We recommend longterm investors to overweight H shares, especially banking, insurance, property and. infrastructure sectors.

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1 10 th Aug, 2015 Hang Seng Index Performance Index Performance Abs chg % Change Hong Kong Close 1-Day 1-Day 1-Mth 3-Mth Hang Seng Index 24, HSCI 3, HSCCI (Red Chips) 4, HSCEI (H-Shares) 11, Mkt T/O ($ Mn) 71, , Source: Bloomberg Market Outlook Eric Yuen ericyuen@guoco.com Hang Seng Index closed up 0.7% at 24,552. Market turnover increased to $71.4 billion. Heavily weighted HSBC (5) cut 0.5% whilst AIA Group (1299), Tencent (700) and China Mobile (941) soared 1.2%, 0.9% and 0.8% respectively. HKEx (388) advanced 3.4% on rumour that Shenzhen-HK stock connect will be kicked off this year. Gaming operators like Sands China (1928) and Galaxy Entertainment (27) climbed 1.6%-3.4%. Local property stocks were mixed. CK Property (1113) and Hang Lung Properties (101) tumbled 1.2%-1.4%. Belle Int l (1880), the worst performing index stock, slid 2.2%. HSCEI surged 1.2% led by coal, railway and financial stocks. China Shenhua (1088) and China Coal (1898) added 2.8%-4.2%. China Railway Group (390) and CCCC (1800) increased 2.8%-3.4%. Securities, banking and insurance counters in HSCEI grew an average 2.0%, 1.4% and 1.3% respectively. BYD Company (1211) and Great Wall Motor (2333) plunged 2.4%-2.5%, the most in HSCEI. Valuation of HSCEI at historical PER of 8.2x is cheap by historical standard. We recommend long-term investors to overweight H shares, especially banking, insurance, property and infrastructure sectors. Oversea DJIA 17, NASDAQ 5, Shanghai SE Composite 3, Crude Oil Futures (US$) Gold Futures (US$) 1, Baltic Dry Index 1, USD / Euro Yen / USD HSCEI HSI 20-Day MA 11, , Day MA 12, , Day RSI We recommend longterm investors to overweight H shares, especially banking, insurance, property and infrastructure sectors. Remarks: GuocoCapital Ltd is licensed by the Securities and Futures Commission to carry on Types 1, 4, and 6 regulated activities in Hong Kong. GuocoCapital Futures Ltd is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong. Bullion trading services provides by GuocoCapital Bullion Ltd. Securities Futures Bullion Corporate Finance Wholly owned subsidiary of Guoco Group Limited (HKEx Stock : 53) A Member of the Hong Leong Group

