2018 - csb.com.hk · Market Strategy Allocation strategy in a rebound scenario 13 Aug 2018 Please...

China Connect Weekly

2018

Market StrategyAllocation strategy in a rebound scenario

13 Aug 2018

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Stock RecommendationsChina Molybdenum CCB CMB Jinduicheng Molybdenum

MacroeconomicsForeign trade still in “rush hour”

csb.com.hk

CITIC Securities Brokerage (HK) LimitedInvestment Advisory ServicesTel：2237 9250E-mail：[email protected]

CompanyPrice

(Rmb)Target (Rmb)

Stop Loss (Rmb)

Upside (%)

China Molybdenum (603993 CH)

5.01 8.20 4.8 64

CCB (601939 CH)

6.85 11.20 6.5 64

CMB (600036 CH)

28.44 43.00 27.0 51

Jinduicheng Molybdenum (601958 CH)

6.48 8.00 6.2 23

MacroeconomicsForeign trade still in

“rush hour”

With the steps taken by the US thus far in

Aug 2018 feeding expectations that the

trade war will escalate, the rush to trade will

continue in the near term.

Allocation strategy in a rebound scenario

A-share market has probably bottomed in

all three dimensions – policy, liquidity and

sentiment. We expect the market to gradually

stabilize and ascend going forward. The line

between rebound and turnaround is thin.

Market Strategy

2 13 Aug 2018

Please refer to the attachment for detailed disclaimer and regulatory disclosures.

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Contents:

Source: Respective Company, CS

Weekly Top Pick

China Molybdenum

3 13 Aug 2018


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Market strategy:

We b e l i e v e t h a t p o l i c y

expectation, l iquidit y f low

and investor sentiment have hit the

rock bottom in the A-share market.

As such, the most l ikely scenario

ahead is for the market to gradually

get back on i t s fee t and move

upwards, and there is only one step

between rebound and turnaround.

For most inves tors , rebalancing

positions is far more important than

seizing opportunities as share prices

rebound. For both short- and long-

term benefits, the following segments

are our top picks: cloud/corporate-

grade SaaS ser v ices , cyber/data

security, insurance, innovative drugs

& pharmacy chain. Banking, 5G and

semi-conductor sectors are the next

tier.

Allocation strategy in a rebound scenario

4 13 Aug 2018


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MaCroeConoMiCs:

Source: CS

Foreign trade still in “rush hour”

In Jul 2018, Chinese exports and

imports rose 12.2% and 27.3% YoY

(denominated in USD), respectively,

versus 11.3% and 14.1% YoY in the

previous month. The rapid growth

in foreign trade was mainly due to (i)

the low comparison base in the year-

ago period; and (ii) continued rush to

export given mounting uncertainties

in the Sino-US trade war. Looking

ahead, the situation will remain highly

fluid. A slew of decisions by the US

so far in Aug have further stoked

expectations that the trade war will

escalate. As a result, the rush to export

and import will continue in the short

term. In the long run, while hiking

tariff in itself has only limited effect on

foreign trade at present, potentially

more intense friction and a wider

scope of commodities subjected to

higher tariffs will exert more adverse

impact. Meanwhile, China’s retaliation

has shif ted from “matching scale”

to “matching proportion”, targeting

US$60bn of imports from the US for

higher tarif fs. On the whole, China

is becoming more precise in fighting

the trade war.

Source: Bloomberg, CS

CITIC S&P 50

(Index)

(Index)

5 13 Aug 2018


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Market review & teChiniCal:

2,800

2,900

3,000

3,100

3,200

3,300

3,400

3,500

26/3

/18

29/3

/18

3/4/

1810

/4/1

813

/4/1

818

/4/1

823

/4/1

826

/4/1

83/

5/18

8/5/

1811

/5/1

816

/5/1

821

/5/1

824

/5/1

829

/5/1

81/

6/18

6/6/

1811

/6/1

814

/6/1

820

/6/1

825

/6/1

828

/6/1

83/

7/18

6/7/

1811

/7/1

816

/7/1

819

/7/1

824

/7/1

827

/7/1

81/

8/18

6/8/

189/

8/18

Market Review: On Monday, the

Shanghai and Shenzhen markets

surged before jolt ing back south.

The Shanghai Composite Index (SCI)

lost 1.29% to end at a 2.5-year low.

On Tuesday, both bourses repeated

the pattern in early trading but later

staged a strong comeback, lifting the

SCI up 2.74% for the day. Wednesday

saw the two markets start low and

f luctuate downwards. The decline

steepened after lunch and the SCI

shed 1.27% at the finish. On Thursday,

the markets cl imbed slowly af ter

a moderately low beginning. The

Shanghai gauge advanced 1.83%. On

Friday, the SCI moved within a narrow

band, eking up 0.03%. In the week,

CITIC/S&P 50 and CITIC/S&P 300 rose

3.7% and 2.8%, respectively.

Technical analysis: The technical

trends of CITIC/S&P 50 and CITIC/S&P

300 are still weak and both indices

remain in the bear zone. We expect

market volatility to persist in the near

future.

2,800

2,900

3,000

3,100

3,200

3,300

3,400

3,50026

/3/1

829

/3/1

83/

4/18

10/4

/18

13/4

/18

18/4

/18

23/4

/18

26/4

/18

3/5/

188/

5/18

11/5

/18

16/5

/18

21/5

/18

24/5

/18

29/5

/18

1/6/

186/

6/18

11/6

/18

14/6

/18

20/6

/18

25/6

/18

28/6

/18

3/7/

186/

7/18

11/7

/18

16/7

/18

19/7

/18

24/7

/18

27/7

/18

1/8/

186/

8/18

9/8/

18

Index 2,998.25

52-wk high/low 3,846.60/2,880.82

50/100/200D MA 3,294.8/3,397.8/3,465.1

RSI (14D) 45.7

MACD (12/26D)/Signal -42.83/-36.55

Index 2,985.66

52-wk high/low 3,852.92/2,860.33

50/100/200D MA 3,207.8/3,325.4/3,351.0

RSI (14D) 49.4

MACD (12/26D)/Signal -27.74/-26.53

CITIC S&P 300

6 13 Aug 2018


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stoCk reCoMMendations:

Source: Bloomberg, Respective Company, CS * Closing prices as of 10 Aug 2018

Risk Rating: 1 to 5 in ascending order

Jinduicheng Molybdenum Target Price: Rmb8

Upside: 23%

Price/Target/Stop Loss 5.01/8.20/4.80

52 Weeks High/Low 9.69/4.76

50/100/200D MA 6.20/7.17/7.22

RSI (14D) 33.1

MACD (12/26D)/Signal -0.38/-0.31

2018E PER (x) 16.2

Company: China Molybdenum operates as a mineral mining and exploration company. The Company explores molybdenum, tungsten, niobium, cobalt, copper, and more.

Share Price Performance

4.64.85.05.25.45.65.86.06.26.46.66.87.0

27/6

/18

29/6

/18

3/7/

185/

7/18

9/7/

1811

/7/1

813

/7/1

817

/7/1

819

/7/1

823

/7/1

825

/7/1

827

/7/1

831

/7/1

82/

8/18

6/8/

188/

8/18

10/8

/18

(Share price/Rmb)

(A Shanghai-HK Stock Connect Northbound Stock)

China Molybdenum Target Price: Rmb8.2

Upside: 64%



50/100/200D MA 6.37/6.63/6.97

RSI (14D) 51.6

MACD (12/26D)/Signal 0.05/0.05

2018E PER (x) 72.0

Company: Jinduicheng Molybdenum is involved in molybdenum mining, dressing, smelt ing, processing, research and trade in Asia.


5.8

6.0

6.2

6.4

6.6

6.8

7.0

7.2

27/6

/18

29/6

/18

3/7/

185/

7/18

9/7/

1811

/7/1

813

/7/1

817

/7/1

819

/7/1

823

/7/1

825

/7/1

827

/7/1

831

/7/1

82/

8/18

6/8/

188/

8/18

10/8

/18

(Share price/Rmb)


Molybdenum sector rebound expected

Given the current environmental compliance inspection, equipment maintenance and

production suspension in the flooding season, the supply of molybdenum is running tight.

Based on data from a molybdenum trade network, refined molybdenum output plunged

15% in Jul 2018, with a good number of suppliers in Shaanxi and Henan halting

operation. In Liaoning, the provincial environmental inspection team launched

a month-long check on enterprises in Jingzhou City at the end of Jul 2018.

Looking forward, tight supply is likely to last and push up molybdenum

prices. We advise eyeing two suppliers – China Molybdenum

(603993 CH) and Jinduicheng Molybdenum (601958 CH) .

CMB Target Price: Rmb43

Upside: 51%



50/100/200D MA 6.85/7.20/7.51

RSI (14D) 50.2

MACD (12/26D)/Signal 0.02/0.01

2018E PER (x) 6.5

Company: China Construction Bank provides a comprehensive range of commercial banking produc t s and ser v ices to ind i v idua l s and corporate customers.


