oil & gas price recovery and lower tax. Management expects oil and 18 March 2011 Sonia Song * Analyst The Hongkong and Shanghai Banking Corporation Limited +852 2996 6557 soniasong@hsbc. windfall profit tax cut unlikely 11.6 1. and is not registered/qualified pursuant to FINRA regulations Issuer of report: The Hongkong and Shanghai Banking Corporation Limited gas production to grow 3. the high base and the YTD oil price of USD88/bbl versus the base case of USD82/bbl.HK 857 HK 526. 2011 guidance upbeat.3 0. respectively.渐飞研究报告 . A USD10/bbl move in crude price changes 2011e net profit by 18.net Flashnote abc Global Research Nat Resources & Energy Oil & Gas Equity – Hong Kong PetroChina (857 HK) N(V): 2010 results in line. PetroChina can endure refining losses of -USD2-3/bbl without a significant impact on the bottom line.2 12M 17. Crude processing was expected to grow by 8. PetroChina is expected to gain RMB38bn or a 23. Tax release unlikely.5%. policy risk will continue to cap earnings upside.4%. Windfall profit tax review discussed.579 3627063 11 2010 results 3% ahead of consensus. management discussed a potential easing of the windfall profit tax.5 target price 1M -0. PetroChina 2H 2010 results at a glance (RMBbn) 2010 Revenue Operating profit Net Profit EPS (RMB) Source: Company data. Our 2010 estimate was 12% below the actual due to higher corporate charge and income tax rate assumptions.6 98.7 0. respectively. and with the Disclaimer. At USD100/bbl.9 74.1 HANG SENG INDEX 0857. EBIT margin contracted from 14.54 13. we raise our 2011-12 estimates by 30% and 21%.3 9. price and cost control still lacking  FY11 guidance upbeat with faster E&P output growth and 16% capex increase: we raise 2011-12 estimates by 21-30%  Windfall profit review discussed but unlikely given earnings natural hedge. PetroChina has been and will continue to control import volume.4% increase to 2011e net profit.9 65.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc.518 4.105.http://bg.3 143. raise 2011-12 estimates by 30/21%. As for import gas losses.4 103. We believe it’s unlikely to see a windfall tax reduction given the earnings natural hedge.8 140.4%. Maintain N(V) rating and HKD11.2% in 2010 due to import gas losses and cost hike in domestic oil marketing. Capex was increased by 15.4 3M 9.76 . Reflecting the guidance.panlv.0 0.8 9.36 h-o-h 14% 11% 14% 11% 1465.3% versus 25% assumed. If the trigger price is raised from the current USD40/bbl to USD60/bbl.4 0.8 88.1% in 2009 to 13. The slight 3% earnings surprise came from a lower income tax rate of 20. Net profit grew 35% y-o-y to RMB140bn on oil and gas price recovery (+35%.9% to RMB320bn (=USD48bn). +18%) and massive sales volume increase (+20-40%). which forms part of it 2009 1019.hk Akash Gupta * Associate Bangalore View HSBC Global Research at: http://www.4 187.50 10.3% and 10.

45 4.5 125.9% 23.8 1.5 -17.1 187.7 15.3 19.335 1.93 4.788 994 315 1.7% 9.5% 3.1% 5.5 7.5 2112.8 9% 2% -29% 11% 22% -42% 21% 2 .25 2% -7% -1% 6% 12% 5% 5% 3% 0% 1% 0% 4% 4% 1% 30% 116% 16% -2% 3% 886.3 768.0 903.42 3.1 1.503 61.7 7.8 16.8 140.8 1465.0 1.3% 35.0 185.53 843.5 9.0 405.4 1168.3 52.2 32.9% 34.3 13.5% 9.3 105.480 1.6 124.72 6.4 -10.0 1.2 214.8 -10.253 48.8 -10.8 16.4 -10.6 159.56 188.3 501.7 7.989 4.9 65.019.550 1.1 20.5 117.9% 47.8 1134.7 10% 17% 16% 8% -1% 10% US$/bbl Earnings forecast changes (RMBbn) EBIT E&P R&C Marketing Gas Pipeline Headquarter Net income Source: HSBC estimates _____________2010e ____________ _____________ 2011e ____________ _____________ 2012e ____________ New Old % revision New Old % revision New Old % revision 187.2% 2.9 4.2 43.net PetroChina (857 HK) Oil & Gas 18 March 2011 abc PetroChina income statement and operational data (2H10) Unit Financials Revenues E&P R&C Marketing Pipeline Others Total revenue Total external revenue Profit from operations E&P R&C Marketing Pipeline Others Total operating profit Net income to Shareholders Operating statistics E&P Crude Oil Output Marketable Natural Gas Oil & Gas Output Refining Crude Processed Gasoline Kerosene Diesel Marketing Marketing volume Chemicals Ethylene Synthetic Resin Synthetic Fibre Synthetic Rubber Urea Avg Realized PTR Crude Px Avg Realized PTR Gas Px Capital expenditure Lifting cost USD/RMB WTI Source: Company data.2 1294.6 148.6 1294.615 5.9 0.0 21.3% 10.809 2.8 5.8 153.8 173.7 1.3 2.2 181.5 11.9 53.5 98.3 -16.38 266.4 1.9 74.6 80.1 10.4 34% 33% 48% 51% 17% 40% 44% 46% -55% 20% 7% -9% 31% 35% 283.3 150.6 22.8 162.6 601.0 3% 2% -29% 7% -4% -34% 13% 214.4 153.0 729.32 424.833 3.2 64.4 2158.3 -15.9 439.745 120.764 72.1 344.1 464.4% -5.0 -11.242 59.0 17.83 62.4% 6.6 2462.8 7.2 780.0 20.8 9.762 991 304 1.97 6.0 16% 7% -16% 9% 35% -38% 30% 240.0 -10.5 43.7 1027.5 43.520 1.308 2.1% 19.0 10.806 2.7% 5.72 6.23 6.2 533.167 26.2 4.7 828.5 149.395 53.2 142.9 4.8 16.2 16.49 87.7 1559.313 1.2 10.8 73.9 23.3% 433.1 182.7 3% 10% 5% 8% 156.0 1.8 159.4 5.828 101.1 221.70 87.2 1195.2 162.155 3640 29% 1% 80.918 73.3 77.2 -1.7 11.7 261.6 979.2 143.985 619 3.8 12.228 27.7 2221.0 1068.2 1228.471 420 3.4 103.0 2451.1 611.0% 28.panlv.8 16.3 140.7 1153.12 6.3 8% 8% 13% 21% 202% 11% 14% 9% -57% 13% -18% -82% 11% 14% 620.7 10.http://bg.973 1.2 -8.8 320.3% 20.2 9.渐飞研究报告 .846 72.0 14% 10% -9% 22% -11% -12% 6% 4% -39% 4% 115% 1% 14% 16% mm bbl bcf mm boe mm bbl 000' T 000' T 000' T 000' T 000' T 000' T 000' T 000' T 000' T U$/bbl U$/Mcf RMBbn US$/bbl 857.70 80.6 88.5 170.3% 18.76 79.9 3.5 9.70 320.3 8.114 2.253 2.0 15.973 53.754.2 15. HSBC 2010 2009 y-o-y 2H10 1H10 h-o-h 2011e 2011/2010 RMBbn RMBbn RMBbn RMBbn RMBbn RMBbn RMBbn RMBbn RMBbn RMBbn RMBbn RMBbn RMBbn RMBbn 544.9 664.82 78.6 684.1 616.3% -1.00 276.