2 Industry / Corporate News Becky Yuen, CFA becky.yuen@guoco.com Vinda (3331) continues to be a long-term buy amid ongoing market share gain and product enrichment Reiterate BUY The latest interim results further demonstrates company's synergies with SCA Risk Level: High Margin expansion to continue via product mix shift to higher-margin non-roll products Time Horizon: Long Personal care business will be a medium-term earnings driver Vinda (3331, $18.26), the third largest household paper brand in China, outperformed HSCEI by 4% since our last BUY commentary on July 20. Comment: We believe the outperformance was mainly due to company s strong interim results, which see its sales and earnings up 29% and 49% respectively to $4.7bn and $331mn. The set of results demonstrated company s strength in tissue segment despite a highly competitive environment. In 1H15, tissue paper accounted for 96.6% of total revenue. If excluding the effect of the acquisition of SCA business, sales actually grew 18.7% yoy, still beat the overall industry growth of high single-digit. Sales volume for tissue rose 25.0% yoy thanks to both organic growth and the consolidation of SCA s Hong Kong and China business (mainly from the brand Tempo) since 4Q14. ASP meanwhile stayed largely stable despite the price war of major tissue brands in China. Company also expanding fast from its e-commerce distribution channel, which accounted for 9.8% of overall sales in 1H15 compared to 5.1% in 1H14. Gross margin continued to show improvement, and expanded from 29.5% in 1H14 and 30.7% in 2H14 to 31.6% in 1H15. This is mainly thanks to the sales of higher margin products such as softpack, hanky and wet wipes (sales growth between 36.6%-48.3% yoy) outgrew that of low margin tissue roll products (sales growth 16.2%). The relatively low pulp price also helped. Distribution expenses to sales ratio rose 1.1ppts to 15.4% amid stronger promotion and advertising, which led to an OPM of 9.9% (1H14: 9.4%). Looking forward, we believe company will continue to gain tissue market share thanks to its effective branding and market strategies as well as successful penetration into e-commerce channels. Meanwhile, we see further expansion into personal care products (accounted for 3.4% in 1H15 only) as the medium-term earnings driver. We now assume Vinda s 2015 sales growth will be at 25%, with Tempo accounted for 7% of sales while personal care products accounted for 6%. Driven by product upgrade and a slightly higher wood pulp cost, we expect 2H15 gross margin to stay largely flat at 31.4%, implying a full-year GPM of 31.5% (up 1.3ppt from 30.2% in 2014). Meanwhile, operating margin will be largely stable at 10.1% (down from 10.3% in 2014) as Vinda adds promotion and advertising expense to promote Tempo and other personal care products. Based on the above assumption, we expect its net profit to increase 24% in 2015 to $735mn (EPS $0.74) versus 1% in 2013 and 9% in Meanwhile, we also introduce our 2016 earnings forecast of $894mn (EPS $0.9) based on an assumption of 22% sales growth, 31.8% gross margin and 10.1% operating margin. This implies an EPS CAGR of 23% between 2014 and The counter has retreated 7.5% from its intraday high of $19.24 on July 24 amid profit-taking, and is now trading at 20.2x 2016 PER. We see this as a good buying opportunity from a long-term perspective as product portfolio enrichment (i.e. increasing sales contribution from personal care products) is likely to lift the counter s valuation benchmark in our view. Maintain our 12-month target price to $20.6, now based on 23x 2016 PER. Recent Recommendations Stock Pick Rating Recommendation Highlights TP FIH Mobile (2038) Buy Market has penalized FIH Mobile (2038) for a wrong cause. Reiterate BUY $5.04 Cosco Int l (517) Buy BUY Cosco Int l (517) as a defensive play with asset injection potential $5.05 China High Speed Valuation of China High Speed Transmission (658) looks cheap following the recent Buy Transmission (658) correction. Reiterate BUY $8.80 Xinyi Glass (868) Buy Maintain BUY on Xinyi Glass (868) as margin should continue to improve despite sluggish property market in China $5.20 Shenzhen International (152) Buy BUY Shenzhen International (152) on anticipation of strong interim results $15.00 Sunny Optical (2382) Hold Valuation of Sunny Optical (2382) now seems fair to us after the recent correction. Upgrade to HOLD $15.50 Hua Hong Semiconductor (1347) Buy Maintain BUY on Hua Hong Semiconductor (1347) due to cheap valuation $11.60 Techtronic Industries (669) Buy Reiterate BUY on Techtronic Industries (669) to ride on the strong US housing trends $32.70 Huaneng Renewables (958) Buy BUY Huaneng Renewables (958) on strong interim results $3.85 Shenzhen Investment (604) Buy BUY Shenzhen Investment (604) on extremely strong contracted sales $4.20

3 Technical Ideas 361 Degrees International (1361, $2.94) TP: $3.27 BUY Risk: High Time Horizon: Short 361 Degrees International designs, develops, manufactures, markets and distributes sportswear products, including athletic footwear, apparel and accessories. The counter rebounded sharply from its critical support at $2.14 after it dropped a max of 49.3% from its 52-week high of $3.35 on 19 May. The counter rose 5.0% last Friday with increasing turnover, surpassing its critical resistance at $ day RSI also see a sharp increasing trend above 50, indicating the counter's positive outlook ahead. BUY. Short-term target at $3.27. Cut loss at $2.72. Source: Bloomberg, GuocoCapital Consensus 2015 PER: 10.7x Consensus target price: $3.50 China Machinery Engineering (1829, $6.53) TP: $7.23 BUY Risk: High Time Horizon: Short China Machinery Engineering Corporation contracts international engineering projects. The company constructs thermal power plants, hydro power plants, power station projects and communication projects. The counter found critical support at $5.59 after it dropped a max of 52.9% from its intraday high of $10.82 on 26 May. The counter rose 10.5% last Friday, surpassing sma250 and its downtrend since late May. 9-day RSI also exceeded 50 with a sharp increasing trend, indicating the counter's strong uptrend momentum ahead. Source: Bloomberg, GuocoCapital BUY. Short-term target at $7.23. Cut loss at $5.66. Consensus 2015 PER: 10.1x Consensus target price: $10.02