6.0

6.2

6.4

6.6

6.8

7.0

7.2

27/6

/18

29/6

/18

3/7/

185/

7/18

9/7/

1811

/7/1

813

/7/1

817

/7/1

819

/7/1

823

/7/1

825

/7/1

827

/7/1

831

/7/1

82/

8/18

6/8/

188/

8/18

10/8

/18

(Share price/Rmb)


CCB Target Price: Rmb11.2

Upside: 64%



50/100/200D MA 27.49/28.46/29.19

RSI (14D) 57.1

MACD (12/26D)/Signal 0.34/0.21

2018E PER (x) 9.0

Company: China Merchants Bank provides a wide range of commercial banking services including deposit , loan, bill discount and other related services.


24.525.025.526.026.527.027.528.028.529.029.5

27/6

/18

29/6

/18

3/7/

185/

7/18

9/7/

1811

/7/1

813

/7/1

817

/7/1

819

/7/1

823

/7/1

825

/7/1

827

/7/1

831

/7/1

82/

8/18

6/8/

188/

8/18

10/8

/18

(Share price/Rmb)


Practicality of credit easing and rational expectations thereof

We expect the pace of China’s deleveraging to

slow somewhat in 2H18E and liquidity supply to

marginally ease, which should prompt banks to extend

more loans. Credit easing is conducive to improving

expectations of liquidity and credit risk over the short/

medium horizon. However, long-term capital supply may

not prefer the “beaten path” and the mitigation of short-

term pressure should allow decision-makers and banks

more leeway to address long-term problems. We expect

monetary policies, liquidity supply and credit to become

more relaxed in 3Q18E. As the 1H18 reporting season

approaches, we suggest focusing on results of premium

banks and recommend lenders with stable asset quality

and highly visible earnings prospects, such as CCB (601939

CH) and CMB (600036 CH).

7 13 Aug 2018


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stoCk reCoMMendations:

Source: Bloomberg, Respective Company, CS * Closing prices as of 10 Aug 2018

Risk Rating: 1 to 5 in ascending order

8 13 Aug 2018


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China/HK Stocks(50%)

US Stocks(10%)

Euro Stocks(5%)

Japan Stocks(8%)

Emerging Markets(2%)

Global ETF(10%)

Cash15%

Recommended global asset allocation (GAA)

Global Asset Allocation

Source: Bloomberg, Respective Company, CS

Hong Kong: Relatively undemanding stock valuation; potential benefit of “Shenzhen-Hong Kong Stock Connect” to small caps

Mainland China: Government preference for a “slow bull market”; relaxed fiscal policy in favor of equities

Japan: Real estates, exports and tourism enjoying monetary easing and weak yen

US: Macro stability and recovery; short-term pressure stemming from rate rise and strong USD

Europe: Stock valuation falling due to weak euro and further quantitative ease

The Philippines: Positive current account balance for over a decade; projected GDP growth of 6.8% in 2016E

India: Relatively strong growth versus other emerging markets; projected GDP growth of 8% in 2016E

Selected equity markets at a glance

9 13 Aug 2018


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China/Hong Kong StocksCompany Remarks

Realcan Pharm (002589 CH) Medical equipment distribution across the nation

Wellhope Agri-Tech (603609 CH) Wider margins in animal feed and upbeat growth in slaughter and trade

Dabeinong (002385 CH) Warming industry climate and growth-driving strategy

Huace Film & TV (300133 CH) Continued progress in SIP operations and promising VR content investment

Alpha Animation (002292 CH) Entering the baby/toddler market upon acquisition of BT and Jinwang

Kweichow Moutai (600519 CH) Steady and superb

CR Land (1109 HK) Benefiting from rate/RRR cuts + projects in top-tier cities

BOCHK (2388 HK) Revenue growth momentum: Top pick among local lenders

Zoomlion (1157 HK) A late-cycle equipment maker stands to win

Haitong Sec. (6837 HK) Gaining from IPO re-launch and rebounding A-share market turnover

Eastern Airlines (670 HK) To ride on Shanghai Disney and Beijing Winter Olympics

Tencent (700 HK) WeChat user experience significantly enhanced on subscription improvement

Mengniu Dairy (2319 HK) New products to drive up income and margins

CCB (939 HK) Outstanding spread and relatively mild impact from IFRS 9

Japan StocksCompany Remarks

Mizhuho (8411 JP) Expanding overseas portfolio remains the key driver

Nissan Motor (7201 JP) Robust sales, favorable currency, further cost cutting

Sony (6758 JP) Growth story continues...

US StocksCompany Remarks

Facebook (FB US) Strong products

Citigroup (C US) Economic growth and interest rate rise to support earnings

Alphabet (GOOG US) Positive data on page view

Euro StocksCompany Remarks

Adidas (ADS GY) Upbeat industry climate

Zurich Insurance (ZURN VX) High dividend yield

LVMH (MC FP) Gain from weak €

Global ETF / ETNName Remarks

Tracker Fund of HK (2800 HK) To track the performance of the Hang Seng Index

CSOP Hang Seng Index Daily (2x) Leveraged Product (7200 HK) To track the daily performance of Hang Seng Index (2x leverage)

CSOP Hang Seng H-Shares Index Daily (2x) Leveraged Product (7288 HK) To track the daily performance of Hang Seng H-Shares Index (2x leverage)

CSOP Hang Seng Index Daily (-1x) Inverse Product (7300 HK) To track the daily performance of Hang Seng Index (inverse 1x leverage)

CSOP Hang Seng H-Shares Index Daily (-1x) Inverse Product (7388 HK) To track the daily performance of Hang Seng H-Shares Index (inverse 1x leverage)

ChinaAMC Hang Seng SmallCap Index (3157 HK) To track the performance of the Hang Seng SmallCap Index

ChinaAMC CSI 300 Index (3188 HK) To track the performance of the CSI 300 Index

Powershares QQQ Trust Series 1 (QQQ US) To track the performance of the Nasdap 100 Index (Excluded Financial Sector)

PowerShares DB Commodity Index Tracking ETF (DBC US) To track the performance of the DBIQ Optimum Yield Diversified Commodity Index

XIE Shares FTSE Chimerica (3161 HK) To track the performance of the FTSE China N Shares All Cap Capped Net Tax Index

Deutsche X-Trackers MSCI Eur (DBEU US) To track the performance of the MSCI Europe USD Hedged Index

Deutsche X-Trackers MSCI Jap (DBJP US) To track the performance of the MSCI Japan US Dollar Hedged Net Index

iShares MSCI Philippines (EPHE US) To track the performance of the MSCI Philippines Investable Market Index

iShares MSCI India (INDA US) To track the performance of the MSCI India Index

SPDR Gold ETF (2840 HK) To track the performance of the price of gold bullion in COMEX

Value Gold ETF (3081 HK) To track the performance of the London Gold Morning Fixing Price

CSOP WTI OIL ETF (3135 HK) To track the performance of the Merrill Lynch Commodity index eXtra CLA Index ER

Source: Bloomberg, Respective Company, CS

Top GAA picks

10 13 Aug 2018


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a-share reCoMMended stoCks:

Defensive StockSMkt Cap PriceU Target Stop Loss Upside Risk

Company Business (Rmb bn) (Rmb) (Rmb) (Rmb) (%) rating Remarks

Great Wall Motors (601633 CH)^ Automobiles 46 7.57 15.00 7.2 98 3

Beating market expectations: launching of new models and new powertrain will optimize its product mix and help improve profitability outlook.

Bank of Beijing (601169 CH)^

Banks 123 5.82 11.50 5.5 98 3Aggressive and resil ient at the same time: Solid financials poised for growth, backed by safe assets and quality clients

China United Network (600050 CH)^

Telecom 167 5.39 9.14 5.1 70 3The approaching 5G era: transformation and profit rebound on SOE reform

Zhejiang Dingli Machinery (603338 CH)^

Construction & Mining Machinery

13 52.10 86.62 49.5 66 3Rationale for growth intact: Remarkable edge in products and upbeat business in and outside of China

Bank of Nanjing (601009 CH)^

Banking Services 62 7.35 10.10 7.0 37 3Active expansion: A better-than-expected first half thanks to scale expansion; capital replenishment a positive response to business model.

SZ Expressway (600548 CH)^

Infrustructure Construction

11 7.90 10.80 7.5 37 3

Strengthening core while seeking transformation: Net cash of Rmb3bn upon repurchase of three toll roads will be used to consolidate main business and facilitate transformation

Daqin Railway (601006 CH)^

Rail Transportation

133 8.97 12.00 8.5 34 3Scarce and valuable assets: Operating a most precious railway of strategic importance

Baiyun International Airport (600004 CH)^

Transport Support Services

28 13.74 16.00 13.1 16 3

More duty free operation tipped to ease T2 impact: Contribution from arrival duty free business revenue plus more departure duty free sales to offset new capacity cost

Aggressive StockSMkt Cap PriceU Target Stop Loss Upside Risk


Xinjiang Tianye (600075 CH)^

Basic & Diversified Chemicals

7 6.91 19.49 6.6 182 3Prices of chemicals tipped to remain elevated: Prices likely to hike further on re-stocking, providing drive to sector earnings growth

Yibai Pharmaceutical (600594 CH)^

Generic Pharma 6 7.98 22.40 7.6 181 3A new healthcare arm to integrate tumor treatment resources: Speeding up resource consolidation and looking to set up shops across the nation

NBTM New Materials (600114 CH)

Auto Parts 6 9.08 24.80 8.6 173 3Riding on new powder metallurgical technology: High value-added products securing profitability

Xinhua Pharmaceutical (000756 CH)*

Specialty Pharma 3 6.88 18.13 6.5 164 3Multi-dimensional re-rating: Accelerating growth in preparation and hiking price for preparation

Hengtong Optic Electric (600487 CH)^

Optical fiber and cables

44 22.98 55.75 21.8 143 3Anticipating more pleasant surprises ahead: All lines of businesses set to ride on the upbeat industry climate.

Huayou Cobalt (603799 CH)^

Base Metals 43 52.18 126.00 49.6 141 3Continuous catalysts for the NEV sector: Optimistic long-term visibility

Tasly Pharma (600535 CH)^

Specialty Pharma 33 21.84 52.15 20.7 139 3Top-tier drug R&D: Core biological drug Pro-UK looking to be a new blockbuster

Yunnan Germanium (002428 CH)*

Base Metals 5 7.29 16.50 6.9 126 3Explosive demand spells opportunity: Upgrading products and investing in high-end manufacturing

COFCO Biochemical (000930 CH)*

Biofuels 9 9.36 21.00 8.9 124 3Cementing leadership in corn deep-processing: Rising oil prices to boost revenue of fuel ethanol business

Rainbow Department Store (002419 CH)*

Department Stores

14 11.51 24.00 10.9 109 3Looking to accelerate new retail: Potential liaison with internet giants for faster growth

Jianghuai Automobile (600418 CH)^

Automobile 11 5.77 12.00 5.5 108 3Volkswagen JV approved: A win-win deal for both parties

CNHTC (000951 CH)*Commercial Vehicles

8 12.22 25.00 11.6 105 3

Expecting high growth for heavy truck sector in 1H18E: improving competit ion landscape of the industry helps leading players to register significantly improvement in earnings.

Grandland (002482 CH)*

Non-Residential Bldg Const

9 6.09 12.00 5.8 97 3Launching employee stock ownership plan: ESOP to fuel endogenous growth

Source: Bloomberg, CS U Closing prices as of 10 Aug 2018 * Shenzhen-HK Stock Connect – Northbound Stocks (ChiNext Board for Professional Institutional Investors Only) ^ Shanghai-HK Stock Connect – Northbound Stocks Risk Rating: 1 to 5 in ascending order

11 13 Aug 2018


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Mkt Cap PriceU Target Stop Loss Upside Risk


Qingdao Kingking (002094 CH)*


6 8.51 16.60 8.1 95 3New retail a key growth driver in 2018E: Planning to erect 10,000 pilot stores practicing new retail

Chilong Zinc & Germanium (600497 CH) ^

Base Metals 25 4.96 9.50 4.7 92 3Benefiting from price hike potentials: Entering an up-cycle for explosive earnings growth

Weichai Power (000338 CH)*

Commercial Vehicles

49 8.04 15.00 7.6 87 3

Expecting high growth for heavy truck sector in 1H18E: improving competit ion landscape of the industry helps leading players to register significantly improvement in earnings.

CYTS Tours (600138 CH)^

Tourism Services 12 16.00 29.80 15.2 86 3Earnings poised to pick up next year: Price hike for Wuzhen and strong income from Gubei

Financial Street (000402 CH)*

Real Estates 22 7.27 13.44 6.9 85 3Bei j ing Real Es tate Sector : Buy ing inves tment properties in core districts while staying away from so-called “king plots”.

Zijin Mining (601899 CH)^

Precious Metal Mining

59 3.43 6.30 3.3 84 3A mining giant: Riding on non-ferrous metal up-cycle and own capacity expansion

Future Land (601155 CH)^

Real Estate Owners & Developers

57 25.40 46.31 24.1 82 3Mortgage rate may be peaking: Selecting leading players that excel in profitability

Greenland (600606 CH)^

Real Estate Services

76 6.28 11.40 6.0 82 3Gross margin upturn as expected: Moderate increase in real estate income, coupled with significantly wider margins

Satellite Petrochemical (002648 CH)*

Chemicals 10 9.38 16.90 8.9 80 3Rebounding climate: Recovering demand for acrylic acid and ester, sanguine prospects in SAP.

Sanan Optoelectronics (600703 CH)^

Semiconductor Devices

76 18.55 33.30 17.6 80 3Endogenous control – a wafer perspective: Strong demand and tight supply to drive industry upward

SDIC Power (600886 CH)^

Power Generation

50 7.38 13.20 7.0 79 3Approaching season of power shortage: Pick thermal power companies in high-demand regions

Xiamen Tungsten (600549 CH)^

Base Metals 20 14.07 24.80 13.4 76 3

Sustaining growth in output and sales of lithium bat tery materials: Rising capacit y coupled with higher proportions of deep-processed materials and overseas sales

China Meheco (600056 CH)^

Healthcare Supply Chain

19 17.52 29.80 16.6 70 4

An emerging integrated platform: One of the few Chinese companies that have already established diversified operations including manufacturing, sales and international trade.

Vanke (000002 CH)*Real Estate Owners & Developers

225 23.18 38.51 22.0 66 3Investment cues for anticipated rebound: Potential rebound of property counters on easing concern over funding cost

Huangshan Tourism (600054 CH)^

Real Estate Owners & Developers

6 11.62 19.20 11.0 65 3Better-than-expected 1Q16 results: Strong tourist flow sustainable, cost reduction effective and profitability enhanced.

CMSK (001979 CH)*Investment Companies

137 17.27 28.35 16.4 64 3Mortgage rate may be peaking: Selecting leading players that excel in profitability

Luzhou Laojiao (000568 CH)*

Beverages 72 49.07 80.50 46.6 64 3Four-pronged reform: Long-term outlook improving on dynamic execution with product, channel, brand and management reforms

China Molybdenum (603993 CH) ^

Base Metals 89 5.01 8.20 4.8 64 3Molybdenum sector rebound expected: Further price hike against disrupted supply

CCB (601939 CH) ^ Banks 66 6.85 11.20 6.5 64 3

" P r a c t i c a l i t y o f c r e d i t e a s i n g a n d r a t i o n a l e x p e c t a t io ns t h e re o f : Fo cus o n b a nk s w i t h s t a b l e a s s e t q u a l i t y a n d v i s i b l e p r o s p e c t s "

Chuangxin New Material (002812 CH)*

Containers & Packaging

12 43.87 71.60 41.7 63 3First-mover advantage: Cutting into battery supply chain abroad to embrace explosive growth in 2018-19E orders

Linglong Tyre (601966 CH)^

Auto Parts 18 15.33 25.00 14.6 63 3Pumping up: Potential to become a tier-2 international brand and one of the global top 10 tire makers

Grand Auto (600297 CH)^

Agricultural Chemicals

54 6.56 10.50 6.2 60 3Driven by auto financing and second-hand car sales: China’s largest car dealer aiming at top-of-the-world rank

Shanghai Mech & Elect (600835 CH)^

Elevator 13 16.36 26.16 15.5 60 3Smart equipment platform established: The Company may serve as platform for parent to float more quality assets going forward.

Gree Electric (000651 CH)*

Air-con 245 40.70 64.50 38.7 58 3Getting smart: Transition into an intelligent appliances era with volume and price rising in tandem


12 13 Aug 2018


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Yang Quan Coal (600348 CH)^

Coal Operations 15 6.35 10.05 6.0 58 3Hit t ing the sweet spot : Warmer- than-expected industry climate and increasingly clear earnings visibility

Chint Electronics (601877 CH)^

Electrical Power Equipment

47 21.71 34.26 20.6 58 3Explor ing the household photovol ta ic power generation market: Favorable policy to boost growth

Huadong Medicine (000963 CH)*

Medicines Retailing

65 44.48 70.16 42.3 58 3Innovative diabetes drug approved for clinical trial: New diabetes medicine approved and coming to the market circa 2021E

Yinlun Machinery (002126 CH) *

Auto Parts 6 7.97 12.50 7.6 57 3Continuous catalysts for the NEV sector: Optimistic long-term visibility

Yunnan Copper (000878 CH)*

Base Metals 14 9.58 15.00 9.1 57 3Rationale for copper price hike: Picking stocks with resource edge, potential capacity expansion, earnings elasticity, M&A plans and sustainable operation

Shaanxi Coal (601225 CH)^

Steel Raw Material Suppliers

75 7.45 11.60 7.1 56 3 Value emerging: Steady margins and high dividend.

Guangshen Railway (601333 CH)^

Transit Services 23 4.14 6.40 3.9 55 3Picking up steam on reform: Faster railway reform expected to boost earnings

Fosun Pharma (600196 CH)^

Pharmaceutical 69 34.24 52.85 32.5 54 3Pocketing a rare gem: Adding a Shenzhen hospital to form a strong healthcare network in the Pearl River Delta

Zhongnan Construction (000961 CH)*

Non-Residential Bldg Const

21 5.78 8.92 5.5 54 3Impressive potential from a low start: Potential to rise as a blue-chip developer

BTG Hotels (600258 CH)^

Leisure & Travel Services

20 20.53 31.57 19.5 54 3New incent i ve scheme to un leash potent ia l : Expecting strong earnings rebound in the short run

Jiangxi Copper (600362 CH)^

Base Metals 31 14.92 22.80 14.2 53 3Rationale for copper price hike: Picking stocks with resource edge, potential capacity expansion, earnings elasticity, M&A plans and sustainable operation

Sunway Communication (300136 CH)*

Electronics Components

33 33.38 51.00 31.7 53 3Making presence in RF ahead of peers: Sustainable gains from high growth in acoustic-RF solutions and RF front-end devices.

