Hang Seng Index Performance. Index Performance. Market Outlook

4 th Sep, 2015 Hang Seng Index Performance Index Performance Abs chg % Change Hong Kong Close 1-Day 1-Day 1-Mth 3-Mth Hang Seng Index 20,934.94-250.49-1.18-14.24-24.31 HSCI 2,847.94-34.28-1.19-14.10-26.72 HSCCI (Red Chips) 3,858.18-51.65-1.32-11.60-25.56 HSCEI (H-Shares) 9,301.32-152.79-1.62-15.52-34.10 Mkt T/O ($ Mn) 96,054.66 10,236.25 11.93 20.76-36.20 Source: Bloomberg Market Outlook Eric Yuen ericyuen@guoco.com Hang Seng Index closed down 1.2% at 20,934. Market turnover increased to $96.1 billion. Heavily weighted HSBC (5), AIA Group (1299) and China Mobile (941) cut 1.8%, 1.5% and 1.1% respectively. Tencent (700) was almost flat. Local property stocks were mixed. Local banks including BOC Hong Kong (2388), Hang Seng Bank (11) and Bank of East Asia (23) shrank 1.6%-3.2%. Gaming operators tumbled on gloomy outlook for Macau s gaming industry. Sands China (1928) and Galaxy Entertainment (27) lost 3.2%-4.2%. Decline in crude oil price weighted on oil producers. PetroChina (857), CNOOC (883) and Kunlun Energy (135) plunged 2.6%- 4.3%. Belle International (1880), the best performing index stock, advanced 1.5%. HSCEI declined 1.6% led by banking, automobile and power stocks. China Longyuan (916), CGN Power (1816), GAC Group (2238) and Great Wall Motor (2333) slumped 2.7%-4.9%. Banking shares in HSCEI dropped an average 3.0%. China Oilfield Services (2883) and Jiangxi Copper (358) slid 5.8%-7.1%, the most in HSCEI. Insurance stocks were little changed. China Railway Group (390), the best performing HSCEI stock, surged 3.2%. Valuation of Hong Kong s stock market is approaching the bottom valuation in 2008 s financial crisis. However, we believe market outlook will remain uncertain before the Federal Reserve meeting in mid- September. Oversea DJIA 16,374.76 23.38 0.14-6.70-8.55 NASDAQ 4,733.50-16.48-0.35-7.29-6.44 Shanghai SE Composite 3,160.17-6.46-0.20-12.77-35.64 Crude Oil Futures (US$) 46.79 0.04 0.09 2.30-19.33 Gold Futures (US$) 1,125.10 1.10 0.10 3.19-4.26 Baltic Dry Index 891.00-15.00-1.66-22.59 49.00 USD / Euro 1.1132-0.0103-0.92 1.55-1.38 Yen / USD 119.875-0.4616-0.38-3.62-3.61 HSCEI HSI 20-Day MA 10,384.45 22,823.82 50-Day MA 11,292.82 24,278.96 9-Day RSI 21.49 23.72 Valuation of Hong Kong s stock market is approaching the bottom valuation in 2008 s financial crisis. However, we believe market outlook will remain uncertain before the Federal Reserve meeting in mid-september. 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

Industry / Corporate News Becky Yuen, CFA becky.yuen@guoco.com We are still a buyer of Wasion Group (3393) thanks to company s promising business outlook Reiterate BUY Interim results in line, with continuous shift to higher-end AMI and ADO segments Risk Level: High Export sales grew 66% yoy, signaling company's expansion in emerging countries is on track Counter is now trading at 7.9x 2016 PER, undemanding given an EPS CAGR of 20% during Time Horizon: Medium 2014-2016 Wasion Group (3393, $7.15) dropped 37% in last two months, underperformed HSCEI by 10%. Comment: We believe the price weakness was mainly due to the overall bearish market sentiment and investors rising concern on corporate governance which triggered capital outflow from small- and mid-cap counters. Yet, we still see Wasion as a key beneficiary of China s smart grid upgrade and increasing awareness on energy efficiency by industrial players to save cost. As a recap, Wasion reported interim results on August 19, which saw revenue and earnings up 17% and 25% yoy to RMB1.63bn and RMB253.8mn respectively. EPS was up 20.8% yoy to RMB0.261. The interim results looked solid in our view, as earnings usually are more skewed towards second half of the year based on historical pattern. While revenue was largely in line with our estimates, gross margin which fell 2.4ppts yoy to 31.0% was a disappointment. Yet, this was offset by a good cost control during the period, with administrative, selling and R&D expenses to sales ratio dropped 1.4ppts, 1.1ppts and 0.5ppts to 4.2%, 7.3% and 4.3% respectively. Product mix in 1H15 continued to skew towards higher-margin advanced distribution operations (ADO) business (revenue grew 70.6% yoy and accounted for 12% of overall sales, up from 8% in 1H14) and Advanced Metering Infrastructure (AMI) segment (revenue grew 14.8% yoy and accounted for 52% of overall revenue). ADO gross margin deteriorated by 5ppts to 33% in 1H15, as company adopted a more aggressive pricing strategies on its ADO projects in order to win market share. AMI gross margin contracted 3ppts to 36%, as sales growth of lower-margin water meters and export sales were stronger (AMI for water, gas and heat up 47% while export sales grew 66%). Management did note that even though gross margin of AMI for water, gas and heat and export were thinner, the selling expenses involved in these products are generally less and thus will have a positive impact on company s overall operating margin and net profit margin. In fact, company s OPM and NPM were up by 1ppt and 0.8ppt respectively during the period. We continue to see Wasion as a strong beneficiary of China s rising demand of smart grid system at both the state and industry level, and also the strong potential in water meters segment as China is actively promoting water escalating pricing. The company is also leveraging on its cooperation with Siemen to win more overseas orders. We have revised down our 2015 earnings estimates by 5% to factor in the lower than expected gross margin. Our new earnings forecast of RMB607.5mn (EPS RMB0.61) now based on a sales growth of 36%, GPM of 32.1% and OPM of 19.0%. We also introduce 2016 earnings estimates of RMB754mn (EPS RMB0.73) assuming a sales growth of 15%, GPM of 32.1% and OPM of 20.1%. This translates to an EPS CAGR of 20% during 2014-2016. Counter is now trading at 7.9x 2016 PER that is not demanding in view of company s strong growth potential in the ADO business. We reiterate BUY with revised 6-month target price of $11.86, as we roll over to 13x 2016 PER. Recent Recommendations Stock Pick Rating Recommendation Highlights TP Huaneng Renewables (958) BUY Huaneng Renewables (958) reported higher than expected interim earnings Maintain BUY $3.85 Techtronic Industries (669) BUY Reiterate BUY on Techtronic Industries (669) as it continues to win market share in power tools segment $32.7 HKEx (388) SELL Maintain SELL on HKEx (388) due to increasing risk of global market crash $170.0 Shenzhen Investment (604) BUY Maintain BUY on Shenzhen Investment (604) on attractive fundamental and valuation $3.65 Shenzhou Int l (2313) BUY Shenzhou Int l (2313) is a beneficiary of Renminbi depreciation. Reiterate BUY $45.7 China Resources Land (1109) BUY BUY China Resources Land (1109) on impressive interim results $23.7 Sunny Optical (2382) BUY Upgrade Sunny Optical (2382) to BUY amid strong growth in handset lens segment $16.2 Henderson Land (12) BUY BUY Henderson Land (12) on cheap valuation and restructuring story $57.0 China High Speed Transmission (658) BUY Reiterate BUY on China High Speed Transmission (658) for solid interim results $7.62 HKEx (388) SELL Maintain SELL on HKEx (388) due to increasing risk of global market crash $170.0

Technical Ideas SJM Holdings (880, $6.46) TP: $5.81 SELL Risk: Medium Time Horizon: Short SJM Holdings Limited offers amusement and recreation services. The Company operates casinos, hotels, and other tourism-related facilities in Macau. The counter tumbled 4.9% on Wednesday, dropped below the decreasing trend initiated on 9 April and reached its 52-week low of $6.40. 9-day RSI also showed a sharp decreasing trend below 50, indicating the counter's strong downtrend momentum ahead. SELL. Short-term target at $5.81. Cover short at $6.87. Source: Bloomberg, GuocoCapital Sino Biopharmaceutical (1177, $8.99) TP: $9.91 BUY Consensus 2015 PER: 10.2x Consensus target price: $9.45 Risk: Medium Time Horizon: Short Sino Biopharmaceutical Limited, through its subsidiaries, researches, develops, produces, and sells biopharmaceutical products for the medical treatment of ophthalmia, as well as modernized Chinese medicine and chemical medicine for the treatment of hepatitis. The counter dropped a max of 31.7% from its 52-week high of $10.72 on 9 April until it found support at $7.29. The counter rose 2.9% on Wednesday, surpassing sma50 and sma250. 9- day RSI also showed an increasing trend above 50, indicating the counter's positive outlook ahead. Source: Bloomberg, GuocoCapital BUY. Short-term target at $9.91. Cut loss at $8.21. Consensus 2015 PER: 24.0x Consensus target price: $10.44

RSI Indicator Overbought (9-day RSI> 80) Tickers 530, 1321 Oversold (9-day RSI<20) Tickers 5, 16, 45, 64, 69, 142, 145, 148, 199, 245, 293, 322, 336, 347, 410, 511, 683, 750, 755, 805, 829, 881, 921, 990, 998, 1045, 1057, 1083, 1101, 1111, 1128, 1136, 1148, 1157, 1169, 1270, 1288, 1345, 1358, 1378, 1398, 1400, 1509, 1599, 1680, 1728, 1822, 1866, 1913, 1988, 2319, 2338, 2888, 3323, 3328, 3618, 3808, 3836, 3918, 3988, 6030, 6136, 6198 Exceptional Turnover & Price Movements Stock Stock Last Price ($) Price Change (%) Turnover / 3-mth daily avg turnover Target price up / downside (%)* Rating*^ Baoxin Auto Group 1293 2.36 10.2 5.2 133.7 4.4 5.3 North Mining Shares 433 0.10 5.3 4.6 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. 2015 PER*

A-H Share Premium / Discount (%) Average AH Shanghai Listed -46.0% Premium/Discount (%) Shenzhen Listed -48.2% 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 (%) 1108 600876 Luoyang Glass 24.67 4.75-84 1071 600027 Huadian Power Intl 7.83 5.89-38 2238 601238 GAC Group 16.41 4.94-75 1336 601336 New China Life 37.39 28.4-38 1053 601005 Chongqing Iron 4.41 1.47-73 1088 601088 China Insurance Shenhua 16.58 12.68-37 3993 603993 China 12.24 4.09-73 3328 601328 BoComm Energy 6.96 5.33-37 1171 600188 Molybdenum Yanzhou Coal 10.03 3.48-72 6818 601818 China Everbright 4.38 3.37-37 2727 601727 Shanghai Mining Electric 11.42 3.98-71 3988 601988 Bank Bank of China 4.24 3.36-35 1033 600871 SSC 6.12 2.17-71 548 600548 Shenzhen Express 5.89 4.69-35 2866 601866 China Shipping 8.73 3.11-71 2607 601607 Shanghai Pharm 19.05 15.22-34 1618 601618 Container MCC 7.79 2.86-70 902 600011 Huaneng Power Intl 10.31 8.49-32 300 600806 Shenji Group 8.84 3.52-67 6837 600837 Haitong Securities 12.3 10.32-31 187 600860 Beijing Kunming Jingcheng 13.29 5.4-67 1288 601288 ABC 3.37 2.96-28 338 600688 Sinopec Machinery Shanghai 6.89 2.81-67 939 601939 CCB 5.92 5.26-27 2880 601880 Dalian Petrochem Port 5.65 2.32-66 1398 601398 ICBC 4.95 4.44-26 553 600775 Nanjing Panda 11.07 4.67-65 6886 601688 Huatai Securities Co 14.82 13.72-24 1919 601919 China Electronics Cosco 11.63 4.94-65 2196 600196 Shanghai Ltd Fosun 23.26 22.2-22 2883 601808 China Oilfield 17.5 7.82-63 2628 601628 China Life Pharm Insurance 26.43 25.75-20 1065 600874 Tianjin Services Capital 8.61 3.85-63 6030 600030 Citic Securities 14.87 14.8-18 588 601588 Beijing Environment North Star 4.36 2.01-62 386 600028 Sinopec 4.89 4.98-16 670 600115 China Eastern 8.19 3.81-62 168 600600 Tsingtao Brewery 34.08 35.25-15 991 601991 Datang Airlines Intl Power 6.38 2.97-62 3968 600036 China Merchants 16.77 17.52-14 2600 601600 Chalco 5.05 2.45-60 3606 600660 Fuyao Bank Glass 12.56 14.02-8 38 601038 First Tractor 8.58 4.17-60 177 600377 Jiangsu Express 5.7 8.98-3 1138 600026 China Shipping 11.08 5.49-59 2601 601601 CPIC 22.93 27.75-1 2009 601992 Development BBMG 8.87 4.45-59 2318 601318 Ping An Insurance 6.7 36.85 1 317 600685 Guangzhou 33.77 17.66-57 914 600585 Anhui Group Conch 18.26 22.9 3 323 600808 Shipyard Magang 3.1 1.63-57 Cement 2899 601899 Zijin Mining 3.56 1.9-56 A-H Shares Shenzhen Listed 1055 600029 China Southern 8.18 4.46-55 1057 002703 Zhejiang Shibao 34.07 5.41-87 1898 601898 China Coal Air Energy 6.49 3.54-55 42 000585 Northeast Electric 5.07 1.88-70 107 601107 Sichuan 4.29 2.35-55 568 002490 Shandong Develop Molong 7.05 2.77-68 390 601390 China Expressway Railway 12.07 6.83-54 719 000756 Shandong Petroleum Xinhua 12.15 5-66 564 601717 Zhengzhou Group Coal 6.06 3.43-54 1812 000488 Shandong Pharm Chenming 6.85 2.83-66 525 601333 Guangshen Mining 4.99 2.98-51 921 000921 Hisense Paper Kelon 8.58 3.91-63 1072 600875 Dongfang Railway Electric 13.1 8.05-50 1157 000157 Zoomlion Heavy 5.35 2.82-57 753 601111 Air China 8.59 5.3-49 347 000898 Angang Industry Steel 5.75 3.04-57 995 600012 Anhui Expressway 9.26 5.72-49 350 000666 Jingwei Textile 17.5 11.42-46 1800 601800 CCCC 13.86 8.72-48 2039 000039 China Machinery International 20.57 13.56-46 358 600362 Jiangxi Copper 14.1 9.1-47 1211 002594 Marine BYD 45.8 30.5-45 2333 601633 Great Wall Motor 29.23 19.06-47 895 002672 Dongjiang Env 16.24 10.94-45 1766 601766 CRRC Corp 12.83 8.62-45 1513 000513 Livzon Pharm 53.35 40-38 874 600332 Guangzhou Pharm 26.61 18.2-44 2338 000338 Weichai Power 10 7.93-35 857 601857 Petrochina 8.75 6.03-43 2208 002202 Xinjiang Goldwind 15.4 12.8-32 1186 601186 CRCC 14.4 9.98-43 763 000063 ZTE Sci&Tec Corp 16.64 15.1-26 998 601998 China Citic Bank 6.23 4.41-42 1776 000776 GF Securities Co Ltd 14.09 13.02-24 1988 600016 China Minsheng Bank 9.28 6.94-39 2202 000002 China Vanke 14.22 17.76 2

HSI & HSCEI Constituents Performance Price Change (%) Index 5 D 1 M 3 M vs 3M High Hang Seng Index -1-15 -24-24 Hang Seng China Ent Index -1-16 -35-35 Outperform Underperform Mixed Infrastructure, Port, HK Property, PRC Property Airline, Asset Management, HK Bank, Gaming, Securities Automobile, PRC Bank, Consumer, Insurance, Oil, Telecom 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 489 Dongfeng Group 15-9 -33-33 836 China Resources 0-11 -17-21 883 CNOOC 10-8 -26-27 388 Power HKEx -1-14 -39-39 2601 China Pacific 9-15 -32-34 700 Tencent -1-12 -19-22 914 Anhui Insurance Conch 6-5 -28-30 1299 AIA -1-18 -18-21 1113 CK Property 5-18 N/A -28 2 CLP Hldgs -1-6 -7-7 2628 China Life 5-10 -30-30 16 SHK Prop -2-20 -29-29 2202 China Vanke 4-4 -9-14 3 HK & China Gas -2-9 -14-14 1211 BYD Company 4-11 -44-49 916 Longyuan Power -2-13 -19-19 688 China Overseas 4-9 -20-22 1898 China Coal -2-7 -28-31 1109 China Res Land 4-15 -25-28 23 Bank of E Asia -2-17 -25-26 1044 Hengan Int'l 4-14 -18-21 2328 PICC P&C -2-11 -20-21 390 China Railway 3 3-32 -35 5 HSBC Hldgs -2-14 -18-19 19 Swire Pacific 'A' 3-16 -20-20 293 Cathay Pac Air -2-25 -30-31 2333 GreatWall Motor 3-26 -63-63 939 CCB -2-17 -29-30 1880 Belle Int'l 3-13 -31-33 1099 Sinopharm -2-12 -30-31 2318 Ping An 3-17 -35-35 6 Power Assets -2-10 -11-11 144 China Mer Hldgs 3-14 -27-28 1088 China Shenhua -2-14 -33-36 1 CK Hutchison 2-11 -17-17 6837 Haitong Securities -3-26 -57-59 83 Sino Hldgs Land Ltd 2-9 -19-19 358 Jiangxi Copper -3-13 -40-40 1336 New China Life 2-15 -43-43 1398 ICBC -3-17 -31-31 3699 Dalian Wanda 2-19 -34-41 1928 Sands China -4-26 -8-31 135 Kunlun Gas 2-30 -36-37 322 Tingyi -4-26 -32-33 941 China Mobile 2-10 -10-12 857 PetroChina -4-22 -33-33 2883 China Oilfield 1-18 -44-44 168 Tsingtao Brew -4-15 -32-32 151 Want Want 1-21 -27-27 753 Air China -5-32 -44-44 3968 CM Bank 1-13 -27-29 1816 CGN Power -5-15 -43-47 291 China Resources 1-8 0-10 3988 Bank of China -5-21 -33-35 12 Henderson Land 1-10 -17-18 2238 GAC -5-20 -37-37 902 Huaneng Power 1-10 -18-18 1288 ABC -5-15 -26-26 386 Sinopec Corp 1-15 -25-27 998 CITIC Bank -5-20 -33-34 4 Wharf 0-16 -23-23 27 Galaxy -5-36 -35-38 101 Hang Lung Prop 0-21 -28-29 3323 Entertainment CNBM -6-30 -50-50 17 New World Dev 0-18 -26-27 2388 BOC Hong Kong -7-23 -24-28 66 MTR Corporation 0-1 -8-10 267 CITIC Ltd -7-7 -13-14 823 Link REIT 0-9 -7-13 728 China Telecom -8-11 -25-26 494 Li & Fung 0-17 -21-26 1988 Minsheng Bank -8-21 -34-35 1339 PICC Group 0-14 -36-36 1359 China Cinda -8-23 -44-44 762 China Unicom 0-9 -25-26 6030 CITIC Securities -9-30 -53-53 992 Lenovo 0-27 -49-49 3328 BOCOM -9-22 -30-37 1800 China Comm Cons 0-12 -34-35 2319 China Mengniu -16-29 -40-41 11 Hang Seng Bank 0-14 -12-15 Dairy

Upcoming Events Date Stock Company Name Event Sep 9 721 China Financial Int l Investments Final Sep 10 16 SHK Properties Final Sep 10 435 Sunlight REIT Final 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) 2218-2818 Fax: (852) 2285-3128 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.