4 RSI Indicator Overbought (9-day RSI> 80) Tickers Oversold (9-day RSI<20) Tickers 526, 708, 1253, 1636, 2213, , 1191, 2333 Exceptional Turnover & Price Movements Stock Stock Last Price ($) Price Change (%) Turnover / 3-mth daily avg turnover Target price up / downside (%)* Rating*^ Golden Meditech N/A 5.0 N/A China Shipping Container Lines China Cosco Zall Development Group N/A N/A N/A China Shipping Development Broad Greenstate International Time2U International N/A N/A N/A Simsen International N/A 1.0 N/A Evergrande Health Industry N/A N/A N/A Source: Bloomberg, GuocoCapital; * Based on consensus estimates ^ The Rating indicates analysts opinions on the security. It is calculated by converting analysts recommendations into a number from 1-5 and taking the average. 5 is the best while 1 is the worst PER*

5 A-H Share Premium / Discount (%) Average AH Shanghai Listed -44.7% Premium/Discount (%) Shenzhen Listed -50.7% Remark: Shenzhen-listed stocks are not included in the upcoming cross-border stock trading pilot program H Share A Share A-H Shares Shanghai Listed Company Name A Close (RMB) H Close (HKD) AH Price Gap (%) H Share A Share A-H Shares Shanghai Listed Company Name A Close (RMB) H Close (HKD) AH Price Gap (%) Luoyang Glass New China Life SSC Haitong Insurance Securities Chongqing Iron China Shenhua GAC Group Shanghai Energy Pharm China Huatai Securities Co Nanjing Molybdenum Panda Huadian Ltd Power Intl Yanzhou Electronics Coal Shanghai Fosun China Mining Shipping Huaneng Pharm Power Intl Shanghai Container Electric China Everbright MCC China Bank Minsheng Shenji Group Bank Bank of China Beijing Kunming Jingcheng Sinopec First Machinery Tractor China Life Insurance Sinopec Shanghai ABC Beijing Petrochem North Star BoComm Dalian Port Citic Securities Chalco CCB China Cosco ICBC China Coal Energy Tsingtao Brewery Tianjin Capital China Merchants Environment Magang Fuyao Bank Glass Zhengzhou Coal Jiangsu Express Guangzhou Mining Anhui Conch China Shipyard Oilfield Cement CPIC China Services Shipping Ping An Insurance Datang Development Intl Power Group Sichuan A-H Shares Shenzhen Listed Zijin Expressway Mining Zhejiang Shibao China Eastern Shandong Molong China Airlines Railway Northeast Petroleum Electric Dongfang Group Electric Shandong Develop Xinhua China Southern Shandong Pharm Chenming BBMG Air Weichai Paper Power Jiangxi Copper Hisense Kelon CRRC Corp Livzon Pharm Guangshen BYD Guangzhou Railway Pharm Zoomlion Heavy Anhui Expressway Dongjiang Industry Env Petrochina Jingwei Textile CRCC China Machinery International Shenzhen Express Angang Marine Steel China Citic Bank GF Securities Co Ltd Great Wall Motor ZTE Corp CCCC Xinjiang Goldwind Air China China Sci&Tec Vanke