Shenzhen Gas (601139 CH)^

Utility Networks 18 6.21 9.40 5.9 51 3Selling low-eff icient assets to improve earnings of projects outside of Shenzhen

Truchum Advanced Materials (002171 CH)*

Base Metals 7 6.68 10.10 6.3 51 3Skewing towards new materials: Developing new materials a part of national strategy

CMB (600036 CH)^ Banking Services 587 28.44 43.00 27.0 51 3Practicality of credit easing and rational expectations thereof: Focus on banks with stable asset quality and visible prospects

Industrial Bank (601166 CH)^

Banking Services 320 15.40 23.00 14.6 49 3Freeing up excess reserve to smooth volat i l i t y : Moderate improvement in f inancia l data and accommodating new rules for reserves .

Gemdale (600383 CH)^Real Estate Owners & Developers

40 8.85 13.11 8.4 48 3Embracing peak season for project launch: Rolling out more projects than previously planned

Qingdao Haier (600690 CH)^

Home Improvement

101 16.49 24.30 15.7 47 3Getting smart: Transition into an intelligent appliances era with volume and price rising in tandem

Sinoma International (600970 CH)^

Industrial Distribution & Rental

12 7.07 10.35 6.7 46 3Across-the-board synergy on M&A deal to widen margins and lead to a profit upturn

Midea (000333 CH)*Home Improvement

298 44.98 65.60 42.7 46 3In-line quarterly results: Industry leader poised to gain from smartization of the whole value chain

Dashenlin (603233 CH)^

Food & Drug Stores

21 51.47 75.00 48.9 46 3Major beneficiary of medical insurance and pharmacy reforms in Guangdong and national expansion on home advantages in southern China

China South Publishing & Media (601098 CH)^

Media 22 12.17 17.72 11.6 46 3Deserving richer valuation: A much undervalued stock seeing catalysts emerging on the upside

Broad-Ocean Motor (002249)*

Industrial Machinery

11 4.50 6.50 4.3 44 3New era of clean and efficient energy: A key player in the core section of the fuel cell chain

Wangfujing (600859 CH)^

Department Stores

13 17.01 24.50 16.2 44 3Riding on high-end consumption recovery: Exploring supermarket and premium store formats via joint ventures

Wuliangye (000858 CH)*

Beverages 256 66.05 93.80 62.7 42 3

Mixed-ownership reform to boost OP efficiency: The private placement will likely align the interests of the management and distributors with the Company, and thus improve the operational efficiency.

Source: Bloomberg, CS U Closing prices as of 10 Aug 2018 * Shenzhen-HK Stock Connect – Northbound Stocks (ChiNext Board for Professional Institutional Investors Only) ^ Shanghai-HK Stock Connect – Northbound Stocks # Sell Only Risk Rating: 1 to 5 in ascending order

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Xingrong Environment (000598 CH)*

Utility Networks 13 4.44 6.30 4.2 42 3Anticipating faster growth on mixed-ownership reform: Progress in reform to exert impact far and wide

ZTE (000063 CH)*Communications Equipment

50 14.50 20.34 13.8 40 3Steadily delivering promised growth: Upbeat 1H17 results and visible 5G prospects

Ninestar (002180 CH)*Power Generation

32 29.78 41.42 28.3 39 3

A dawning golden decade for semiconductor plays: China-US trade dispute to reinforce Chinese determination to replace imports with home-made products

Shanghai Jahwa (600315 CH)^

Household Products

23 34.79 48.00 33.1 38 3New incentive scheme to help boost performance: Expect new stock option plan to lend support to growth

Huadian International (600027 CH)^

Power Generation

32 3.92 5.40 3.7 38 3

Earnings elasticity in 2Q18E: with strong power demand and decline in spot & long coal prices, the profitability of the thermal power industry will continue to recover.

Spring Airlines (601021 CH)^

Airlines 29 31.41 43.00 29.8 37 3Returning to positive growth: Greater earnings upside in high-end markets

SAIC Motor (600104 CH)^

Automobiles 350 29.99 41.00 28.5 37 3Strong NEV sales: new models wil l continue to perform well, and its leading position will help the Company to register higher than industry growth.

Dongjiang Environmental (002672 CH)*

Waste Management

10 15.00 20.50 14.3 37 3Stronger capital on share placement: Clearly positive climate for waste treatment and detoxification likely to speed up earnings

Yili (600887 CH)^ Dairy products 167 27.42 36.70 26.0 34 3Beginning of a beautiful story: Faster growth ahead on recovering demand in lower-tier cities, regulatory approval and channel restocking

Asymchem Laboratories (002821 CH)*

Specialty Pharma 19 81.35 106.80 77.3 31 3Joining hands with domestic and international leading names: Rapid growth ahead on domestic and offshore drivers

O-film Tech (002456 CH)*

Electronics Components

47 17.16 22.44 16.3 31 3Sensing the future: To be driven by market expansion on dual camera and OLED technology advancement and increasing number of major clients

Focus Media (002027 CH)*

Advertising & Marketing

157 10.67 13.80 10.1 29 3Dominating the out-of-home advertising scene: Building advertising to expand steadily and cinema advertising to surge

Sunlord Electronics (002138 CH)*

Electrical Components

15 18.80 24.00 17.9 28 3L ikely breakthrough in appl icat ion of ceramic components: Use of ceramic parts to dif ferentiate mobile phones.

Double Medical (002901 CH)*

Medical Devices 13 33.07 41.74 31.4 26 3Exploring high-value medical consumables: Rapidly growing market for spine products

Sinopec (600028 CH)^ Integrated Oils 634 6.63 8.25 6.3 24 3Tight supply expected for 2H18E: High or even rising oil price boding well for E&P and oilf ield services companies

Jinduicheng Molybdenum (601958 CH)^

Base Metals 21 6.48 8.00 6.2 23 3Molybdenum sector rebound expected: Further price hike against disrupted supply

Hengli Petrochemical (600346 CH)^

Rubber & Plastic 82 16.18 19.80 15.4 22 3Investing on ethylene and polyester filament projects: Cementing leadership in the sub-sectors of the petrochemical industry

Three-Circle (300408 CH)*

Advanced Ceramics

42 23.85 29.12 22.7 22 3Expert electro ceramics maker upgrading business structure and looking to promising future with new products

Yangtze Power (600900 CH)^

Power Generation

360 16.35 19.80 15.5 21 3Cash dividend trumping est imates: Bet ter- than-expected payout and positive impact from industrial investment

Ping An Bank (000001 CH)*

Banking Services 158 9.23 11.16 8.8 21 3Freeing up excess reserve to smooth volat i l i t y : Moderate improvement in f inancia l data and accommodating new rules for reserves.

Chongqing Department Store (600729 CH)^

Department Stores

13 30.94 34.50 29.4 12 3Embracing reform and innovation: Alibaba and local government collaboration to of fer growth opportunities


14 13 Aug 2018


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very Agressive StockSMkt Cap PriceU Target Stop Loss Upside Risk


Taihai Manoir Nuclear (002366 CH)*

Flow Control Equipment

11 12.81 47.70 12.2 272 3New business deals in of fshore nuclear power equipment: Improving fundamentals to support further growth

Eastone Century Technology (300310 CH)*

IT Services 4 4.80 14.40 4.6 200 3Beefing up prospective research in IoT: Joining hands with strong player in the field to reinforce R&D muscle

Sanqi Interactive Entertainment (002555 CH)*

Application Software

23 10.74 30.60 10.2 185 3A traffic giant in the age of web-to-mobile conversion: Blockbuster games expected to lift 2018E earnings

Kehua Hengsheng (002335 CH)*


5 16.96 47.40 16.1 179 3Emerging in top-t ier markets: Cloud computing project in Shanghai received go-ahead

Guoxuan High-Tech (002074 CH)*


15 13.60 36.00 12.9 165 3Policy guidance to beef up industry leaders: Large-scale manufacturers of car bat teries to r ide on favorable policy and first-mover advantages

Huayi Brothers (300027 CH)*

Movie/TV drama 16 5.84 14.97 5.5 156 3

Set sail for an exciting long journey with powerful partners onboard: Cooperate with Alibaba and Tencent in e -commerce, new media and movie production development.

Kangni Mechanical (603111 CH)^

Electronic Components

7 6.91 17.60 6.6 155 3Acquisi t ion target may surprise on the upside: Proposing merger to tap into the growing mobile casing market

CIMC (000039 CH)*Fabricated Metal & Hardware

15 11.84 29.00 11.2 145 3Framework pact signed for Qianhai plot : Land conversion to commercial use t ipped to boost valuation and balance sheet

Better Life (002251 CH)*

Food & Drug Stores

9 10.04 23.00 9.5 129 3Global trade of growing scale: Upbeat about players with strong overseas supply chains and commodity flow.

Denghai Seeds (002041 CH)*

Crop Seeds 6 6.83 15.60 6.5 128 3Anticipating new concept in management and upgrading products: Buying quality seed companies and bringing in strategic investors to raise valuation.

Yinhe Electronics (002519 CH)*

Cable TV Equipment

4 3.98 9.00 3.8 126 3Upbeat all around: Steady and smooth growth of STB, military electromechanical and new-energy auto parts businesses.

SPC Environment Protection Tech (002573 CH)*

Pollution Control Equipment

12 11.45 24.30 10.9 112 3ESOP reflects strong confidence: Tipped to solidify its lead in air pollution treatment

Zhiyun Automation (300097 CH)*

Automation Equipment

5 16.59 34.68 15.8 109 3O n w a y t o l e a d h o m e - g r o w n e q u i p m e n t makers: Acquisition to pave way into a new market segment.

Hytera Communications (002583 CH)*

Communications Equipment

17 9.50 19.70 9.0 107 3Seeking global dominance in private communication net works: Core technology and r ich product s pointing way to industry leader worldwide

Vtron Tech (002308 CH)*

Consumer Electronics

8 8.72 18.00 8.3 106 3Acquiring a controlling share in Keer Education: Leveraging on top-quality education resources and offline development in core cities.

Shouhang Resources Saving (002665 CH)*

Comml & Res Bldg Equip & Sys

15 5.80 11.70 5.5 102 3Killing two birds with one mixed-ownership stone: Faster advance on reform and business upturn

Changjiang Electronics (600584 CH)^

Semi Conductor 22 16.45 31.95 15.6 94 3Leading the race: Intensifying M&As as the Moore’s Law coming towards a bottleneck

Kingfa Tech (600143 CH)^

Specialty Chemicals

13 4.79 9.30 4.6 94 3New materials forming multiple drivers for earnings turnaround in 2018E

Originwater (300070 CH)*

Waste Water Treatment

38 12.05 22.50 11.4 87 3“River chiefs” assuming duty: Shanghai rolling out new system to clean polluted waters .

Global Top E-Commerce (002640 CH)*

Apparel, Footwear & Acc Design

23 14.47 26.50 13.7 83 3Consolidating to stoke quality growth: Persistently strong electronics and recovering apparel trade

Newland (000997 CH)*

Infrastructure Software

15 15.11 26.50 14.4 75 3

Full speed ahead to payment business: Buying a national merchant acquir ing l icense to boost prof i tabi l i t y and t rans form into an integrated electronic payment operator.

CHJ Industry (002345 CH)*

Jewelries and Accessories

6 6.82 11.60 6.5 70 3All that glitters is gold: The Company appears ready to attract industry capital from China and abroad to facilitate future M&As and incubate new brands.

Sunsea Telecommunications (002313 CH)*


7 21.12 34.40 20.1 63 3High-level liaison: Well-defined strategy and excellent execution


15 13 Aug 2018


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Star-net Communication (002396 CH)*

Communication Equipment

11 19.69 32.00 18.7 63 3 Sustainable growth: Abundant business innovation

UTour Int'l Travel (002707 CH)*

Tourism Services 8 9.43 14.90 9.0 58 3

Rais ing the bamboo cur ta in: Growing onl ine distribution platforms such as Tuniu and huge offline resources, its O2O model has huge upside potential going forward.

Ningbo Shanshan (600884 CH)^

Apparel, Footwear & Acc Design

19 17.21 27.00 16.3 57 3Leading supplier of lithium battery material: Favorable climate thanks to the NEV market boom

Cha Cha Food (002557 CH)*

Packaged Food 8 16.08 25.00 15.3 55 3

Nuts are core in online food sales: Nuts outrunning all other snacks in online food sales during the Chinese New Year holidays; online venders with nuts as core products ready for a bumper harvest ahead

Maoye Communication & Network (000889 CH)*

Real Estate & Telecom

8 13.05 20.00 12.4 53 3Accelerating business transit ion: Steady organic growth with scale expansion on the horizon.

NavInfo (002405 CH)*Application Software

24 18.33 27.99 17.4 53 3A launch pad to international track: Buying a stake into global mapping service provider to form strong alliance

Lu'An Environmental Energy (601699 CH)^

Coal Operations 26 8.64 13.08 8.2 51 3Rebound underway as the high season unfolds: Expecting a strong sector rebound over the two months ahead

Tongwei (600438 CH)^Agricultural Producers

26 6.58 9.90 6.3 50 3A big deal: New order to account for 30% of capacity in the next three years, sustaining robust growth of the Company’s PV power division

Hikvision Digital (002415 CH)*


295 32.00 48.10 30.4 50 3Upbeat industrial climate: New products to generate fresh growth drivers

Perfect World (002624 CH)*

Entertainment Content

37 27.88 41.10 26.5 47 3Asset sales to consolidate core business: Sell ing cinema line assets in a bid to concentrate on core

Lianchuang Electronic (002036 CH)*


7 11.92 17.53 11.3 47 3Investment prospects in science and technology: 2017E to see equipment market expansion and explosive content growth.

Wangsu Science (300017 CH)*

IT Services 25 10.12 14.70 9.6 45 3Informatization and internetization tasks outlined: Broad-stroke IT policy to be followed by concrete measures.

BYD (002594 CH)* Automobiles 76 41.69 60.00 39.6 44 3Cooperating with Salt Lake Industry: To set up the latter’s lithium resources via a JV.

AVIC Helicopter (600038 CH)^

Aircraft & Parts 21 35.07 50.00 33.3 43 3Promising target: The sole listed helicopter asset in parent group

Hoshine Silicon (603260 CH)^

Specialty Chemicals

40 59.78 85.20 56.8 43 3Stellar performance: Full-chain operation guarantees long-term growth

AECC Aviation Power (600893 CH)^

Aircraft & Parts 52 23.24 32.50 22.1 40 3Promising target: A whole-engine plat form with sustainable strong growth

Worldunion (002285 CH)*

Real Estate Services

13 6.19 8.52 5.9 38 3New JV for secondar y housing management : Potent ia l t akeover o f compet i t i ve t a rget s on increasingly strict industry regulation

Heilan Home (600398 CH)^

Specialty Apparel Stores

46 10.31 14.04 9.8 36 3Advancing the multi-brand strategy: Expanding scale and widening presence via UR acquisition

Shanghai Ganglian (300226 CH)*

Internet Based Services

88 55.50 75.47 52.7 36 3Building up moat via information service: Enhancing the supply-chain service model

Accelink Technologies (002281 CH)*


15 23.27 31.50 22.1 35 3E x p e c t i n g b re a k t h ro u g h s i n p h o to n i c ch i p manufacturing: Prospective exposure to VCSEL and photonic chip platform

Haid Group (002311 CH)*

Agricultural Producers

32 20.29 27.40 19.3 35 3Galloping growth: Deserving premium for sustainable growth and visibility

Sinnet (300383 CH)*Network Integration Services

21 14.76 19.60 14.0 33 3

Acquiring a tech f irm and land to build a cloud computation base: The new project, when completed and running at full steam, could add Rmb360mn net profit a year.

AVIC Electromechanical (002013 CH)*

Aircraft Parts 26 7.32 9.70 7.0 33 3Asset injection on the door steps: Private placement of shares approved by regulator.

EVE Energy (300014 CH)*

Renewable Energy Equipment

13 15.33 20.00 14.6 30 3Policy guidance to beef up industry leaders: Large-scale manufacturers of car bat teries to r ide on favorable policy and first-mover advantages


16 13 Aug 2018


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Wanhua Chemical (600309 CH) ^


136 49.89 65.00 47.4 30 3 The second leap: M&A deals set to lift profits

Sunner Develop (002299 CH)*

Meat Type Chicken Products

21 17.30 21.40 16.4 24 3

Seize the opportunity from oversold poultry plays: Another round of broiler price hikes drawing near and upbeat industry climate tipped to last into 2018E on tight supply

Jinyu Bio-technology (600201 CH)^

Animal Biopharm-aceuticals

19 15.82 19.00 15.0 20 3New product approval cements leadership: Another vaccine approved, expanding room for further market penetration.

Fenghua Advanced Technology (000636 CH)*

Electrical Components

15 16.68 19.80 15.8 19 3New opportunities: Scale and business expansion to be fueled by SOE reform.

Semir Garment (002563 CH)*

Garment 31 11.68 13.68 11.1 17 3Stronger kids are us: Consolidating lead in children’s garment through cooperat ion with Amer ican counterpart

Dabeinong (002385 CH)*

Animal Feeds 17 3.98 4.62 3.8 16 3Setting sails again: Concentrating on high-end feed to maintain strong margins

New Beiyang (002376 CH)*

Office Electronics 10 14.30 15.75 13.6 10 3Benef it ing from the popularization of intelligent terminals: Increasing popularization of intelligent terminals pointing to long-term growth potential


17 13 Aug 2018


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top twenties:

Top 20 GainersCompany

Price (Rmb)

WoW Chg (%)

Great Wall Military (601606 CH) 7.03 111

New Oriental Star (002755 CH) 17.28 61

Chunguang Technology (603657 CH) 56.48 45

Focus Technology (002315 CH) 16.97 32

Tensyn Digital (300392 CH) 8.99 32

Taiji Computer (002368 CH) 34.59 29

Xinjiang Haoyuan (002700 CH) 11.25 27

Younglight Chemicals (000635 CH) 13.13 26

Boomsense Technology (300312 CH) 8.44 26

Liuguo Chemical (600470 CH) 4.63 25

LS Heavy Equipment (603169 CH) 6.00 23

Huijin Electromechanical (300368 CH) 7.09 23

Xi'an Tourism (000610 CH) 7.40 23

Zhongxin Fluoride (002915 CH) 29.45 22

Shandong Shengli (000407 CH) 4.93 21

China National Software (600536 CH) 27.93 21

Jones Tech (300684 CH) 84.16 21

Calxon Group (000918 CH) 5.82 20

Talkweb Information (002261 CH) 5.02 20

Tech Semiconductors (300046 CH) 15.83 20

Top 20 LosersCompany

Price (Rmb)

WoW Chg (%)

Contemporary Eastern (000673 CH) 8.78 (41)

Kinglai Hygienic Material (300260 CH) 13.19 (36)

Haibo Heavy Engineering (300517 CH) 17.94 (35)

Tonghua Golden-Horse (000766 CH) 7.72 (33)

Busen Garments (002569 CH) 10.29 (32)

Fujian Superpipe (300198 CH) 3.35 (31)

Whole Easy Internet (002464 CH) 9.69 (30)

Risen Energy (300118 CH) 7.57 (29)

NanHua Bio-medicine (000504 CH) 14.35 (27)

DMG Entertainment (002143 CH) 3.75 (27)

Yabaite Technology (002323 CH) 1.32 (23)

Xinlong Holding (000955 CH) 5.21 (23)

Steyr Motors (000760 CH) 4.29 (23)

Changsheng Bio-technology (002680 CH) 6.36 (23)

High Speed Railway (000008 CH) 3.95 (20)

Yapp Automotive (603013 CH) 25.10 (20)

Kangda New Materials (002669 CH) 15.99 (20)

Jinhong Holding (000669 CH) 5.85 (19)

Chieftain Control (300430 CH) 8.40 (19)

Nanjing Xinjiekou (600682 CH) 11.64 (18)

Source: Bloomberg, CS * Closing prices as of 10 Aug 2018

18 13 Aug 2018


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a/h preMiuM table

A-share H-share CompanyPrice

(Rmb)

A/H premium

(%)

600876 CH 1108 HK Luoyang Glass 14.59 476

601330 CH 1330 HK Dynagreen Environmental Protection 15.57 395

002703 CH 1057 HK Zhejiang Shibao 5.01 341

002490 CH 568 HK Shangdong Molong 4.91 304

002910 CH 1533 HK Zhuangyuan Pasture 20.45 225

600860 CH 187 HK Beijing Jingcheng 5.11 211

600874 CH 1065 HK Tianjin Capital Environmental 8.89 201

601727 CH 2727 HK Shanghai Electric 6.34 181

600775 CH 553 HK Nanjing Panda 5.92 179

000585 CH 42 HK Northeast Electric Development 1.95 176

601038 CH 38 HK First Tractor 5.73 162

601326 CH 3369 HK Qinhuangdao Port 3.82 138

601866 CH 2866 HK CSCL 2.48 129

601375 CH 1375 HK Central China Securities 4.30 126

603157 CH 6116 HK La Chapelle Fashion 15.61 122

601881 CH 6881 HK China Galaxy Securities 7.49 114

600871 CH 1033 HK Sinopec SSC 1.96 114

601880 CH 2880 HK Dalian Port 2.00 108

601811 CH 811 HK Xinhua Winshare 8.91 97

601066 CH 6066 HK CSC Financial Co Ltd 8.61 90

601869 CH 6869 HK Yangtze Optical Fibre and Cable Joint Stock Ltd Co 47.09 88

601800 CH 1800 HK China Comm. Construction 13.61 88

600685 CH 317 HK COMEC 12.77 86

601005 CH 1053 HK Chongqing Iron & Steel 2.15 85

000756 CH 719 HK Xinhua Pharmaceutical 6.88 81

601618 CH 1618 HK Metallurgical Corporation 3.55 81

601633 CH 2333 HK Great Wall Motor 7.57 81

600958 CH 3958 HK DFZQ 8.34 79

601898 CH 1898 HK China Coal 5.00 77

600362 CH 358 HK Jiangxi Copper 14.92 77

601991 CH 991 HK Datang Int'l Power 3.18 75

600875 CH 1072 HK Dongfang Electrical 7.32 74

601717 CH 564 HK ZMJ 5.97 73

601828 CH 1528 HK Red Star Macalline Group Corp Ltd 13.47 71

601107 CH 107 HK Sichuan Expressway 3.60 66

601588 CH 588 HK Beijing North Star 3.69 65

601238 CH 2238 HK Guangzhou Automobile 10.44 64

002202 CH 2208 HK Goldwind 13.15 63

603993 CH 3993 HK China Molybdenum 5.01 60

601808 CH 2883 HK China Oilfield Services 10.33 58

600999 CH 6099 HK CMSC 13.32 57

601857 CH 857 HK PetroChina 8.03 55

000157 CH 1157 HK Zoomlion 4.17 53

600635 CH 1635 HK DZUG 3.75 52

000039 CH 2039 HK CIMC 11.84 51

600011 CH 902 HK Huaneng Power 6.94 50

601788 CH 6178 HK EB Securities 10.81 50

600012 CH 995 HK Anhui Express 5.86 50

601336 CH 1336 HK New China Life Insurance 44.87 48

601919 CH 1919 HK COSCO 4.44 47

002672 CH 895 HK Dongjiang Environmenta 15.00 45

A-share H-share CompanyPrice

(Rmb)

A/H premium

(%)

600029 CH 1055 HK China Southern Airlines 6.72 45

601688 CH 6886 HK HTSC 15.48 44

601992 CH 2009 HK BBMG 3.73 43

600188 CH 1171 HK Yanzhou Coal 11.70 42

000776 CH 1776 HK GF Securities 13.31 41

000921 CH 921 HK Kelon Electric 7.97 39

601766 CH 1766 HK China South Locomotive 8.71 38

600027 CH 1071 HK Huadian Power 3.92 38

000488 CH 1812 HK Chenming Paper 7.81 38

601998 CH 998 HK CITIC Bank 5.95 36

600837 CH 6837 HK Haitong Securities 8.81 35

600026 CH 1138 HK China Shipping Dev. 4.36 34

601899 CH 2899 HK Zijin Mining Group 3.43 34

601186 CH 1186 HK China Railway Construction 11.22 34

601628 CH 2628 HK China Life 22.31 33

000513 CH 1513 HK Livzon Pharmaceutical 41.84 33

600115 CH 670 HK China Eastern Airlines 5.52 33

600688 CH 338 HK Shanghai Petrochemical 5.36 31

000063 CH 763 HK ZTE 14.50 28

600548 CH 548 HK Shenzhen Express 7.90 27

601600 CH 2600 HK Aluminum of China 3.78 27

601390 CH^ 390 HK China Railway Group 7.47 26

600332 CH 874 HK Baiyunshan 36.11 25

601601 CH 2601 HK Pacific Insurance 33.86 23

601111 CH 753 HK Air China 7.56 23

600030 CH 6030 HK CITIC Securities 16.37 22

601818 CH 6818 HK China Everbright Bank 3.59 22

601607 CH 2607 HK Shanghai Pharmaceuticals 21.97 22

601333 CH 525 HK Guangshen Railway 4.14 20

600016 CH 1988 HK Minsheng Bank 5.96 19

601088 CH 1088 HK Shenhua Energy 18.12 17

600808 CH 323 HK Maanshan Iron & Steel 4.14 16

601328 CH 3328 HK BoComm 5.58 15

601988 CH 3988 HK BOC 3.54 12

601939 CH 939 HK CCB 6.85 12

601288 CH 1288 HK ABC 3.61 10

600600 CH 168 HK Tsingtao Brewery 39.15 10

601398 CH 1398 HK ICBC 5.50 9

600196 CH 2196 HK Fosun Pharmaceutical 34.24 7

600036 CH 3968 HK China Merchants Bank 28.44 7

002594 CH 1211 HK Byd Co Ltd 41.69 6

000002 CH 2202 HK Vanke 23.18 6

600377 CH 177 HK Jiangsu Express 8.67 5

000338 CH 2338 HK Weichai Power 8.04 5

600028 CH 386 HK Sinopec 6.63 3

601211 CH 2611 HK Guotai Junan Securities 14.63 3

600660 CH 3606 HK Fuyao Glass 23.63 1

601318 CH 2318 HK Ping An 60.44 (4)

000898 CH 347 HK Angang Steel 6.39 (7)

600585 CH 914 HK Anhui Conch Cement 38.65 (11)

Source: Bloomberg, CS * Closing prices as of 10 Aug 2018 ^ Suspended

19 13 Aug 2018


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CITIC S&P 50 IndexPER (x) 17-19E Chg (%) 6M Avg Daily T/O Mkt Cap

Sector 17 18E 19E PEG (x) 1-wk 1-mth YTD 1-yr (Rmb mn) (Rmb bn)

Market cap weighted average 17 14 12 0.8 3.0 0.4 (9.6) 4.3 50,472 12,928

Energy 13 9 9 0.7 1.5 1.0 (1.4) 3.7 1,434 932

Materials 14 11 9 0.6 3.8 9.6 4.1 17.9 2,938 466

Capital Goods 24 19 15 0.9 7.7 16.2 (16.6) (17.6) 1,905 679

Transportation 10 9 9 1.8 3.2 5.2 (1.1) 2.5 315 133

Automobiles & Components 10 9 9 1.2 3.2 (13.4) (6.4) 1.3 617 350

Consumer Durables & Apparel 14 12 10 0.8 5.4 (9.7) (13.3) 10.4 5,676 643

Media 16 15 13 1.2 4.2 (5.2) (17.1) (33.3) 122 36

Retailing 127 23 46 1.9 (1.0) (3.8) 2.2 5.7 833 117

Food, Beverage & Tobacco 30 23 19 1.1 1.8 (6.5) (5.4) 31.2 7,695 1,462

Pharmaceuticals, Biotechnology & Life Sciences 65 52 41 2.5 4.4 (4.5) 21.4 52.0 1,638 364

Banks 7 6 6 0.8 2.0 2.3 (10.0) (2.9) 8,372 4,589

Diversified Financials 15 13 12 1.3 1.8 (1.7) (17.3) (17.8) 2,584 311

Insurance 16 13 11 0.7 3.7 1.9 (18.8) 3.3 5,672 1,332

Software & Services 137 90 60 2.7 3.2 (6.1) (23.7) (6.0) 1,436 63

Technology Hardware & Equipment 25 23 16 1.0 6.3 (3.7) (27.6) 0.7 5,142 467

Telecommunication Services NA 45 28 NA 5.5 9.1 (14.8) (27.8) 735 167

Utilities 17 16 16 4.2 (2.4) 0.5 2.3 4.2 386 411

Real Estate 9 7 6 0.4 9.2 (1.8) (23.1) 3.7 2,973 404

CITIC S&P 300 IndexPER (x) 17-19E Chg (%) 6M Avg Daily T/O Mkt Cap

Sector 17 18E 19E PEG (x) 1-wk 1-mth YTD 1-yr (Rmb mn) (Rmb bn)

Market cap weighted average 24 17 14 0.8 2.6 (0.6) (10.0) 1.2 121,461 24,003

Energy 44 19 16 0.7 3.9 2.6 (1.3) 1.0 2,903 2,337

Materials 23 15 13 0.7 1.8 1.6 (9.1) (0.7) 16,236 1,431

Capital Goods 23 18 15 0.9 4.5 7.3 (15.2) (13.7) 12,736 2,165

Commercial & Professional Services 21 15 12 0.7 (1.3) (2.2) (29.5) (37.2) 332 54

Transportation 17 16 14 1.7 2.1 (4.8) (11.6) (2.1) 3,345 730

Automobiles & Components 17 13 11 0.7 2.1 (9.5) (20.8) (13.2) 2,723 872

Consumer Durables & Apparel 17 14 12 0.8 4.3 (9.3) (15.7) 3.2 7,947 860

Consumer Services 35 24 19 1.0 (0.4) (2.4) 22.1 72.9 1,104 190

Media 31 21 17 0.9 1.4 (4.4) (19.5) (26.5) 551 176

Retailing 67 17 28 1.2 1.5 0.9 (11.0) (9.4) 1,349 267

Food & Staples Retailing 32 34 25 2.6 1.7 0.7 (27.6) (0.8) 616 95

Food, Beverage & Tobacco 31 24 20 1.2 1.2 (6.3) (4.6) 29.8 10,413 2,057

Household & Personal Products 60 42 32 1.6 (2.8) (10.6) (5.7) 15.2 161 23

Health Care Equipment & Services 38 29 31 4.0 (1.0) (13.9) (2.8) 12.9 1,490 198

Pharmaceuticals, Biotechnology & Life Sciences 52 41 33 2.1 2.1 (6.7) 5.3 26.9 9,379 1,252

Banks 7 6 6 0.9 1.8 1.0 (10.1) (4.7) 9,661 5,803

Diversified Financials 17 15 13 1.3 2.1 (1.7) (19.5) (23.7) 3,177 503

Insurance 16 13 11 0.7 3.7 1.9 (18.8) 3.3 5,672 1,332

Software & Services 75 53 39 1.9 6.8 1.8 7.2 19.5 5,673 297

Technology Hardware & Equipment 33 27 21 1.3 5.4 0.4 (17.3) 9.4 15,176 1,162

Semiconductors & Semiconductor Equipment 26 19 14 0.7 1.9 (4.7) (31.6) (3.0) 2,083 138

Telecommunication Services 2 43 27 NA 5.3 8.2 (16.4) (28.0) 873 184

Utilities 26 16 14 0.8 (2.0) 1.1 (4.8) (7.6) 1,591 958

Real Estate 12 7 6 0.3 5.4 (3.8) (20.1) (5.3) 6,267 921

Source: Bloomberg, CS * Closing prices as of 10 Aug 2018 GICS (Global Industry Classification Standard)

Major index perforManCe:

20 13 Aug 2018


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ario

what to watCh out for:

Results Announcement Code Company Estimated Date Financial Year / Quarter^

002230 CS Iflytek Co Ltd Tentative 13/08/2018 06/18 Q2

600048 CG Poly Real Estate Group Co Ltd Tentative 13/08/2018 06/18 Q2

600547 CG Shandong Gold Mining Co Ltd Tentative 13/08/2018 06/18 Q2

000566 CS Hainan Haiyao Co Ltd Tentative 14/08/2018 06/18 Q2

000895 CS Henan Shuanghui Investment & Development Co Ltd Tentative 14/08/2018 06/18 Q2

002146 CS RiseSun Real Estate Development Co Ltd Tentative 14/08/2018 06/18 Q2

002714 CS Muyuan Foodstuff Co Ltd Tentative 14/08/2018 06/18 Q2

600664 CG Harbin Pharmaceutical Group Co Ltd Tentative 14/08/2018 06/18 Q2

600867 CG Tonghua Dongbao Pharmaceutical Co Ltd Tentative 14/08/2018 06/18 Q2

600886 CG SDIC Power Holdings Co Ltd Tentative 14/08/2018 06/18 Q2

603288 CG Foshan Haitian Flavouring & Food Co Ltd Tentative 14/08/2018 06/18 Q2

000001 CS Ping An Bank Co Ltd Tentative 15/08/2018 06/18 Q2

000423 CS Dong-E-E-Jiao Co Ltd Tentative 15/08/2018 06/18 Q2

000830 CS Luxi Chemical Group Co Ltd Tentative 15/08/2018 06/18 Q2

600050 CG China United Network Communications Ltd Tentative 15/08/2018 06/18 Q2

600352 CG Zhejiang Longsheng Group Co Ltd Tentative 15/08/2018 06/18 Q2

600751 CG HNA Technology Co Ltd Tentative 15/08/2018 06/18 Q2

601233 CG Tongkun Group Co Ltd Tentative 15/08/2018 06/18 Q2

601600 CG Aluminum Corp of China Ltd Confirmed 15/08/2018 06/18 Q2

002450 CS Kangde Xin Composite Material Group Co Ltd Tentative 16/08/2018 06/18 Q2

600256 CG Guanghui Energy Co Ltd Tentative 16/08/2018 06/18 Q2

601877 CG Zhejiang Chint Electrics Co Ltd Tentative 16/08/2018 06/18 Q2

000538 CS Yunnan Baiyao Group Co Ltd Tentative 17/08/2018 06/18 Q2

000559 CS Wanxiang Qianchao Co Ltd Tentative 17/08/2018 06/18 Q2

000786 CS Beijing New Building Materials PLC Tentative 17/08/2018 06/18 Q2

000970 CS Beijing Zhong Ke San Huan High-Tech Co Ltd Tentative 17/08/2018 06/18 Q2

600004 CG Guangzhou Baiyun International Airport Co Ltd Tentative 17/08/2018 06/18 Q2

600410 CG Beijing Teamsun Technology Co Ltd Tentative 17/08/2018 06/18 Q2

600438 CG Tongwei Co Ltd Tentative 17/08/2018 06/18 Q2

600498 CG Fiberhome Telecommunication Technologies Co Ltd Tentative 17/08/2018 06/18 Q2

600535 CG Tasly Pharmaceutical Group Co Ltd Tentative 17/08/2018 06/18 Q2

601933 CG Yonghui Superstores Co Ltd Tentative 17/08/2018 06/18 Q2

002422 CS Sichuan Kelun Pharmaceutical Co Ltd Tentative 19/08/2018 06/18 Q2

600015 CG Huaxia Bank Co Ltd Tentative 19/08/2018 06/18 Q2

600176 CG China Jushi Co Ltd Tentative 19/08/2018 06/18 Q2

*Companies included in CITIC S&P 300 Index only ^ MM/YY QQSource: Bloomberg, CS

Publication of Economic DataDate/Time* Event Period Figures Actual Previous Revision

08/08 - 08/18/2018 Foreign Direct Investment YoY CNY Jul -- -- 0.3% --

08/10 - 08/15/2018 Money Supply M1 YoY Jul 6.6% -- 6.6% --



08/10 - 08/15/2018 Aggregate Financing CNY Jul 1,100b -- 1,180b --

08/10 - 08/15/2018 New Yuan Loans CNY Jul 1,250b -- 1,840b --

08/14/2018 10:00 Surveyed Jobless Rate Jul -- -- 4.8% --

08/14/2018 10:00 Retail Sales YoY Jul 9.1% -- 9.0% --

08/14/2018 10:00 Retail Sales YTD YoY Jul 9.4% -- 9.4% --

08/14/2018 10:00 Industrial Production YoY Jul 6.3% -- 6.0% --

08/14/2018 10:00 Industrial Production YTD YoY Jul 6.6% -- 6.7% --

08/14/2018 10:00 Fixed Assets Ex Rural YTD YoY Jul 6.0% -- 6.0% --

08/15/2018 09:30 New Home Prices MoM Jul -- -- 1.11% --

08/17/2018 FX Net Settlement - Clients CNY Jul -- -- 47.3b --

Source: Bloomberg, CS * MM/DD/YYYY

Major corporate results and economic data


21 13 Aug 2018


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(10)

0

10

20

30

40

50

31/7

/201

7

31/8

/201

7

30/9

/201

7

31/1

0/20

17

30/1

1/20

17

31/1

2/20

17

31/1

/201

8

28/2

/201

8

31/3

/201

8

30/4

/201

8

31/5

/201

8

30/6

/201

8

31/7

/201

8

2018

E

China Export Trade USD YoY

China Import Trade USD YoY

(%)

6.4

6.5

6.6

6.7

6.8

6.9

7.0

30/9

/201

5

31/1

2/20

15

31/3

/201

6

30/6

/201

6

30/9

/201

6

31/1

2/20

16

31/3

/201

7

30/6

/201

7

30/9

/201

7

31/1

2/20

17

31/3

/201

8

30/6

/201

8

2018

E

China GDP Constant Price YoY

China GDP Constant Price CumulativeYoY

(%)

012345678

31/7

/201

7

31/8

/201

7

30/9

/201

7

31/1

0/20

17

30/1

1/20

17

31/1

2/20

17

31/1

/201

8

28/2

/201

8

31/3

/201

8

30/4

/201

8

31/5

/201

8

30/6

/201

8

31/7

/201

8

2018

E

China CPI YoY

China PPI YoY

(%)

50.150.450.751.051.351.651.952.252.5

31/7

/201

7

31/8

/201

7

30/9

/201

7

31/1

0/20

17

30/1

1/20

17

31/1

2/20

17

31/1

/201

8

28/2

/201

8

31/3

/201

8

30/4

/201

8

31/5

/201

8

30/6

/201

8

31/7

/201

8

(Index)

GDP ►China posted GDP growth of 6.7%

YoY for 2Q18, compared to 6.8% YoY

in 1Q18. Macro growth was relatively

steady in the quarter thanks to stronger

consumption. Affected by the US-China

trade war, exports as a growth driver

weakened. The market forecasts full-

year 2018E GDP growth to be 6.6%

YoY.

Import and Export ►In Jul 2018, the value of Chinese exports and imports surged 12.2% and 27.3% YoY, respectively, beating market consensus by a large margin. With China and the US starting to impose higher tariffs on each other’s exports since 6 Jul 2018, foreign trade maintained its rapid pace due to two factors: (i) the low comparison base in the year-ago period and (ii) continued rush to export and import in the face of mounting uncertainties from the Sino-US trade war. The market expects full-year 2018E exports and imports to advance 10.0% and 15.2% YoY, respectively.

◄ Manufacturing PMI

China’s manufactur ing PMI came to

51.2 for Jul 2018, down 0.3 MoM. Given

policy “presetting and fine-tuning”, macro

growth in 2H18E should continue steadily

and the risk of a major recession appears

limited.

◄ CPI and PPI

In Jul 2018, China’s CPI growth picked

up 0.2ppt to a reading of 2.1% YoY, while

PPI slowed 0.1ppt MoM, advancing 4.6%

YoY. The numbers are broadly in line with

consensus. Given moderate CPI growth

YTD, short-term inflationary pressure should

remain under control . Both the r isk of

sustained price hikes and that of meaningful

stagf lation appear limited in 2018E. The

market projects full-year 2018E CPI and PPI

to rise 2.1% and 3.3% YoY, respectively.

Major economic indicators


22 13 Aug 2018


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5

7

9

11

13

15

17

31/7

/201

7

31/8

/201

7

30/9

/201

7

31/1

0/20

17

30/1

1/20

17

31/1

2/20

17

31/1

/201

8

28/2

/201

8

31/3

/201

8

30/4

/201

8

31/5

/201

8

30/6

/201

8

2018

E

China Monthly Money SupplyM1 YoY

China Monthly Money SupplyM2 YoY

(%)

5.75.96.16.36.56.76.97.17.37.57.7

31/7

/201

7

31/8

/201

7

30/9

/201

7

31/1

0/20

17

30/1

1/20

17

31/1

2/20

17

Jan-

Feb

2017

31/3

/201

8

30/4

/201

8

31/5

/201

8

30/6

/201

8

2018

E

China Value Added of Industry YoY Cumulative

China Value Added of Industry YoY

(%)

0

500

1,000

1,500

2,000

2,500

3,000

30/6

/201

7

31/7

/201

7

31/8

/201

7

30/9

/201

7

31/1

0/20

17

30/1

1/20

17

31/1

2/20

17

31/1

/201

8

28/2

/201

8

31/3

/201

8

30/4

/201

8

31/5

/201

8

30/6

/201

8

(Rmb bn)

8.4

8.89.2

9.610.0

10.410.8

11.2

31/7

/201

7

31/8

/201

7

30/9

/201

7

31/1

0/20

17

30/1

1/20

17

31/1

2/20

17

Jan-

Feb

2018

31/3

/201

8

30/4

/201

8

31/5

/201

8

30/6

/201

8

2018

E

(YoY %)

Value Added of Industry ►In Jun 2018, scale industrial enterprises in

China saw their actual value-added grow

by 6.0% YoY, which was 0.8ppt slower

than the previous month. The market

forecasts full-year 2018E industrial value-

added to expand 6.4% YoY.

Monthly Supply M1 & M2 ►For Jun 2018, China posted M2 growth

of 8.0% YoY, an all-time low and short of

market forecast of 8.4% and May’s 8.3%

print; M1 growth came to 6.6% YoY. The

consensus now is that M2 will increase

8.5% YoY in 2018E.

◄ Retail Sales Value

Total retail sales value increased 9.0% YoY

nominally in Jun 2018, up 0.5ppt from

May. Lower tarif f on foreign vehicles

should boost auto sales going forward,

lending suppor t to consumption in

2H18 E . A s such we w ar n aga ins t

e xces s i ve pes s imism on consumer

spending in the second half. The market

project s ful l - year 2018E retai l sa les

growth of approximately 9.8% YoY.

◄ CNY Monthly New Loan

New loans in China tallied Rmb1.84trn

in Jun 2018, relative to an estimated

Rmb1.54trn and the Rmb1.15trn reading

in the previous month.

Major economic indicators

Analyst CertificationThe analysts primarily responsible for the preparation of all or part of the research report contained herein hereby certify that: (i) the views expressed in this research report accurately reflect the personal views of each such analyst about the subject securities and issuers; and (ii) no part of the analyst’s compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed in this research report.

Investment rating system

Rating standard for Investment RecommendationsInvestment ratings are divided into stock rating and sector rating (unless stated otherwise). Rating standard is based on the relative performance with market in 6 to 12 months from the report issuance date, i.e. Performance of company stock price (or sector index) over the 6-to-12-month period from report issuance day is benchmarked against the change in market representative index in the same period. CSI 300 Index will be the benchmark index for A-share market; the NEEQ Component Index (stocks subject to negotiated transfer) or the NEEQ Market Making Index (stocks subject to market making) will be the benchmark index for the NNEQ board; MSCI-China Index will be the benchmark index for Hong Kong market; and NASDAQ Composite Index or Standard & Poor’s 500 Index will be the benchmark indices for U.S. market.

Ratings Description

Stock ratings

BUY Increase relative to market representative index over 20%

OVERWEIGHT Increase relative to market representative index between 5% and 20%

HOLD Increase relative to market representative index between -10% and 5%

SELL Decrease relative to market representative index over 10%

Industry ratings

OUTPERFORM Increase relative to market representative index over10%

NEUTRAL Increase relative to market representative index between -10% and 10%

UNDERPERFORM Decrease relative to market representative index over 10%

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disClaiMer:

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acquisition of CLSA in 2013, our research coverage of overseas companies and global macro

has expanded further and our ability to trade in international markets has strengthened.

Our Investment Advisory Services products have been enriched remarkably in content as

a result, allowing us to serve our renowned clients with high quality products and better

Wealth Management services.

CITIC Securities Brokerage (HK) Limited26/F, CITIC Tower, 1 Tim Mei Avenue, Central, Hong KongTel：2237 9250E-mail：[email protected]

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