212MW was suspended.http://bg. Strong LNG spot pricing. Japan’s installed power capacity stood at 64. which could result in a 1-3ppt cut in consensus ROE for 2011e. however whether this will translate into new order volume in 2011 remains to be seen. and with the Disclaimer.5GW in 2009.net Flashnote abc Global Research Korea Industrials Equity – Korea Korea Shipbuilding Adding one more to the mix  Japan’s fuel mix change should put upward pressure on global LNG pricing  Offshore and container segments still strong + LNG recovery should favour bigger yards  Our top pick in the sector remains HHI in Korea with strong order momentum and its diversified strategy Japan’s fuel mix change.panlv. and is not registered/qualified pursuant to FINRA regulations Issuer of report: The Hongkong and Shanghai Banking Corporation Limited. On the back of this. For example. We do not expect any change in new orders at the moment.8x P/B 2012e.ryu@kr.5GW in 2010.com Jinkyu Ryu* Associate The Hongkong and Shanghai Banking Corporation Limited. Seoul Securities Branch Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix. Assuming the power plants remain closed.hsbc. LNG + already strong offshore and container segments should favour bigger yards going forward. creating valuation pressure. Seoul Securities Branch +822 3706 8758 paulchoi@kr. cost push.000 TEU or above) and drillship segments. we believe the timing of Financial Investment Decisions (FID) will be moved forward for offshore LNG projects in Australia in 2011.000. The supply outage accounts for roughly 15% of Japan’s power capacity and could significantly shift the fuel mix from nuclear to LNG.hsbc. HSBC expects heavy plate prices (Far East Asia) to rise by 17% in 2Q11. Japan’s LNG imports are likely to rise by 4-5m tonnes per annum. Japan’s LNG imports increased by 4m tonnes in 2007. LNG vessel recovery? It was not a big surprise to see strong spot rates this week. when operation of power plants with 8. LNG spot price in Europe has jumped 13% since last Friday as Japanese utilities attempt to secure more LNG supply.428MW) and Tokai plant 2 (1. Steel concerns vs.174MW). we still prefer HHI to peers until we see a cyclical upturn in bulkers and tankers. HHI remains our top pick in the sector. however we cannot rule out the possibility that higher LNG pricing could bring back stronger demand for LNG carriers in the mid-long term. especially in the containership (13.com View HSBC Global Research at: http://www. The stock is trading at 8. In this regard. We reiterate our Overweight (V) rating on HHI with a SOTP-based TP of KRW600.hsbc. However. while peak demand was 52.渐飞研究报告 . With its better earnings quality and strategy. We believe the long-awaited rebound in vessel prices could create further volume upside going forward.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc. New build LNG vessel orders had been quiet since 2009 with only five new orders in 2010 and five YTD 2011. Seoul Securities Branch +822 3706 8783 jinkyu.5x EV/EBITDA and 1. we think this cost push will translate into higher vessel prices. Fukushima plants 1 and 2 (6. which forms part of it .research.100MW) has been suspended (9.700MW in total). Koreans are strongly positioned in both segments. Operation of Japan’s Onagawa plants 1-3 (2. 17 March 2011 Paul Choi* Analyst The Hongkong and Shanghai Banking Corporation Limited.

net Korea Shipbuilding Industrials 17 March 2011 abc UK NBP LNG spot price Japan's natural gas consumption (GBP/Therm) 68.000 1.200 1.000 4.000 2.0 nuclear pow er plants (11 Mar) 64.0% 80 70 60 2.0 01-Mar-11 Source: Bloomberg (Billion Cubic Meter) 110 100 90 3.000 0 2010 North America Middle East Source: BP Stat (Million Tonnes oil equiv alent) 5. Steel plate price ($/ton) 1.000 1.000 3.0 The earthquake hit Fukushima 66.000 0 2015 2020 2025 2030 2010 North America Middle East Source: BP Stat 2015 2020 2025 2030 Latin America Africa Europe & Eurasia Asia Pacific S & C America Africa Europe & Eurasia Asia Pacific Steel plate price trends and forecast Newbuilding price vs.渐飞研究报告 .8% 00 01 02 03 04 05 06 07 08 09 Source: BP Stats Japan's Natural Gas Consumption % of Global Gas Consumption 3.000 800 600 400 200 0 China domestic Steel Plate price(RHS) Source: Clarkson.http://bg.0 56.panlv.2% 3.100 1.000 900 800 700 600 500 400 300 2006 2007 2008 2009 2010 2011 2012 2013 Far East Domestic Source: HSBC (Index ) 200 180 160 140 120 100 2006 2007 2008 2009 2010 2011 ($/ton) 1.0 58.000 4.0 54.000 2.000 3. HSBC New building price (LHS) 2 .9% 2.0 62.1% 06-Mar-11 11-Mar-11 16-Mar-11 Global natural gas production Global natural gas consumption (Million Tonnes oil equiv alent) 5.0 60.

KRW5. UAE and Kuwait.1 1M -3. With 1Q11e backlog standing at cKRW20.000 187.000 based on SOTP valuation.0trn orders secured y-t-d. far below European peers above 50%. expected to come onstream in 2014e.0trn orders y-t-d. SE has now secured cKRW5. Risks include weak oil prices. A KRW14trn new orders target should be achievable.2 28. in our view.research.0 12M 52. in our view. Seoul Securities Branch +822 3706 8750 briancho@kr. Seoul Securities Branch +822 3706 8763 keithhwang@kr. We add KRW87.net Flashnote abc Global Research Mid Cap Construction & Engineering Equity – Korea Samsung Engineering (028050) OW(V): Sailing with a tailwind  Saudi ARAMCO awards contracts. higher raw material prices and KRW appreciation that weakens pricing power. market jitters on risk to orders from Middle East unrest to dissipate  Reiterate OW(V) and maintain target price of KRW247. SE will carry out the engineering. which forms part of it .com *Employed by a non-US affiliate of HSBC Securities (USA) Inc.5 3M -5. While the Middle East region comprises c50-91% of Korean E&C players’ overseas backlog. applying last year’s hit ratio of 20% to the bid market size this year of cUSD67bn (hydrocarbon cUSD47bn). we also expect ongoing flows from captive group works (company guiding for volume growth to nearly double in 2011) to provide an additional tailwind on the back of Samsung group’s aggressive capex agenda (mainly from IT facilities). and is not registered/qualified pursuant to FINRA regulations Issuer of report: The Hongkong and Shanghai Banking Corporation Limited.0 KOSPI INDEX 028050. Reiterate OW(V) and maintain target price of KRW247.75bn). we find Samsung Engineering is now trading at 30% EV to 1Q11e backlog (22% EV to 2011e backlog). NGL recovery trains and utilities.5 -3.com Keith Hwang* Analyst The Hongkong and Shanghai Banking Corporation Limited. Potential risks may proliferate if current political jitters spread out to the GCC (Gulf Cooperation Council) nations and this may present critical downside risk to order bidding activities – but the chances of this are minimal.panlv. 36% of 2011e guidance (KRW14trn).0trn orders y-t-d (36% of 2011e guidance).4trn net cash to derive our per share NAV of KRW246.580 6. the largest GCC exposure at the country level includes Saudi Arabia. we think overseas order momentum for SE remains intact and the recent sector correction looks overdone.4bn worth of non-core assets and KRW1.672 7.com View HSBC Global Research at: http://www. Overweight (V) Target price (KRW) Share price (KRW) Potential return (%) Performance Absolute (%) Relative^ (%) Index^ RIC Bloomberg Market cap (USDm) Market cap (KRWb) Enterprise value (KRWb) Free float (%) Note: (V) = volatile (please see disclosure appendix) 247.hsbc. Including this Shaybah order (USD2. This represents 56% of 2010 orders (KRW9trn) already. Saudi ARAMCO noted that Samsung Engineering (SE) has been awarded contracts to build the Shaybah natural gas liquids (NGL) project in eastern Saudi Arabia (source: MEED). and we expect the company to win over KRW8-9trn orders within 1H11e.6 -2.000 Four packages awarded to SE at Shaybah.5x target EV/EBITDA for 2011e core operations (reflecting fair EV to 2011e backlog standing at 30%). Despite market concerns on potential overseas work delays and the order flow downturn ahead.hsbc. Jitters on Middle East unrest set to dissipate.hsbc. and with the Disclaimer.KS 028050 KS 6. Samsung Engineering to carry out EPC works for Shaybah’s entire four packages  KRW5.500 32. We apply 15.http://bg.769.5trn. and four cogeneration units with combined capacity of more than 1 GW. Seoul Securities Branch Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix. procurement and construction (EPC) work for all four construction packages at Shaybah NGL: inlet facilities.217 70 17 March 2011 Brian Cho* Regional Head of Industrials Research The Hongkong and Shanghai Banking Corporation Limited.渐飞研究报告 . On top of strong overseas momentum.

119 1.434 1.045 777 -457 4 388 2.1 12/2010e 1.1 Note: * = Based on HSBC EPS (fully diluted) Price relative 221250 171250 121250 71250 21250 2009 2010 Rel to KOSPI INDEX 221250 171250 121250 71250 21250 2011 2012 Ratio.3 9.2 -11.9 -21.966 1.8 9.panlv.110 14.7 -82.21 11927.41 2000.7 12.26 11927.5 31.471 333 -17 316 30 336 336 -77 259 259 4.2 24.59 8885.30 2 .225 708 -16 692 66 838 838 -226 611 611 Valuation data Year to EV/sales EV/EBITDA EV/IC PE* P/NAV FCF yield (%) Dividend yield (%) 12/2009a 1.05 2000.3 34.986 12.2 -2.434 3.6 -95.5 143.615 1.4 16.3 9.2 21.5 9.788 1.6 1.045 2.072 1.5 37.718 0 -1.3 36. growth and per share analysis Year to Y-o-y % change 12/2009a 12/2010e 12/2011e 12/2012e Samsung Engineering Source: HSBC Note: price at close of 16 Mar 2011 Revenue EBITDA Operating profit PBT HSBC EPS Ratios (%) Revenue/IC (x) ROIC ROE ROA EBITDA margin Operating profit margin EBITDA/net interest (x) Net debt/equity Net debt/EBITDA (x) CF from operations/net debt Per share data (KRW) EPS reported (fully diluted) HSBC EPS (fully diluted) DPS NAV 31.net Samsung Engineering (028050) Construction & Engineering 17 March 2011 abc Financials & valuation Financial statements Year to 12/2009a 12/2010e 12/2011e 12/2012e Key forecast drivers Year to New orders Petrochem Industrial Environment 12/2009a 10.6 -3.84 2000.452 1.1 -69.6 40.3 37.5 16.4 22.804 539 -15 523 51 654 654 -176 477 477 7.1 1.0 34.21 2000.2 34.3 -2.5 1.896 1.236 884 866 12/2012e 16.9 5.248 383 -18 365 43 487 487 -131 355 355 5.6 9.41 6472.6 -105.3 -2.669 0 -1.6 38.383 1.119 2.2 28.0 15.00 26567.4 32.5 35.043 996 Profit & loss summary (KRWb) Revenue EBITDA Depreciation & amortisation Operating profit/EBIT Net interest PBT HSBC PBT Taxation Net profit HSBC net profit Cash flow summary (KRWb) Cash flow from operations Capex Cash flow from investment Dividends Change in net debt FCF equity Balance sheet summary (KRWb) Intangible fixed assets Tangible fixed assets Current assets Cash & others Total assets Operating liabilities Gross debt Net debt Shareholders funds Invested capital 5 286 1.1 28.00 36494.117 9.640 581 721 12/2011e 13.7 126.460 -237 5 599 3.1 12/2012e 0.1 -11.7 -35.2 15.8 7.1 12/2011e 1.8 7.916 0 -1.7 6472.3 7.4 15.84 15286.212 1.0 -98.582 253 281 12/2010e 11.渐飞研究报告 .0 8.943 10.6 13.46 15286.1 -245.6 9.7 44.896 4.8 38.4 3.0 11.2 1.05 8885.5 9.6 1.1 29.4 9.991 -174 726 -117 -448 -80 -533 561 264 -119 -121 -80 -74 89 515 -120 -127 -80 -316 335 663 -121 -128 -80 -462 480 3.6 43.7 12.093 2.8 37.8 19.00 49781.8 15.063 -311 5 493 2.00 19416.095 0 -1.2 -139.8 6.2 4.http://bg.134 1.1 -134.

costs have increased due to stable wafer and rising cost of silver paste.38 Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix.13 Sep-10 810 110.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc. HSBC estimates.682 14. more importantly.80 5. but likely to get worse in 1Q11  4Q10 earnings decline on oversupply related price pressures  1Q11e will likely be worse.8% 0.4 3M 11. which are likely to lose market share.59 4. Earnings collapse coming in 1Q11: Gintech’s monthly revenue trend has remained weak in January-February and a mild recovery in late-February may be fading rapidly due to a regulatory change in Italy on 3 March-2011.88 6. Solarfun.8% 170 1.58 Dec-11e 1400 42. there is significant downside to 2011 consensus EPS of TWD12. and with the Disclaimer.76 0.00 -48. the building up of a war chest may be a sign of preparation for the downcycle (like its peers Trina Solar. .00 0.2% 202 1.2% 193 1.27 Jun-10 720 112.2% 148 0. we believe the company’s EPS would decline by more than 70%QoQ in 1Q.3% 12.576 12.2% 19.0% 3.09 0.0% 209 1.60.research. Cell makers are also more vulnerable due to their reliance on partially integrated module makers that rely on in-house cell capacity in downcycle and high cost module makers.590 22.05 0. and is not registered/qualified pursuant to FINRA regulations Issuer of report: The Hongkong and Shanghai Banking Corporation Limited Key quarterly estimates Mar-10 Cell Capacity (MW) Utilisation (%) Cell Shipments (MW) Cell ASP (USD/W) Unit Cell CoGS (USD/W) Wafer cost (USD/W) Revenue (TWD mn) Gross Margin (%) Operating Margin (%) EPS (TWD) 680 99.26 1.5% 3.5% 4. LDK and Jinko Solar). which forms part of it Source: Company data.7% 1.00 93.0% 181 0. View HSBC Global Research at: http://www.013 29. EPS to decline by over 60% in 2011e  Reiterate Underweight (V) with lower TP of TWD48 (TWD73) Underweight (V) Target price (TWD) Share price (TWD) Potential return (%) Performance Absolute (%) Relative^ (%) Index^ RIC Bloomberg Market cap (USDm) Market cap (TWDm) Enterprise value (TWDm) Free float (%) Note: (V) = volatile (please see disclosure appendix) 48.3% 12.3% 3.net Flashnote Global Research abc Telecoms.15 1.92 7.2% 228 1. Not only will an equity issuance result in equity dilution but.224 7.58 Sep-11e 1225 59.panlv.6 17.6 6.12 0.31 1.http://bg. a 27%QoQ decline in what was arguably the best quarter for the industry ever.95 0.渐飞研究报告 .1% 4.24 1.6% 224 1. The earnings decline was primarily driven by a sequential 610bp decline in operating margin due to lower cell ASP triggered by oversupply as well as higher wafer and non-silicon costs.730 21.1% 18.82 Jun-11e 1000 77. while cell prices have remained weak due to oversupply.8 12M 4.800 15.com. As seen earlier in January. this poor performance was not due to seasonal factors.6% 9. 17 March 2011 Shishir Singh * Analyst The Hongkong and Shanghai Banking Corporation (HK) Limited +852 2822 4292 shishirkumarsingh@hsbc.85 7.964 32. In our view.52 3.955 16.26 1.hk Demand & price indicators turning negative again: Both PV insights and Energy Trend current weekly surveys showed that demand is weakening due to project cancellations in Europe. In our view.7% 1.05 0.9 -3.870 15.hsbc.4% 11. Consequently. E-Ton. Note: 4Q10 numbers are HSBC estimates as the company has not disclosed full details of 2010 results yet.97 0.9% 1.74 5. Moreover.81 0.97 in 4Q10.135 100 Sales flat-line and margin declines sharply in 4Q10: Gintech announced EPS of TWD2. It’s worth noting that company’s EPS more than double sequentially a year ago in 4Q09. Potential equity dilution & slowdown signals: The board approved a plan to issue up to 50m shares (16% of outstanding) through a private placement even though the company is virtually debt free.11 Mar-11e 930 90. cell prices are the ones to get hit first due to greater oversupply and lack of differentiation.95 0.4 TAIWAN WEIGHTED IN 3514. Media & Technology Electrical Equipment Equity – Taiwan Gintech (3514 TT) UW(V): 4Q10 margins slump.9% 14.TW 3514 TT 1.84 6.05 Dec-10e 930 98.0 1M 1.10 0.

7 2.212 0 13.1 0.1 5.767 23.9 149.5 -0.434 -122 2.887 2.51 13.7 3.00 54.900 0 13.75 5.151 2.326 4.1 16.0 12/2010e 1.5 -98.0 Note: * = Based on HSBC EPS (fully diluted) Balance sheet summary (TWDm) Intangible fixed assets Tangible fixed assets Current assets Cash & others Total assets Operating liabilities Gross debt Net debt Shareholders funds Invested capital 0 8.2 1.http://bg.805 1.711 21.8 59.052 -1.3 1.650 2.8 53.1 -100.144 5.801 -90 1.151 791 21.2 0.0 0.6 11.26 7.2 14.9 12.37 5.00 60.9 -42.4 33.210 -4.462 13.0 12/2011e 1.947 390 0 -6.5 12.282 3.971 2.7 0.8 0.029 2.8 0.1 12/2009a 12/2010e 12/2011e 12/2012e Source: HSBC Note: price at close of 16 Mar 2011 2 .370 1.渐飞研究报告 .165 -1.437 2.3 42.1 Profit & loss summary (TWDm) Revenue EBITDA Depreciation & amortisation Operating profit/EBIT Net interest PBT HSBC PBT Taxation Net profit HSBC net profit Cash flow summary (TWDm) Cash flow from operations Capex Cash flow from investment Dividends Change in net debt FCF equity 1.617 0 -2.8 19.400 52 731 0.0 9.0 -58.6 10.632 -1.150 20.715 1.674 2.400 65 914 0.6 5.6 0.0 12335.8 79.3 1.247 962 4.7 -67.184 -2.028 15.0 12/2012e 1.36 0.7 0.251 -1.515 -78 2.3 0.1 1.197 4.1 12/2012e 1.2 3.7 0.849 8.0 17.12 0.3 7.652 -1.5 20.7 0.662 7.533 9.360 28.6 -60.258 11.557 -211 4.1 1.3 1.01 0.150 2.6 -0.173 16.810 -4.652 0 -2.4 7.0 35.30 -0.997 5.323 4.5 1.291 4.35 1.3 3.435 -95 4.8 5.711 876 -774 101 -163 36 -62 34 70 -28 28.2 464.3 7.090 8.6 11.141 5.1 2.6 -0.230 4.10 7.56 13.499 Price relative 115 95 75 55 35 15 2009 2010 Rel to TAIWAN WEIGHTED INDEX 115 95 75 55 35 15 2011 2012 Gintech Ratio.3 11.2 33.7 5.216 17.0 18.882 -77 1.553 1.339 -189 4.9 0.530 6.7 5.315 2.335 26.198 1.515 4.954 5.4 8.8 1.935 24.810 0 600 -597 3.6 35.024 2.448 0 10.2 39.4 6.145 -3.net Gintech (3514 TT) Electrical Equipment 17 March 2011 abc Financials & valuation Financial statements Year to 12/2009a 12/2010e 12/2011e 12/2012e Key forecast drivers Year to Cell Capacity (MW) Utilisation (%) Cell Shipments (MW) Cell ASP (USD/W) Unit cost (USD/W) Unit Gross Profit Spread (USD/ 12/2009a 640 58 368 1.00 67.0 12/2010e 930 89 824 1.4 187. growth and per share analysis Year to Y-o-y % change Revenue EBITDA Operating profit PBT HSBC EPS Ratios (%) Revenue/IC (x) ROIC ROE ROA EBITDA margin Operating profit margin EBITDA/net interest (x) Net debt/equity Net debt/EBITDA (x) CF from operations/net debt Per share data (TWD) EPS reported (fully diluted) HSBC EPS (fully diluted) DPS NAV 0.00 56.3 -57.485 16.4 1.2 4271.8 -95.5 27.panlv.8 0.1 23.0 28.1 543.676 -1.9 9.312 Valuation data Year to EV/sales EV/EBITDA EV/IC PE* P/NAV FCF yield (%) Dividend yield (%) 12/2009a 2.463 13.9 0.0 15.816 19.25 0.1 33.6 2.2 12/2011e 1.5 -2.151 2.2 -27.0 1.7 0.3 14.

and this will likely to drag FYP growth in 2011 as well. close to the historical average 12M trailing PB of 2.9x) to reflect high business risk from forex hedging and uncertain financial market.13x our estimated FY11 book.051 4. (2) asset reflation and (3) aggressive rate hikes.9% on higher underwriting cost at life unit and (2) lower EV (embedded value) multiples applied to life unit (from 1x to 0.28% and provision coverage reached 277%) we think CUB will continue to be the earnings driver for Cathay FHC in 2011. 1.559 6.2% y-o-y and fees by 24%.45 1.09 0.7 12.91 1. expecting loans to grow by 10%. Our new SOTP-based TP implies 2. FYP growth may slow in 2011 due to regulatory change  Brighter bank outlook with loan demand and NIM continuing to improve and credit cost staying low  Maintain N.research.7 NA 60 17 March 2011 Sarah Hung*. CFA Analyst HSBC Securities (Taiwan) Corporation Limited +886 2 8725 6026 sarahychung@hsbc.1 20.4 -5.hk View HSBC Global Research at: http://www.76 Div yield (%) 1.4% for 9M) as gains from the stock market were offset by high hedging cost (1.com. The banking unit was relatively stable with loans growing by 9.1 12M -11.724 21. NIM continues to improve by 5-10bps even without rate hikes.092 PAT (TWDm) RoE (%) 11.45 2. The company’s guidance for 2011 is positive.http://bg..TW): Earnings summary PBT (TWDm) 2009a 2010e 2011e 2012e 16.300 5.09 2.523 17.0 443. With solid asset quality (NPL is 0. life business is likely to stay sluggish in 2011. TP cut to TWD48.5 8.5 30. we expect unstable financial markets to cast risk concerns Earnings dropped in 4Q due to high hedging cost. Cathay FHC reported a weak profit of TWD373m only in 4Q on high hedging cost (TWD9bn) and net provision costs (TWD800m).601 14.6 PB (x) 2. We cut out TP due to (1) lower FY11e earnings estimate by 24.0 -1.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc. HSBC estimates . Asia Pacific The Hongkong and Shanghai Banking Corporation Limited +852 2996 6599 tdunivant@hsbc.1% in 4Q. and is not registered/qualified pursuant to FINRA regulations Issuer of report: HSBC Securities (Taiwan) Corporation Limited Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix.5 1. The Life unit’s first year premium (FYP) sales dropped by 22% q-o-q due to decline of interest rate sensitive policies owing to regulation change.3 -18.5% for FY10 (vs. and with the Disclaimer.2% for 9M).4 Neutral Target price (TWD) Share price (TWD) Potential return (%) Performance Absolute (%) Relative^ (%) Index^ RIC Bloomberg Market cap (USDbn) Market cap (TWDbn) Enterprise value Free float (%) Note: (V) = volatile (please see disclosure appendix) 48.12 BVPS (TWD) 20. while NIM (net interest margin) widened by 5bps to 1.渐飞研究报告 .tw Todd Dunivant* Head of Banks Research. Cathay FHC (2882.8 (from TWD52. Stable banking segment will continue to be earnings driver in 2011.TW 2882.panlv. maintain Neutral.4) on downward earnings revisions and risk concerns on life unit.387 25.1x from 2009 to date.8 (from TWD52.hsbc. 3.5 22.34% in 4Q.8% vs. (1) stock market up/downside.2 2.8 43.TT 15.0 1M -9.1 6. Investment yield was flattish at 3. declined by 1bps only to 4.9 21. on the other hand.8 PE (x) 40.2 3M -6.com. Funding cost.03 1.4) on higher risks in life segment.9 24.5 TAIWAN WEIGHTED INDEX 2882.1 0.7 2. which forms part of it Source: Company data.2 96. cut TP to TWD48. Catalysts.9 EPS (TWD) 1.net Flashnote abc Global Research FIG Diversified Financial Services Equity – Taiwan Cathay FHC (2882) N: Still sluggish life business outlook in 2011  4Q earnings weaken on high hedging cost and y/e provisions.

45 0.0) 12.547.7 0.09 96.997 4.728 2.5 2.032 3.526 4.051 13.398 1.769 41.516) 343.295.869 1.114 582.179 (55.548.99 (6.76 1.675 93.72 9.601 0 4.166 3.392 (0.724 16.845 3.229 (97.1 1. NPL data as of 4Q10 Neutral Net Profit Breakdown by Subsidiary FY09 2.468) 0 219 11.744 1.428.675 99.461 2.065 781.9) (57.654 (88.959 (12.005 24.870 2.292 1.653 2.798 212 (53.898 12.626.963 2.885 72.800 8.2 6.113) (2.428 (11.258 8.3 Source: TEJ & HSBC 5 .058 202.405 39.007 26.130 2.218 1.055 1.684 (13.935 1.161 (3) (54.461 0 4.0 8.560.70 Basic EPS Fully Diluted EPS DPS Reported BVPS NPL Adjusted BVPS Fully adj.146 FY10e (6.219 15.268.389 1.662 336.810.304 40.410 31.5 0.5 0.776 3.643) 5.677 4.117 8.065 179.286) (53.382 39.116.601 FY11e 108.48 20.343 3. BVPS Valuation data P/E basic (x) P/BV (x) P/fully adjusted BV (x) Dividend yield (%) FHC: DuPont Analysis RoE (%) RoA(%) Double leverage Ratio (%) Issuer Information Share price (TWD) Reuters Market cap.8 0.04 0.810 3.7 10.658 52.985.960 41.469) (1.719) 0 186 21.109 40.439 12.351.53 30.66 12.45 0.0 0.199) (1.814 41.688 (300) 11.051 FY10e 95.panlv.3 101.9 32.996 0 5.224 1.144 8.0) 12.210 3.690.0 3.7 2882.195 0 4.961 41.43 30.5 61.092 1.548.593 213 24.802 83.539 1.754.957 863.637 9.8 25.030 (64.485 74.841 804.0 (59.341 212.7 3.486 1.665.544.046 1.12 2.060 7.788 213 21.3 35.051 0 11.17 TWD 100 80 60 40 20 Cathay 0 Aug-07 Apr-08 Jan-09 Oct-09 Jun-10 Cathay /Taiex (RHS) (x) 1.717 5.407.172 (1.698 4.4 1.130 (79.1 1.560.281 232.9 2.974 11.2 (5.659) 1.7) (0.29 1.5 0.0) 11.308.53 1.665.336 (73.03 1.052 3.874 6. unit-linked) Investment yield (net of hedging) RoE (%) RoA (%) Capital Data and Asset Quality Banking Subsidiary Tier I Capital (%) Tier II capital (%) Total CAR (%) CAR Data as of 1H10.4 97.TW 443.4 34.0 (53.848 8.279 615.186 577.7 Share price performance 43.683.1 28.渐飞研究报告 .7) 61.559 4.5 21.078.05 15.230) 7.701 187.559 0 21.34 0.011 506.288.144 0 25.058 FY09 87.980 FY11e 3.078.083.304.3 1.09 1.295.127 22 14.130) (729) (5.929 13.025 119.73 22.284 FY12e 8.0 9.09 Provision coverage ratio (%) 11.062 251.131) 3.428 57.997 2.405) (6.332 (215) 4.065) 8.532 (11.558 323.0 (56.575 11.328.TT 60 23.025 9.1 15.7 3.023 1.45 1.22 2.97 15.298.605 2.823 7.446.845.541.060.858) 0 195 14.9 822.401 (2.5 1.434 8.6 1.059.154 285 31.9 0.516) 11.385 282 (57.742.788 624.11 NPL ratio (%) 2.413 331. HSBC (63.724 0 14.154 Country Bloomberg (Equity) Free float (%) FINI Holding (%) Taiwan 2882.053 3.4 0.06 24.978.769 292.523 3.661) 5.434 130.547.793 1.228 4.558 12. (TWDbn) Shares outstanding (m) Source: Company.675 105.865.281 1.466 14.9 0.533 3.559 18.044 (41.497 71.510.536 798.575 270.814 305.701 2.3 6.662 8.890 527.810.4 3.106) (3.010 1.5 1.net Cathay FHC (2882) Diversified Financial Services 17 March 2011 abc Financials & valuation Cathay FHC FHC: Consolidated P&L TWD m Net interest income Net fee income Trading income (net) Insurance income Other operating income Pre-provision revenue Less: bad debt provisions SG&A Non-Op income/loss Tax Non-recurring items Adjustments Net profit Preferred dividends Attributable profit FHC: Consolidated Balance Sheet Cash & receivables S-T investments L-T investments Loans Fixed assets Other assets TOTAL ASSETS Operating liabilities Deposits Corporate bond & L-T debts Insurance reserves Other liabilities Minority interest Total Liabilities Common equity Preferred equity LIABILITY & EQUITY Per share data (TWD) 1.1 0.867 1.28 277.998 944.737 5.2 CAR-FHC (%) 0.978 113.9 21.182 27.254 96.899.9 23.2 0.949 25.2) 6.961 279.130 804.323) 2.536 121.559 Cathay Life CUB Others & adjustments Net profits CUB: Financial Summary Net interest income Net fee income Trading income Total income Bad debt provisions SG&A Net profit Financial instruments Loans Total asset Customer deposits Corporate bonds Common equity CUB: Financial Ratios (%) Gross loan growth Loan to deposit ratio Net interest margin (NIM) Fee income growth Cost/income ratio RoE (%) RoA (%) Cathay Life: Financial Ratios (%) Insurance income Investment income SG&A Net profit Cash and cash equivalents Financial Investments Loans (net) Total Assets Insurance reserves Common equity Cathay Life: Ratios (%) Premium growth (excl.3) 9.9 0.474) 77.991 2.449 493.2 141.319.389 4.172 1.2 3.09 1.806 11.45 0.97 25.http://bg.568) 101.520 1.605 5.91 1.116.130 168.127 577.9 0.920) 117.23 21.3 98.1 0.767.4 0.1 0.12 1.5 0.724 FY12e 125.2 2.064) 0 143 4.132 92.472 347.114) 80.683.005 1.328.67 20.675 94.144.5 0.117 113.1 63.428.1 100.332 545.849 0 5.256 1.422 1.5 0.632 39.154) 3.0 2.1 3.8 6.984 2.61 7.688 523.605 218.601 14.3 60.318 2.601.

7% in January). 5. While it is still early days. By products. Leif Eskesen | +6562390840 | LEIFESKESEN@HSBC. on the other hand. However. Implication Today's export numbers were a bit on the soft side in terms of annual growth. the economy will struggle with tight capacity.net Economics . By markets. Exports of petrochemicals. growth in NODX destined for the EU eased significantly after last months' jumper (14. Looking ahead. 38.5% in January). While growth is expected to ease relative to last year. For nonelectronics exports.Data Reactions 17 March 2011 Singapore Non-oil domestic export growth slows in February Growth in non-oil domestic exports eased in February to 7. therefore.5% y-o-y) and that of consensus (10.com Issuer of report: The Hongkong and Shanghai Banking Corporation Limited Singapore Branch .6% y-o-y vs. this means that inflation will be pushed up by rising wages and more pass-through of higher input costs to end-consumers. Facts Total exports grew in February by 10. NODX growth for electronics exports dropped (-12. Also.3% in January) as pharmaceutical exports grew at a much slower rate (1. 20. But.8% y-o-y vs. NODX to most other markets also experienced slower growth rates.research.4% y-o-y (vs. sequential growth picked up relative to January. Non-electronics exports also slowed after the jump during the previous month (19. calling for policy vigilance to keep inflation at bay.5% y-o-y). with weak readings seen for most product groups. international commodity prices add to the inflation pressures.5% y-o-y vs. exports are expected to grow at a slower pace in 2011 following the post-crisis jump last year.7% y-o-y vs.8% in January).渐飞研究报告 .5% in January).SG View HSBC Global Research at:http://www. but the sequential momentum held up pretty well. overall GDP growth is still expected to keep pace with potential in 2011. picked up pace (37. Bottom line: NODX growth was a bit softer than expected. the tragic events in Japan could also have implications for Singapore's exports over the nearer term. led by electronics and pharmaceuticals. 31. while non-oil domestic exports (NODX) grew 7. Macroeconomic policies will. but growth in overall economic activity is expected to keep pace with potential.3% y-o-y vs. 24. therefore. 17.9% m-o-m sa vs. The growth numbers for NODX were below our forecast (9. 19.0% in January).panlv. while exports to China grew at a slower pace (13. 15.8% y-o-y (vs.7% in January). although sequential growth picked up pace and suggest that the momentum is holding up relatively well. 30. However.1% y-o-y vs.3% in January). Exports to the US grew slightly faster (20. 20. be important maintain a tight macroeconomic policy stance to contain inflation pressures. With GDP already at or above its potential.6% in January). It will.9% y-o-y (vs.1% y-o-y vs. NODX growth rose to 11. In real terms. exports of pharmaceuticals are also likely to grow at a slower pace on average relative to last year when new facilities were added and the product mix also boosted output (and thereby exports).7% y-o-y in January). the annual growth rate for electronics exports is likely to ease further as the inventory cycle matures.hsbc. NODX sequential growth picked up (2.8% yo-y (vs. we will as usual see ups and downs driven by the pharmaceutical sector's erratic production cycles and changes in product mix. 2.1% in January).3 % in January). 51. have to be kept in tightening mode.COM. Despite the expected slowdown in export growth. Going ahead.http://bg.

panlv.http://bg. Electronics and pharmaceuticals pulled down annual growth in February Chart 3. NODX sequential momentum has perked up Chart 2. except the US 2 .net HSBC Global Research Economics .渐飞研究报告 . Economics Associate Chart 1. Chief Economist for India & ASEAN Prithviraj Srinivas.Data Reactions 17 March 2011 Leif Lybecker Eskesen. NODX annual growth slowed for all major export markets.

6% . Singapore Branch +65 6239 0624 xiushicai@hsbc.0x 2. We believe this is not fully reflected in market expectations yet.1x 2. Without a takeout scenario materializing.5x 3.com.2 JAKARTA S E COMPOSITE BDMN.00 -28.617 540 275 2. and is not registered/qualified pursuant to FINRA regulations Issuer of report: The Hongkong and Shanghai Banking Corporation Limited.7% 12.2 3M 13. This should cap RoEs at sub-20% until the bank manages to either lower its funding cost or boost its leverage quickly. which trades at 2.1 -0. BDMN's relatively higher 104% gross loans-to-deposits ratio could constrain either growth or margins. Still our least preferred Indonesian bank stock.587 100 BDMN is not for sale.2% 2012e 4.2% 15.521 412 210 2.652 19. We believe this was mainly driven by hopes for an M&A takeout.2x.渐飞研究报告 .7% 2013e 4.9 15.4x 3.199 16. Singapore Branch BDMN: Key financials and valuations 2010A Core net profit (IDRbn) Core EPS (IDR) DPS (IDR) BVPS (IDR) Core ROE (%) P/E (x) P/B (x) Dividend yield (%) Source: Company. we believe this is difficult to justify with prospective RoEs of <20% compared to a 10-year average of 22%.com. 17 March 2011 Kar Weng Loo* Analyst The Hongkong and Shanghai Banking Corporation Limited.081 477 243 2. HSBC MICA (P) 142/06/2010 MICA (P) 193/04/2010 2011e 3.net Flashnote abc Global Research FIG Commercial Banks Equity – Indonesia Bank Danamon (BDMN IJ) 4700.0 Underweight Target price (IDR) Share price (IDR) Potential return (%) Performance Absolute (%) Relative^ (%) Index^ RIC Bloomberg Market cap (USDm) Market cap (IDRb) Free float (%) Note: (V) = volatile (please see disclosure appendix) UW: Time to refocus on the fundamentals BDMN is not for sale Street is too optimistic on earnings Latest news reinforces our UW stance on BDMN 1M 3.927 19.883 337 172 2. rising 12% y-t-d. and with the Disclaimer.7x 2.sg Todd Dunivant* Head of Banks Research. the stock trades at 16x 2010e EPS compared to its 10-year average of 13x.409 18.2% 13.com.7x Dec 11e BV compared to its 10-year average of 2. Asia Pacific The Hongkong and Shanghai Banking Corporation Limited (HK) +852 2996 6599 tdunivant@hsbc. The stock has done relatively well.7 -2.sg Xiushi Cai* Analyst The Hongkong and Shanghai Banking Corporation Limited. This latest news reinforces our Underweight stance on BDMN. the market is likely to refocus its attention on fundamental performance.panlv.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc.7x 3. Without a takeover scenario materializing.2% Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix. This should quell at least some of the M&A option premium built into the stock.00 6550. which forms part of it 2.2x 4.research.221 54.2 12M 29. The Singapore Business Times quoted BDMN's CEO Henry Ho saying that Temasek is not interested in selling its 68% stake in BDMN. Our 2012e-2013e earnings forecasts are 7%-16% below consensus.JK BDMN IJ 6.hk View HSBC Global Research at: http://www.8% 19. Even on a PE basis.http://bg.9x 2.hsbc. The market may be too optimistic on earnings under a business-as-usual scenario. Singapore Branch +65 6239 0654 karwengloo@hsbc.

7 88.6 27.6 2.9 51.8 12/10e 16.763 5.92 19.JK 1.13 2.939 15.58) 3.2 117.098) (629) 4.260 (5.525 2.7 16.83 2.3 2.617 Year to Gross yield Cost of funds Net interest margin Non-int inc/operating inc Gross loans/deposits Cost/operating income ratio Cost/average assets Net provision/ avg net loans Gross NPLs/loans Coverage Effective tax rate Core ROA Core ROE Growth (Y-o-Y.221) 8.27 3.9 9.5 2.2 15.9 2.2 13.04 11.60 12.18 3.3 14.2 41.3x 16.39) 3.61 28.net Bank Danamon (BDMN IJ) Commercial Banks 17 March 2011 abc Financials & valuation: Bank Danamon Indonesia Tbk Income statement (IDRbn) Year to Interest income Interest expense Net interest income Net fees & commissions Other income Operating income Operating expense Pre-prov op profit (PPOP) Provision charges Associates & amortization Non-op items Profit before tax Core profit before tax Taxation Minorities + preferences Attributable profit Core earnings Balance sheet summary Ordinary equity Customer loans (Net) Investment in securities Customer deposits Debt issued Interest earning assets Interest bearing liabilities Total assets Capital (%) RWA (IDRbn) Core equity Tier 1 Tier 1 CAR Per share data (IDR) Core EPS Core diluted EPS DPS NTA BV Valuations (x) PE Pre-provision multiple P/NTA P/BV Dividend yield (%) Price relative 7938 6938 5938 4938 3938 2938 1938 938 2009 2010 2011 Rel to JAKARTA S E COMPOSITE Bank Danamon Indonesia Tb Source: HSBC Note: price at close of 16 Mar 2011 Underweight 12/09a 15.6 23.233 (8.2 9.285 BDMN IJ BDMN.198.0 16.56 12.9 2.55 12.78 6.1 22.3x 19.00) (0.559 136.589 0 113.001 13.81 (1.2 103.3 20.4 No of shares (m) Market cap (IDR bn) Market cap (USD m) Bloomberg (Equity) Reuters (Equity) FSSTI weight (%) 8.0 2.751 21.521 3.08 3.531 (3.256) 6.2 12/12e 15.372) 10.1 15.780 109.862 135.813.66 16.411 2.012 (2.9 2.6 18.0 2.98 243.09) 2.956 139.694 2.1 18.521 6.3 6.295.8 2.8 51.2 3.77 18.343) (109) 3.29) 3.03) (0.09) 2.7 14.0 15.9 20.976) (500) 5.78 19.88 28.94) (0.2 13.6 20.638 118.0 15.0 13.550 4.8 27.9) 18.883 (IDRbn) 18.1 13.21 (1.0 19.70 19.984 (7.06) (0.537) 11.2 13.032 3.50) 6.3 21.328 0 134.9 6.48) 6.5 3.415 55.251 114.http://bg.1 3.7 16.9 15.1 17.77 6.0 2.4 8.883 2.60 2.6x 18.544) 9.2 9.081) 10.79 (6.91 5.1 18.94) (0.760) (143) 4.085.3 186.1 22.4 19.796 115.0 3.2 15.1 13.002 (1.651. HSBC 16.16 (2.450 79.927.427 14.5 16.127 0 158.7 5.9 486.69 (0.9 6.002 4.92 (1.006 (6.046 1.2 22.119 6.420 184.05) (0.277 79.746) 15.70 7.8 2.78 (6.34) 3.31 5.0 2.1 (9.538.182 129.9 16.2 13.26 539.86 5.66 6.66 337.31 (2.42 11.1 16.8 550.0 419.763 (1. %) Earning assets Total assets Gross loans Deposits Net interest income Non interest income Operating income Total cost Provision charges Pre-provision profit Core PBT Core net profit Core EPS DPS BVPS ROE Decomposition Net Interest Income Non-Interest Income Operating Income Operating Expenses PPoP Provisions Non-op items Op Inc before Tax Taxation Minorities & pref div Attributable profit Leverage ROE Issuer information Share price (IDR) HSBC PT (IDR) Rating Free float (%) 6M ADV (USDm) Source: Company.7 Prices as of market close 16 Mar 2011 2 .03 171.207 96.931 8.418 (4.643 0 97.74 2.63 12.36 476.90 (6.2 12/10e 17.2 16.1 5.1 16.816 16.556) (126) 4.018) (100) 2.6 6.500 13.698 8.239 (2.511) 1 (500) 6.612 (11.7 3.8 9.6 20.8 108.4 39.4 9.5 17.92 (1.1 24.804 94.618 4.57 209.210 95.8 6.408.7 24.08) 2.2 12/11e 16.3 22.06) (0.527 13.9 30.1 9.521 (1.4 2.700 Underweight 32% 4.110 121.9 15.0 14.4 15.7 Financial ratios and assumptions (%) 12/09a 14.14 5.1 10.428 152.2 4.3 50.3 15.4 27.9 2.5 130.8 25.3 161.panlv.0 15.09) 2.128 105.184 91.62 2.1 16.7 3.261 18.1 13.489 2.728 (2.03) (0.973 (1.05 28.9 10.337 3.6 41.1 13.5 2.18 2.310 157.83 2.118 156.0 15.081 4.5 2.64 275.06 12.1 15.94 13.2 14.9 15.2 113.47) 6.783 (9.0 15.2 2.521 12/11e 20.723 1.0 15.0 50.081 12/12e 23.539) (500) 4.9x 19.64 (6.67 411.渐飞研究报告 .6 88.943 8.605 8.973 4.23 3.69) 6.0 343.4 2.5 4.29 (2.45 10.08 27.76 15.270 (7.7 7938 6938 5938 4938 3938 2938 1938 938 2012 6.44 2.50 10.1 17.517) 13.

panlv. Facts As expected. This. the RBI raised both the repo and reverse repo rates by 25bps.com Issuer of report: The Hongkong and Shanghai Banking Corporation Limited Singapore Branch . a potential increase in subsidies on petroleum prices. the RBI still points to elevated prices for protein rich foods and note upside risks to inflation from "high international crude prices. It takes note of the "volatile" nature of the industrial production index. The hawkish statement emphasized the upside risks to inflation from global commodity prices and demand-led price pressures. the statement notes the weak performance of capital goods production in recent months and suggests that the "investment momentum may be slowing down. in that context.http://bg. The RBI continued the gradualist approach. the statement points out that it is "too early to assess the macroeconomic impact of the natural disaster". On the global economy.COM." It further points out that "substitution of thermal for nuclear energy in Japan may exert further pressures on petroleum prices." On Japan.SG View HSBC Global Research at:http://www." However." This was also reflected in the upward revision to their March 2011 WPI forecast from 7% y-o-y last time to now 8%. The cash reserve ratio (CRR) was kept unchanged at 6%. the statement also observed that "while the budgeted level of fiscal deficit for 2011-12 gives some comfort on the demand front. the repurchase (repo) rate and reverse repo rates were both raised by 25bps to 6. the statement also noted emerging risks to growth. While highlighting the strong growth in emerging markets and the pick up in momentum in the US and Europe. expenditure on reconstruction may provide a boost to the economy. that "the spike in oil prices has engendered inflation concerns.75% and 5. the statement remains upbeat in light of strong high-frequency indicators. direct and indirect tax collections. requires "keeping aggregate [spending] under control" and "only by doing this can the fiscal situation contribute to demandside inflation management.渐飞研究报告 ." Interpretation This was a widely expected move.research.hsbc. suggest that the growth momentum persists. respectively." Turning to inflation. such as the latest PMI. merchandise exports. However. in turn." It also noted.net Economics ." On the Indian economy. their impact on freely priced petroleum prices. but goes on to say that "other indicators.75%. but "as normalcy is restored." Lead indicators for service sector activity are also seen as "robust. and the pick-up in non-food manufactured product prices. the statement strikes a more concerned tone than last time. given (i) growth considerations. (ii) still tight liquidity in domestic money markets (expected to tighten temporarily later in March with advance Leif Eskesen | +6562390840 | LEIFESKESEN@HSBC. An additional 75 bps are expected by end-2011. the statement was a bit more cautious compared to March.. with the next hike to be delivered during the second quarter.Data Reactions 17 March 2011 India The Gradualist strikes again: RBI hikes rates by 25bps As expected.could put pressure on expenditure. 25 rather than 50 bps.. and bank credit. the increase in administered coal prices. the statement noted that "the sharp increase in oil prices as a result of the turmoil in the Middle East and North Africa is adding uncertainty to the pace of global recovery. suggesting that "underlying inflation pressures have accentuated" On food inflation.. suggesting that they will continue with gradual rather than more aggressive tightening. Interestingly.

this will only translate into a gradual rather than an aggressive tightening cycle. Bottom line: The 25bp hike was in line with expectations. Also.net HSBC Global Research Economics . They are clearly worried that the elevated international commodity prices will both have direct and a second-order impact on inflation. the statement notes the emergence "risks to growth. translating into another 75bps in rate hikes this year. We believe another 75bps are needed and the next hike is expected to come during the second quarter. The statement was indeed hawkish. highlighting the significant uptick in non-food manufacturing inflation in February and noting the "persistence of demand-side pressures. The RBI seems to believe. At the end of the day." RBI also believes the liquidity squeeze will ease in coming months. Of course. Leif Lybecker Eskesen. We. It is also important to keep in mind that monetary policy still remains highly accommodative. but factoring also in the hawkishness of the statement gives a better sense of how concerned RBI is about inflation. consequently. The RBI would now appear even more concerned about the inflation outlook. rising international commodity prices and demand-led inflation pressures. RBI sounded a hawkish tone. However.panlv. Further to this. On balance.http://bg.Data Reactions 17 March 2011 tax payments). Economics Associate 2 . the statement points to further tightening. with current policy rates well below neutral levels. Chief Economist for India & ASEAN Prithviraj Srinivas. This was another gradual move. The statement was also more explicitly worried about core inflation. continue to see the repo rate go to 7. inflation risks clearly remain the dominant concern. and (iii) the flexibility afforded by the now twice-quarterly meetings. They are basically not convinced that the FY 2012 budget in the end will do its bit in terms of demand management.5% by end-2011." related to the global environment and domestic investments. adding to the challenge of containing inflation. the RBI is concerned that they are going to fight a lonely battle against inflation. as part of its more deliberate verbal intervention strategy. that the expenditure assumptions for subsidies are too optimistic and that the budget could end up not being sufficiently tight if additional expenditures on subsidies are not countered by savings elsewhere.渐飞研究报告 . especially considering the current dangerous cocktail of elevated food prices. to help manage inflation expectations. as do we.

The inflation forecasts for the March end were revised upwards from 7% to 8%. Figure 1. HSBC Economics forecasts three more rate hikes totalling 75bp over next nine months.hsbc.5 6.5 4.5 5. the commencement of GOI supply and Oil and Natural Gas Corp. 16 March).0 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Repo rate (LHS) 1yr1yr OIS -repo rate (RHS) 50 100 bp The Hongkong and Shanghai Banking Corporation Limited 6.500 1.http://bg. Insufficient rate hike premium in 1yr1yr INR OIS 7. During its mid-quarter policy review on 17 March.0 200 Figure 2.hk Himanshu Malik Associate Bangalore View HSBC Global Research at: http://www. FPO (eINR120bn) in April is likely to keep liquidity in the deficit zone. 1yr1yr OIS is expected to price in the increased rate hike premium and liquidity tightening expectations (Figure 1).000 1. Moreover.panlv. Additionally. the RBI announced a 25bp hike in repo/reverse repo rates.000 3 Mar-10 May -10 Jul-10 Sep-10 Nov -10 Jan-11 Mar-11 Net RBI repos (RHS) 1yr INR OIS (LHS) Call rate (LHS) Repo rate (LHS) Source: HSBC.500 -2.000 -1. Bloomberg .0 4. Bloomberg Source: HSBC. Reconstruction activities and the search for alternative energy resources in Japan could further intensify energy and commodity inflation in the region (Japan and Asia: Implications for monetary policy. expressing the concern over the fuelling inflation. which forms part of it % 5. That said. indicating the higher inflation risks and the possibility of further rate hikes.com Virgil F Esguerra Strategist The Hong Kong and Shanghai Banking Corporation Limited HK +852 2822 4665 virgilesguerra@hsbc.0 150 6 -500 -1. in the context of the Japan crisis.渐飞研究报告 .000 500 0 5 4 INRbn Issuer of report: % Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix.research.de.com. Liquidity conditions normalised for a brief period in March due to increased government spending and the absence of Government of India (GOI) bond supply (Figure 2).net Flashnote abc Global Research Asia-Pacific Rates Strategy India India: RBI review re-emphasizes elevated front-end OIS Post RBI review update  Inflation appears more unrelenting post events in Japan  Discontinuation of rate tightening cycle seems unlikely  Overnight fixing to stay high as liquidity remains in deficit 17 March 2011 André de Silva. However. Liquidity re-tightens after a temporary pause 8 7 2. 14 March). overnight rates moved higher by around 60bp over past week as re-tightening was caused by the FY-end tax outflows. the impact is more likely to be on the inflation side rather than the growth prospects. and with the Disclaimer. CFA Strategist The Hong Kong and Shanghai Banking Corporation Limited HK +852 2822 2217 andre.com HSBC FI Research reiterates its recommendation to pay 1yr1yr INR OIS in anticipation of increased rate hike premium and tightening liquidity conditions (India: OIS to underperform bonds.silva@hsbcib.

We will focus on (2) as our main scenario. According to news reports.SHIRAISHI@HSBC.0. What we would like to do is set out two scenarios for the rest of the year. Japan has a current daily power supply capacity of about 31m KW.hsbc. This envisages a negative impact on growth from electricity shortages in the second quarter. Blackouts have already begun as a result of the electricity disruption caused by the earthquake. The earthquake can affect the Japanese economy in a number of ways. Power supply capacity has fallen by a daily total of 16. the blackouts and associated disruption to industrial production will cut GDP by 5% in March ( 40%×25%×0. more gloomy scenario. Main scenario .15m KW at thermal power plants.9. cutting growth from 1. down 0.渐飞研究报告 .net Economics 17 March 2011 Japanese earthquake Two economic scenarios It is obviously very difficult to quantify the impact of the Japanese earthquake on the country's economy at this stage. even adding traded surplus electricity from electricity companies in other areas. Hence we are not making any formal changes to our forecasts.1m KW at the Fukushima nuclear plant and 7.com Issuer of report: HSBC Securities (Japan) Limited . The first looks at the potential impact on the economy from extensive electricity supply disruptions. 2) Weaker economic growth because of electricity supply shortages 3) Deteriorating consumer and business sentiment leading to slower consumer spending and capital investment. it is expected that electricity demand will be roughly 41m KW per day in early spring.9 per cent Japanese growth this year.research. The areas supplied by the Tokyo Electricity Company (Tepco) account for about 40 per cent of Japanese GDP.hence the need for blackouts in the coming weeks. meaning there will be 10m KW shortage. This is our main scenario and would lead to a 0. That means demand will exceed supply by around 25 per cent .4 per cent (our estimate before the earthquake) to 0.5 percentage point fall in Japanese GDP this year. assumes a broader radiation contamination.4 per cent.JP View HSBC Global Research at:http://www. However. Seiji Shiraishi | +81352033802 | SEIJI. including: 1) Lower production due to damage to factories. This will lower annual GDP by about 1.25 percentage points (-15÷12).5 percentage points from our pre-quake estimate.CO. The second. subway lines are running fewer trains. If we assume that electricity consumption and GDP are closely linked and the 25% demand cut continues until the end of April.http://bg.9 per cent.5 month) and by 10% in April (40%×25%×1 month). shops are closing early and offices are shutting off non-essential electricity. pegging growth back to 0. before an improvement in electricity supply from Q3 and a positive impact from reconstruction efforts later in the year. affecting the Tokyo metropolitan area.panlv. As a result.25m kilowatts . This scenario could cut GDP by 1 percentage point this year.

it is highly likely that domestic demand will be hit by slower economic activity and deteriorating sentiment due to falling stock prices.2011 GDP falls to 0. That is because production was smoothly moved from the quakehit area to other regions. you end up with a little more than a 1% loss for the year as a whole. This time.2% in Q2. Also. it is trying to restart thermal power plants which are now inactive. It is planning to add 4m KW of thermal power capacity by restoring half of the damaged capacity. It also announced that it would provide ample funds to meet demand in financial markets. If radiation levels continue to rise in the metropolitan area.38 trillion in 1995 and 1996 to assist the recovery. we believe it will return to growth in July-September as demand from reconstruction investment emerges. ) Moreover. Policy response Further additional easing by the Bank of Japan is possible.渐飞研究报告 .3%. At its monetary policy meeting on March 14. An additional expansion of the funds for asset purchases would be the main option. following the nuclear accident at the Fukushima nuclear plant. we expect a number of mitigating effects: 1) Tepco believes it can solve the electricity shortage problem by the end of April(*). 2) Most of Tokyo's 23 wards . which accounts for 18% of the total GDP. The allocation would depend on the economic and market conditions at the time.are not affected by the planned blackouts. while the economy could shrink 0.4%. if Tokyo.panlv. total damages and the budget for the recovery are likely to be larger.6 trillion (about 2% of nominal GDP).http://bg. Any positive impact from recovery-related projects would be offset. production and exports plunged. 1995. For the record. 2 . that equates to a 9% loss of Japanese GDP for six weeks assuming no knock on effects to other regions (a big if). The BoJ indicated it was ready to act again if downside risks intensified. given low interest rates in most developed markets and strong economic growth in many parts of Asia.. (*The impact on GDP of each incremental month of delay in electricity supply recovery ( of 25% of electricity demand) is about 0. There should also be a boost from external demand. we do not think the BoJ would hesitate to expand the funds for further asset purchases. after the Kobe earthquake on January 17. But production was back to pre-earthquake levels in February and exports back in March. If share prices plunged. 3) Factories in Central and Western Japan can increase production as companies still have overcapacity. Downside risk scenario . falls by half as a consequence of the disaster for six week. when the earthquake impact is felt most. Recovery costs The total cost from damage to buildings and transport from the Kobe earthquake was around JPY9. For instance.and if you annualize that.where economic activity is concentrated . the BoJ decided to expand the funds for asset purchases by 5 trillion yen to 40 trillion. 1 percentage point down from our earlier forecast Financial markets were shocked by the news that radiation levels had shot up in Tokyo earlier this week.net HSBC Global Research Economics 17 March 2011 However. The government formed three supplementary budgets and spent JPY3...

For a stock to be classified as Overweight. Given these differences. Stocks between these bands are classified as Neutral. as appropriate. *A stock will be classified as volatile if its historical volatility has exceeded 40%. Rating definitions for long-term investment opportunities Stock ratings HSBC assigns ratings to its stocks in this sector on the following basis: For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or. This report addresses only the long-term investment opportunities of the companies referred to in the report.net First Light Asia 18 March 2011 abc Disclosure appendix Important disclosures Stock ratings and basis for financial analysis HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations. Notwithstanding this. The performance horizon is 12 months.http://bg. HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon. quantitative. In addition. the stock must be expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). which depend largely on individual circumstances such as the investor's existing holdings. risk tolerance and other considerations. The price target for a stock represents the value the analyst expects the stock to reach over our performance horizon. if the stock has been listed for less than 12 months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility.com/research. however. In any case. Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation of coverage. . technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating. and 2) from time to time to identify short-term investment opportunities that are derived from fundamental. Investors should carefully read the definitions of the ratings used in each research report. expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily triggering a rating change. volatility has to move 2. change of volatility status or change in price target). HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings and other considerations. For a stock to be classified as Underweight. regional market established by our strategy team. As and when HSBC publishes a short-term trading idea the stocks to which these relate are identified on the website at www. investors should carefully read the entire research report and should not infer its contents from the rating. In order to avoid misleadingly frequent changes in rating. Details of these short-term investment opportunities can be found under the Reports section of this website. ratings should not be used or relied on in isolation as investment advice. Historical volatility is defined as the past month's average of the daily 365-day moving average volatilities.hsbcnet.渐飞研究报告 .5 percentage points past the 40% benchmark in either direction for a stock's status to change. HSBC has assigned ratings for its long-term investment opportunities as described below. because research reports contain more complete information concerning the analysts' views. stocks which we do not consider volatile may in fact also behave in such a way.panlv. and although ratings are subject to ongoing management review. However. the implied return must exceed the required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*).

economists.panlv.hsbcnet. Additional disclosures 1 2 3 This report is dated as at 18 March 2011. and strategists are paid in part by reference to the profitability of HSBC which includes investment banking revenues.net First Light Asia 18 March 2011 abc Rating distribution for long-term investment opportunities As of 17 March 2011. For disclosures in respect of any company mentioned in this report. HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. unless otherwise indicated in the report. * HSBC Legal Entities are listed in the Disclaimer below. please see the most recently published report on that company available at www.com/research. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. the distribution of all ratings published is as follows: Overweight (Buy) 50% (23% of these provided with Investment Banking Services) Neutral (Hold) Underweight (Sell) 36% 14% (21% of these provided with Investment Banking Services) (20% of these provided with Investment Banking Services) Analysts. Information Barrier procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.渐飞研究报告 . All market data included in this report are dated as at close 17 March 2011.http://bg. .

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