6 HSI & HSCEI Constituents Performance Price Change (%) Index 5 D 1 M 3 M vs 3M High Hang Seng Index Hang Seng China Ent Index Outperform Underperform Mixed Airline, PRC Bank, Cement, Gaming, Infrastructure Gas, Oil, HK Property, Securities, Telecom Automobile, Consumer, Global Player, Insurance, Power Price Change (%) Price Change (%) Stock vs 3M Stock vs 3M Company Name 5 D 1 M 3 M Company Name 5 D 1 M 3 M High High 390 China Railway China Oilfield Anhui Conch China Mobile BYD Company AIA CNBM China Pacific China Comm Cons China Insurance Mer Hldgs CM Bank New World Dev Air China Sinopec Corp CGN Power Dalian Wanda Dongfeng Group PICC Group GAC China Overseas Galaxy Henderson Land Entertainment China Vanke China Resources China Cinda Ping An New China Life Tingyi Sands China China Telecom MTR Corporation Link REIT Cathay Pac Air SHK Prop BOCOM Belle Int'l HSBC Hldgs Tencent Tsingtao Brew Longyuan Power CITIC Ltd Sino Land Minsheng Bank Wharf China Shenhua Lenovo CCB Power Assets China Resources China Coal Hang Power Seng Bank China Unicom Sinopharm Haitong Securities BOC Hong Kong China Res Land HKEx Hengan Int'l ICBC PICC P&C ABC Kunlun Gas Jiangxi Copper Swire Pacific 'A' China Life Bank of E Asia CITIC Securities CK Property -4 0 N/A Bank of China Hang Lung Prop Huaneng Power China Mengniu CNOOC GreatWall Dairy Motor CITIC Bank PetroChina CK Hutchison Want Want HK Hldgs & China Ltd Gas Li & Fung CLP Hldgs

7 Upcoming Events Date Stock Company Name Event Aug Beijing Capital Land Interim Aug C Cheng Holdings Interim Aug Beijing Capital Juda Interim Aug Champion REIT Interim Aug China Lilang Interim Aug Concord New Energy Group Interim Aug Chia Tai Enterprises Interim Aug Essex Bio-technology Interim Aug Huiyin Household Appliances Interim Aug Lee & Man Paper Manufacturing Interim Aug Phoenix Healthcare Group Interim Aug Renheng Enterprise Holdings Interim Aug Texhong Textile Interim Aug Varitronix International Interim Aug Wing Lee Property Investments Interim Disclosures Investment Rating System Ratings Description GuocoCapital s investment rating system is Buy Expected positive return of > 10 % divided into investment ratings, risk rating Investment Ratings Hold Expected return range of ~ ±10 % and investment time horizon. The rating Sell Expected negative return > 10% scale is subject to change upon periodic High (H) 90-day volatility of > 50% review of market by research department. Risk Ratings Medium (M) 90-day volatility of > 30-50% Assigned ratings are based on company Low (L) 90-day volatility of < 30% and sector historical performance and analysts intrinsic valuation of the stock Long (L) 6 12 Months Investment Time Medium (M) 3 6 Months Horizon Short (S) Less than 1 Month Note: 90-day volatility is measured from the security s standard deviation of day to day logarithmic historical price changes. The 90-day price volatility equals the annualized standard deviation of the relative price change for the 90 most recent trading days closing price, expressed as a percentage GuocoCapital Limited 12/F, The Center, 99 Queen s Road Central, Hong Kong Tel: (852) Fax: (852) This report is for information only and is not to be construed as investment advice or as an offer to buy or sell securities or financial instruments. Your investment decision should be based upon your personal investment objectives and should be made only after evaluating the stock s expected performance and risk. While the report is compiled using sources believed to be reliable, no assurance or guarantee is given regarding its accuracy or completeness. Neither GuocoCapital nor any of its associated companies, (nor any employees or other persons connected with any of them) accepts any responsibility or liability arising from any use of this report. To the extent permitted under applicable law, the above-mentioned companies or individuals may have used the research materials before publication. However, it is hereby declared that neither GuocoCapital nor the writer, at the time of writing, has interest in any of the securities mentioned in this report. GuocoCapital Ltd is licensed by the Securities and Futures Commission to carry on Types 1, 4, and 6 regulated activities in Hong Kong. GuocoCapital Futures Ltd is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong.