RESEARCH NOTES€¦ · China International Travel Services (CITS) Serious impact on the tourism industry in 1Q20 In 2003, because of the SARS virus, China passenger traffic volume

PLEASE REFER TO THE IMPORTANT DISCLOSURES AND DISCLAIMERS AT THE BACK OF THIS REPORT.

Morning Note | China/Hong Kong | February 4, 2020

Markets at a Glance

Indices Closing DoD%

Hang Seng Index 26357.0 0.2

HSCEI 10268.1 0.3

Shanghai COMP 2746.6 (7.7)

Shenzhen COMP 1609.0 (8.4)

Gold 1576.7 (0.8)

BDIY 487.0 (2.2)

Crude Oil, WTI (US$/BBL) 50.1 (2.8)

Crude Oil, BRENT (US$BBL) 54.5 (3.8)

HIBOR, 3-M 2.4 (0.1)

SHIBOR, 3-M 2.9 (0.2)

RMB/USD 7.02 1.1

Source: Bloomberg

Upcoming Key Data Releases

Date Key Data

Feb 5th Caixin China PMI Composite (Jan)

Feb 5th Caixin China PMI Services (Jan)

Feb 7th Exports (Jan)

Feb 7th Imports (Jan)

Feb 7th Foreign Reserves (Jan)

Source: Bloomberg

Research Contact

Wong Chi Man, Head of Research

T: (852) 3698 6317

E: [email protected]

CGIS Yum Cha Daily

RESEARCH NOTES

CONSUMER DISCRETIONARY – We expect the novel coronavirus to have a serious impact on

the tourism and restaurant sectors in 1Q20; the impact in 2Q20 will depend on the effectiveness of the control measures. Based on the SARS experience, we expect the tourism sector to recover in Jun/Jul 2020 and the restaurant sector to recover in Apr/May. Because of fewer gatherings, dining and business activities, the coronavirus should have a negative impact on baijiu, beer and condiment consumption in the short term. But we expect a limited impact on dairy demand, given people’s health concerns. We recommend investors look at Mengniu, Yili and Tingyi. (Analyst:

Lei Yang)

TMT SECTOR UPDATE – Concerns about the outbreak of the novel coronavirus (nCoV)

originating in Wuhan led to a recent sell-off in the China telecommunications sector. We may see delays in the network roll-out in the short term. However, FAI may pick up later in 2020, so economic growth and the full-year performance of equipment manufacturers is expected to remain decent. Recent industry news flow is more on the positive side. We still prefer wireless equipment and infra names, including ZTE [0763.HK] and China Tower [0788.HK]. We remain cautious on optical communications and reiterate our reduced rating for both YOFC [6869.HK] and O-Net [0877.HK]. Operators may be treated as defensive plays. (Analyst: Mark Po)

SOUTHBOUND TRADING - Monthly southbound trading net fund inflows dropped significantly

from HK$41.35bn in December 2019 to HK$27.87bn in January 2020, partly because of the CNY holiday. Average daily turnover (ADT) of southbound trading (buy and sell) was HK$16.4bn in January 2020, up from HK$12.2bn in December 2019. Xiaomi (1810.HK) ranked at the top in net fund inflows in January, with a net fund inflow of HK$5.20bn in the past month, followed by Tencent (0700.HK), Meituan (3690.HK) and SMIC (0981.HK). Financial stocks were major selling targets of southbound investors in January, with Ping An Insurance (2318.HK) leading the net fund outflows, followed by China Merchants Bank (3968.HK). (Analyst: Wong Chi-man)

mailto:[email protected]

Sector Note Consumer Discretionary│China│February 3, 2020

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Consumer Discretionary - Overall Novel coronavirus expected to impact the tourism and restaurant sectors ■ We expect the novel coronavirus to have a serious impact on the tourism and

restaurant sectors in 1Q20; the impact in 2Q20 will depend on the effectiveness of the control measures.

■ Based on the SARS experience, we expect the tourism sector to recover in Jun/Jul 2020 and the restaurant sector to recover in Apr/May.

■ Because of fewer gatherings, dining and business activities, the coronavirus should have a negative impact on baijiu, beer and condiment consumption in the short term.

■ But we expect a limited impact on dairy demand, given people’s health concerns. ■ We recommend investors look at Mengniu, Yili and Tingyi.

Serious impact on the tourism industry in 1Q20 In 2003, because of the SARS virus, China passenger traffic volume dropped by 6.9%, 41.2% and 22.2% yoy in Mar, Apr and May 2003, but recovered to positive 3.4% yoy in Sep. While domestic travel volume fell 1% yoy in 2003 (after rising 12% yoy in 2002), outbound travel volume grew 22% yoy in 2003 (after growing 37% yoy in 2002). Both volumes rebounded strongly to 27% and 43% yoy in 2004. Since travel controls this time are more serious than during the SARS period, we expect the coronavirus to negatively impact tourism companies’ revenue by 30–50% yoy in 1Q20. The impact in 2Q20 will depend on the effectiveness of the control measures. Q1 normally accounts for 25–28% of the full-year net profit of Trip.com, Songcheng and China International Travel Services. So we now expect the full-year earnings impact to be 10–20%. We expect the tourism market to start to rebound in Jun/Jul 2020.

Restaurant industry expected to recover in Apr/May 2020 The coronavirus should also have severe impact on the restaurant sector in 1Q20. Catering sales growth fell to 2.1%, -15.5% and 3.4% yoy in Apr, May and June 2003 (from 15.3% in Mar and 16.5% in Feb 2003). But it strongly rebounded to 12.1% in Jul. Ajisen said currently only half of their restaurants are open, and when the remaining 50% of restaurants start to operate depends on announcements by local governments. We expect the catering industry to start to recover in Apr/May 2020, and believe the catering industry will experience a consolidation period in FY20F. Those players with strong cash balance on hand will have an advantage to gain market share.

Some negative impact on baijiu, beer and condiment consumption We may not see a large negative impact on baijiu companies’ top-line growth in 1Q20, since most of them completed their sales quotas before CNY. But digesting channel inventory and driving up sales in 2Q20 will be a problem. We expect the premium baijiu players to launch more marketing campaigns to help distributors digest channel inventory. Q1 is the low season for beer consumption, so we need to look at coronavirus development in 2Q20, which is the high season for beer consumption. In the SARS period in 2003, baijiu output dropped by 4.2%, 4.3% and 9.5% in Mar, Apr and May 2003, but rebounded 10% yoy in Jun. Beer output fell 9.7%, 1.3% and 1.5% yoy in the same period, but rebounded 6% in Jun.

Limited impact on dairy and instant noodle demand Dairy output growth was not significantly impacted by SARS in 2003, because of people’s health concerns. We believe the coronavirus may have impacted gift pack sales of dairy products during the CNY period, but still expect dairy demand to maintain solid growth in FY20F. We expect a positive impact for instant noodle players, since many consumers will stock instant foods at home during the travel control period. Tingyi said their Wuhan plant was still working during the CNY period to produce instant noodles.

Figure 1: Total passenger weekly turnover (YoY %) and total passenger traffic growth (YoY %) (2003–2004)

SOURCES: CGIS RESEARCH,NATIONAL BUREAU OF STATISTICS,WIND

China

Neutral

Highlighted companies

Songcheng Performance ADD, TP Rmb40, Rmb25.7 close

Songcheng’s theme parks have all been closed since Jan 24. When they reopen will depend on government announcements. We expect the coronavirus to have a serious impact on Songcheng’s 1Q20 performance, which accounts for 20–25% of its full-year earnings.

China International Travel Services (CITS) ADD, TP Rmb108, Rmb73.8 close

We expect CITS’s duty free business to be negatively impacted by the coronavirus in 1Q20, given the significantly reduced outbound travel volume. But we expect the tourism market to recover in Jun/Jul.

Kweichow Moutai ADD, TP Rmb1,285, Rmb1003.9 close

We see limited impact on 1Q20 sales for Moutai, as family and business group purchases for CNY were mostly completed before Jan. Because of the cancelation of group dinners and travel controls, these purchases will take a longer time to consume, perhaps affecting 2Q20 sales. However with Moutai’s strong resilience, we expect sales to recover in 2H20.

Summary valuation metrics

Insert

Analysts

Lei Yang

T (86) 21 6162 9676 E [email protected]

Sun Feifei T (86) 21 6162 5750 E [email protected]

Songcheng Dec-19F Dec-20F Dec-21F

FD Core P/E (x) 30.14 25.33 20.73

P/BV (x) 4.05 3.56 3.10

ROE 14.3% 15.0% 16.0%

CITS Dec-19F Dec-20F Dec-21F

FD Core P/E (x) 38.79 30.29 24.78

P/BV (x) 8.05 6.82 5.71

ROE 22.8% 24.4% 25.1%

Kweichow Moutai Dec-19F Dec-20F Dec-21F

FD Core P/E (x) 32.43 28.15 24.41

P/BV (x) 9.78 8.21 6.93

ROE 32.9% 31.7% 30.8%

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Total passenger weekly turnover (YoY %) Total passenger traffic (YoY %)

2

Consumer Discretionary│China

Consumer Discretionary - Overall│February 3, 2020

Coronavirus expected to impact tourism and restaurant sectors

Figure 2: Total retail sales growth of social consumer goods including the hotel and catering sectors

SOURCES: CGIS RESEARCH, NATIONAL BUREAU OF STATISTICS,WIND

Figure 3: No. of domestic tourists (’00,000) Figure 4: No. of domestic residents outbound (’00,000)

SOURCES: CGIS RESEARCH, NATIONAL BUREAU OF STATISTICS,WIND SOURCES: CGIS RESEARCH, NATIONAL BUREAU OF STATISTICS,WIND

Figure 5: Production output growth (YoY %) for dairy product, hard liquor and beer in 2003

SOURCES: CGIS RESEARCH, COMPANY DATA, BLOOMBERG

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of which, hotel and catering retail sales growth (YoY %)

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3

Consumer Discretionary│China

Consumer Discretionary - Overall│February 3, 2020

Negative impact on the baijiu, beer and condiment sectors in the short term, but limited impact on the dairy sector We may not see a large negative impact on baijiu companies’ top-line growth in 1Q20, since most of them completed their sales quota before CNY. But digesting channel inventory and driving up sales in 2Q20 will be a problem. We expect the premium baijiu players to launch more marketing campaigns to help distributors digest channel inventory. Q1 is the low season for beer consumption, so we need to look at coronavirus development in 2Q20, which is the high season for beer consumption. In the SARS period in 2003, baijiu output dropped by 4.2%, 4.3% and 9.5% in Mar, Apr and May 2003, but rebounded 10% yoy in Jun. Beer output fell 9.7%, 1.3% and 1.5% yoy in the same period, but rebounded 6% in Jun.

We reviewed the financial data of Moutai, Wuliangye, Tsingtao and Yili in the 2003 SARS period. Moutai’s 2Q03 earnings growth slowed down 10% yoy, but recovered strongly 44% in 3Q03. Wuliangye’s earnings growth fell -9% in 2Q03 due to the SARS impact, but earnings recovered 11% in 3Q03 and 40% in 4Q03. Tsingtao’s net profit dropped 16% yoy in 2Q03, but recovered strongly 29% in 3Q03 and 69% yoy in 4Q03. We expect the coronavirus to negatively impact baijiu and beer sales in 1Q20 and 2Q20, but we expect to see demand recovery in Apr/May.

Yili’s earnings growth was not strongly impacted by the SARS virus in 2003. Based on the output data from the China Statistical Bureau, dairy output growth was not significantly impacted by SARS in 2003, because of people’s health concerns. We believe the coronavirus may have impacted gift pack sales of dairy products during the CNY period, but still expect dairy demand to maintain solid growth in FY20F.

Figure 6: Moutai, Wuliangye, Tsingtao and Yili’s quarterly financial data in 2003 and 2004


Moutai Wuliangye Tsingtao Yili

YoY % Revenue Net profit YoY % Revenue Net profit YoY % Revenue Net profit YoY % Revenue Net profit

Q103 2% 5% Q103 1% 16% Q103 12% 7% Q103 43% 82%

Q203 16% 10% Q203 -4% -9% Q203 7% -16% Q203 48% 46%

Q303 33% 44% Q303 19% 11% Q303 9% 29% Q303 69% 18%

Q403 80% 244% Q403 38% 40% Q403 4% 69% Q403 67% 21%

Q104 16% 20% Q104 8% 33% Q104 11% 7% Q104 51% 15%

Q204 67% 151% Q204 -13% 52% Q204 15% 49% Q204 47% 53%

Q304 39% 63% Q304 -8% -11% Q304 14% -4% Q304 30% 8%

Q404 11% 31% Q404 2% -4% Q404 21% 11% Q404 30% -10%

YoY %

FY03 31% 56% FY03 11% 15% FY03 8% 10% FY03 57% 41%

FY04 25% 40% FY04 -1% 18% FY04 15% 10% FY04 39% 20%

Sector Note Technology│China│February 4, 2020


Telco - Others Surviving through adversity ■ Concerns about the outbreak of the novel coronavirus (nCoV) originating in Wuhan

led to a recent sell-off in the China telecommunications sector. ■ We may see delays in the network roll-out in the short term. ■ However, FAI may pick up later in 2020, so economic growth and the full-year

performance of equipment manufacturers is expected to remain decent. ■ Recent industry news flow is more on the positive side. ■ We still prefer wireless equipment and infra names, including ZTE [0763.HK] and

China Tower [0788.HK]. We remain cautious on optical communications and reiterate our reduced rating for both YOFC [6869.HK] and O-Net [0877.HK]. Operators may be treated as defensive plays.

Selling pressure due to concerns about distortion in supply chain Concerns about the outbreak of the nCoV originating in Wuhan has led a sell-off in the telecommunications sector, including the infrastructure, equipment and operator segments. Wuhan is a key manufacturing base for the optical communications sector; it is the headquarters of leading players, such as YOFC [6869.HK], Accelink and FiberHome. The timing of the removal of transportation controls is uncertain, and there are concerns about a significant disruption in product shipments in the optical communications industry, which will result in a delay in the 5G network roll-out in China. Therefore, we may see a delay in the network roll-out since a) dealing with the outbreak of the nCoV is the top priority of the Chinese government, and telecom operators will follow; b) there has been a slow start in labour-intensive construction works to avoid the spread of the nCoV; and c) operators want to avoid a near-term shortage of components. However, as we discussed earlier, the telecom operators released prudent CAPEX for 2020F, which shouldn’t increase significantly yoy. They will wait until the finalization of SA standards (which most likely will be delayed by the outbreak of the nCoV) and are in the planning stage in 1H20. We originally expected the network roll-out to be concentrated in 2H20 and that 2H20 would be the peak season. The impact of the distortion to the supply chain is expected to be manageable as there is time to make adjustments.

Policy to support growth

Economic growth in 1H20 is likely to be dragged down by the outbreak of the nCoV, so the Chinese government relaxed monetary policy, with a 10bp cut in OMO rates and a Rmb1.2tr liquidity injection to hedge against the impact of the virus. We believe that FAI, especially in new infrastructure-related CAPEX (5G), may finally need to pick up in the later part of 2020 to boost economic activity. We expect the full-year performance of the sector to remain decent. While it is too early to fully assess the severity of the nCoV outbreak, we maintain a constructive view on telecom CAPEX plays. Despite their relative share price outperformance, we still prefer wireless equipment names such as ZTE [0763.HK]. Infrastructure names such as China Tower [0788.HK] and CCS [0552.HK] look interesting after the recent correction. We hold a cautious view on optical communications names like YOFC [6869.HK] and O-Net [0877.HK]. The measures to contain the spread of nCoV, such as travel bans and prolonged holidays, have make applications such as internal communication and collaboration platforms more popular. The development of case and application scenarios, especially for the 5G network, such as online video conferencing and remote diagnosing, will drive demand for infrastructure services, which is positive for telecom services providers, such as China Mobile [0941.HK], China Telecom [0728.HK] and China Unicom [0762.HK], software providers, such as AsiaInfo [1675.HK], and cloud services providers. Telecom operators, especially China Mobile, may be treated as defensive plays if investors hold a cautious view on the impact of the virus.

Industry news flow on the positive side

Despite the potential risks related to the outbreak of nCoV, industry news is on the positive side. Huawei resumed business operations yesterday, and according to Digitimes, companies in optical communications (LandMark and Truelight) and IC distribution (WPTG and WT Micro) mentioned that demand for 5G infrastructure (base stations) in China remains strong. News flow suggests that optical communications names were asked by Huawei to step up shipments for China 5G base stations. Moreover, the order books of the leading Japanese component suppliers reported a 2% yoy increase for the three months ended Dec 2019 (first yoy increase in five quarters), indicating strong demand for 5G (both base stations and terminals). Anritsu management raised guidance for FY20, given strong 5G demand. This is one reason we remain positive on Pentamaster [1665.HK], as it should benefit from 5G-related testing equipment demand. Finally, Huawei is allowed to participate the 5G roll-out in the UK and EU (though in the non-core network), which is also positive for the Huawei supply chain.

The outbreak of novel coronavirus (nCoV) has become more severe in China, and we think the impact on the telecom sector is mixed. The production of telecom equipment and component manufacturers may be disrupted, while the consumption of mobile and

China

Overweight (no change)

Highlighted companies

China Tower ADD, TP HK$2.22, HK$1.66 close

Negatives seem priced in.

YOFC REDUCE, TP HK$10.12, HK$13.42 close

The market may be disappointed by the size and pricing of tenders in the coming months.

ZTE ADD, TP HK$30.61, HK$25.85 close

Wireless equipment is a preferred segment.

Summary valuation metrics

Insert

Analysts

Mark Po

T (852) 3698 6318 E [email protected]

Wong Chi Man T (852) 3698 6317 E [email protected]

P/E (x) Dec-19F Dec-20F Dec-21F

China Tower 50.01 37.16 28.72

YOFC 10.45 10.33 9.04

ZTE 19.97 18.81 15.52

P/BV (x) Dec-19F Dec-20F Dec-21F

China Tower 1.45 1.42 1.38

YOFC 1.08 1.08 0.99

ZTE 3.52 3.14 2.75

Dividend Yield Dec-19F Dec-20F Dec-21F

China Tower 1.00% 1.35% 1.74%

YOFC 2.39% 2.42% 2.77%

ZTE 1.88% 1.88% 1.88%

2

Technology│China

Telco - Others│February 4, 2020

Figure 1: Relative share price performance


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YOFC ZTE China Tower Comba O-Net CCS China Mobile China Telecom China Unicom Hang Seng

Comoba

ZTE

China Tower

O-Net

HSI

YOFC

CHina UnicomCCS

CHina Telecom

CHina Mobile

Comba

Strategy Note Hong Kong│February 4, 2020


Hong Kong Strategy Southbound Stock Connect: Technology/internet stocks dominated net fund inflows in January ■ Monthly southbound trading net fund inflows dropped significantly from HK$41.35bn

in December 2019 to HK$27.87bn in January 2020, partly because of the CNY holiday.

■ Average daily turnover (ADT) of southbound trading (buy and sell) was HK$16.4bn in January 2020, up from HK$12.2bn in December 2019.

■ Xiaomi (1810.HK) ranked at the top in net fund inflows in January, with a net fund inflow of HK$5.20bn in the past month, followed by Tencent (0700.HK), Meituan (3690.HK) and SMIC (0981.HK).

■ Financial stocks were major selling targets of southbound investors in January, with Ping An Insurance (2318.HK) leading the net fund outflows, followed by China Merchants Bank (3968.HK).

Net fund inflows dropped by 33% mom Southbound net inflows fell 32.6% mom, from HK$41.35bn in December 2019 to HK$27.9bn in January 2020 (Figure 1). The decrease in net fund inflows was mainly because of the CNY holiday and growing concerns about the novel coronavirus outbreak after mid-January.

Jump in ADT in January The ADT of southbound trading was HK$16.4bn (buy and sell) in January, a rise of 34.1% mom. The ADT of the overall Hong Kong market also rose from HK$75.6bn in December 2019 to HK$103.6bn in January 2020, up 37% mom.

Xiaomi led the net fund inflows in January The share price of Xiaomi reached its peak in mid-January, up 29% compared to the end of December. The net fund inflow in January 2020 for Xiaomi was HK$5.2bn, up from HK$3.78bn in December 2019. Xiaomi has stayed in the top 10 monthly net fund inflow list in the past few months. But January was the first month the stock was listed at the top of the net fund inflows. Of the top five monthly net fund inflow stocks, four are related to technology or the internet. Tencent ranked second on the net fund inflow list in January, increasing from HK$4bn in December to HK$5.06bn in January. The other three stocks in the top five list were Meituan, SMIC and Bank of China (3988.HK).

Financial stocks led the fund outflow list In January, financial stocks were heavily sold by southbound investors. Ping An Insurance, the top monthly net fund outflow stock in January, recorded a net fund outflow of HK$2.05bn in January 2020, up from HK$1.39bn in December 2019. China Merchant Bank also recorded a strong monthly net fund outflow of HK$1.06bn in January. CICC (3908.HK) posted a net fund outflow of HK$447m in January, after recording a net fund outflow of HK$167m in December.

Southbound investors aggressively added to positions in SMIC and Weimob in January At end-January, southbound investors owned a 24.04% stake in SMIC, a jump from 19.28% at end-December (Figure 7). The share price rose about 20% in January. For Weimob (2013.HK), the stake owned by southbound investors surged by 4.25ppt within a month, reaching 6.28% at end-January. The share price was up 22.7% in January.

Hong Kong

Analysts

Wong Chi Man

T (852) 3698 6317 E [email protected]

Mark Lau T (852) 3698 6393 E [email protected]

2

Hong Kong

Strategy Note│February 4, 2020

Figure 1: Monthly net buy/sell of southbound investors (HK$bn)


Figure 2: Top 20 net inflows in Stock Connect positions

SOURCES: CGIS RESEARCH, HKEX, BLOOMBERG

22.96

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Ticker Company nameShare price

(HK$)

Market cap

(HK$m)

Stake owned

by

southbound

investors

2019F P/E

(x)

2020F P/E

(x)P/BV (x)

Dividend

yield (%)

2 weeks ago 1 month ago 2 months ago

1810 HK Equity Xiaomi Corp 12.02 288,556 4.24% 1,749.01 5,194.28 8,971.14 23.42 19.79 3.27 0.00

3690 HK Equity Meituan Dianping 99.5 578,471 3.10% 1,605.28 3,532.24 5,573.16 314.54 75.22 5.97 0.00

981 HK Equity Semiconductor Manufacturing International Corp 14.72 74,625 24.04% 1,505.87 3,436.95 3,917.87 54.15 55.74 1.57 0.00

3988 HK Equity Bank of China Ltd 3.04 1,053,812 1.95% 1,400.65 1,861.98 3,482.78 4.45 4.24 0.43 6.91

939 HK Equity China Construction Bank Corp 6.01 1,513,244 6.39% 882.73 1,784.28 10,609.27 5.13 4.85 0.66 5.89

941 HK Equity China Mobile Ltd 63.8 1,306,336 0.38% 670.99 1,399.85 2,942.26 10.80 10.87 1.09 4.89

2382 HK Equity Sunny Optical Technology Group Co Ltd 128.4 140,836 8.50% 479.36 53.82 (402.53) 36.53 26.14 12.74 0.71

2269 HK Equity Wuxi Biologics Cayman Inc 99.65 129,285 7.44% 458.22 884.18 943.30 111.36 76.42 13.06 0.00

763 HK Equity ZTE Corp 25.85 157,454 6.09% 455.47 896.25 1,003.64 20.23 18.37 4.00 1.10

2013 HK Equity Weimob Inc 4.1 9,259 6.28% 289.10 401.77 388.89 44.66 50.09 n.a. n.a.

700 HK Equity Tencent Holdings Ltd 380 3,629,994 2.03% 285.13 5,064.67 9,108.25 34.91 28.53 8.12 0.29

1093 HK Equity CSPC Pharmaceutical Group Ltd 17.94 111,880 4.50% 282.63 49.09 (419.10) 25.46 21.04 6.14 1.29

6862 HK Equity Haidilao International Holding Ltd 30.25 160,325 1.82% 279.39 306.63 450.39 56.74 38.79 15.77 0.37

1951 HK Equity Jinxin Fertility Group Ltd 10.68 25,999 4.54% 262.80 497.00 594.74 47.80 36.71 n.a. 0.87

3323 HK Equity China National Building Material Co Ltd 7.67 64,695 7.86% 258.83 772.03 939.44 5.32 5.16 0.76 3.68

2313 HK Equity Shenzhou International Group Holdings Ltd 104.2 156,636 3.23% 248.69 565.66 880.73 27.22 22.81 6.01 1.93

1030 HK Equity Seazen Group Ltd 7.78 48,314 5.43% 225.29 426.72 496.69 5.75 4.32 2.21 5.64

1347 HK Equity Hua Hong Semiconductor Ltd 19.38 24,977 4.10% 217.82 247.50 229.80 17.57 16.97 1.47 1.56

520 HK Equity Xiabuxiabu Catering Management China Holdings Co Ltd 7.82 8,451 4.63% 203.34 323.76 272.22 17.54 13.89 3.30 2.35

772 HK Equity China Literature Ltd 32.7 33,103 4.49% 197.35 550.63 591.97 29.65 24.11 1.43 0.00

Net buy since (HK$m)

3

Hong Kong


Figure 3: Top 20 net selling in Stock Connect positions


Figure 4: Top 20 net additions in Stock Connect positions



(HK$)

Market cap

(HK$m)

Stake owned

by

southbound

investors

2019F P/E

(x)

2020F P/E

(x)P/BV (x)

Dividend

yield (%)

2 weeks ago 1 month ago 2 months ago

2318 HK Equity Ping An Insurance Group Co of China Ltd 87.6 1,583,490 0.73% (807.71) (2,024.85) (3,406.95) 9.14 9.12 2.26 2.84

2018 HK Equity AAC Technologies Holdings Inc 57.05 68,945 5.68% (714.14) (542.03) 122.90 26.66 19.67 3.41 1.81

1177 HK Equity Sino Biopharmaceutical Ltd 10.72 134,947 7.37% (380.37) (461.13) (346.00) 37.28 31.99 3.99 0.67

2238 HK Equity Guangzhou Automobile Group Co Ltd 7.97 102,868 11.23% (340.47) (254.81) 719.31 9.27 7.41 0.94 4.22

958 HK Equity Huaneng Renewables Corp Ltd 3.15 33,285 0.85% (328.28) (516.80) (601.92) 7.80 7.03 1.00 2.00

175 HK Equity Geely Automobile Holdings Ltd 12.6 115,968 8.91% (303.89) (7.42) 93.66 11.82 9.19 2.23 1.97

3968 HK Equity China Merchants Bank Co Ltd 38.15 974,412 0.98% (274.06) (1,059.09) (1,197.48) 9.60 8.47 1.55 3.13

2628 HK Equity China Life Insurance Co Ltd 18.7 811,452 0.76% (272.13) 353.24 966.29 8.23 10.23 1.30 4.16

425 HK Equity Minth Group Ltd 23.95 27,542 7.40% (260.89) (234.94) (284.70) 13.56 11.55 1.85 2.93

27 HK Equity Galaxy Entertainment Group Ltd 53.1 230,126 0.86% (240.66) 275.30 539.67 17.34 16.72 3.36 1.76

1918 HK Equity Sunac China Holdings Ltd 38.8 180,092 19.78% (235.68) 1,440.40 2,306.29 5.97 4.75 2.46 3.60

1398 HK Equity Industrial & Commercial Bank of China Ltd 5.26 2,072,810 5.66% (212.02) 378.04 3,586.67 5.51 5.22 0.70 5.47

1288 HK Equity Agricultural Bank of China Ltd 3.02 1,282,782 1.49% (209.68) 443.58 1,763.76 4.55 4.31 0.56 6.59

1558 HK Equity YiChang HEC ChangJiang Pharmaceutical Co Ltd 44.65 20,040 12.76% (198.41) (326.60) (219.81) 11.13 9.60 4.49 3.57

883 HK Equity CNOOC Ltd 11.68 521,482 0.27% (188.30) 118.71 172.47 8.16 7.85 1.09 5.63

3908 HK Equity China International Capital Corp Ltd 13.7 59,851 7.26% (185.66) (446.50) (606.39) 12.20 10.37 1.22 1.71

880 HK Equity SJM Holdings Ltd 8.88 50,300 2.98% (169.34) (175.68) (159.91) 16.88 19.69 1.80 3.36

3333 HK Equity China Evergrande Group 17.42 230,400 1.41% (164.20) (214.77) (324.00) 4.77 4.43 1.41 11.27

241 HK Equity Alibaba Health Information Technology Ltd 10.48 126,054 3.31% (153.07) (470.20) (603.44) 947.50 315.83 22.69 0.00

6030 HK Equity CITIC Securities Co Ltd 15.12 268,520 2.34% (135.77) 269.84 557.40 12.72 11.57 1.06 3.39

Net buy since (HK$m)


(HK$)

Market cap

(HK$m)

Stake owned

by

southbound

investors

2019F P/E

(x)

2020F P/E

(x)P/BV (x)

Dividend

yield (%)

2 weeks

ago

1 month

ago

2 months

ago2013 HK Equity Weimob Inc 4.1 9,259 6.28% 2.91% 4.25% 4.58% 44.66 50.09 n.a. n.a.

1131 HK Equity Agritrade Resources Ltd 0.187 1,192 10.63% 2.35% 2.44% 2.39% n.a. n.a. 0.27 n.a.

520 HK Equity Xiabuxiabu Catering Management China Holdings Co Ltd 7.82 8,451 4.63% 2.12% 3.00% 2.67% 17.54 13.89 3.30 2.35

981 HK Equity Semiconductor Manufacturing International Corp 14.72 74,625 24.04% 1.96% 4.74% 6.06% 54.15 55.74 1.57 0.00

1890 HK Equity China Kepei Education Group Ltd 4.25 8,503 2.67% 1.24% 1.52% 1.38% 17.55 13.58 n.a. 2.19

1269 HK Equity China First Capital Group Ltd 0.246 1,237 21.41% 0.98% 4.08% 16.39% n.a. n.a. 0.42 n.a.

1951 HK Equity Jinxin Fertility Group Ltd 10.68 25,999 4.54% 0.97% 1.81% 2.14% 47.80 36.71 n.a. 0.87

698 HK Equity Tongda Group Holdings Ltd 0.85 5,508 7.90% 0.93% 1.85% 5.64% 8.33 6.59 0.86 3.18

496 HK Equity Kasen International Holdings Ltd 3.36 5,019 5.38% 0.92% 1.25% 1.65% n.a. n.a. 1.47 n.a.

1458 HK Equity Zhou Hei Ya International Holdings Co Ltd 3.66 8,722 12.53% 0.82% 0.60% 0.66% 18.28 14.39 1.90 2.36

1347 HK Equity Hua Hong Semiconductor Ltd 19.38 24,977 4.10% 0.82% 0.95% 0.95% 17.57 16.97 1.47 1.56

2001 HK Equity China New Higher Education Group Ltd 2.59 3,991 13.27% 0.78% 1.13% 1.72% 9.29 7.16 1.53 3.07

1806 HK Equity Huifu Payment Ltd 2.46 3,177 2.96% 0.69% 1.21% 1.22% 9.55 7.34 1.32 n.a.

570 HK Equity China Traditional Chinese Medicine Holdings Co Ltd 3.67 18,481 11.45% 0.67% 0.57% 0.62% 9.70 8.03 1.03 3.04

772 HK Equity China Literature Ltd 32.7 33,103 4.49% 0.58% 1.50% 1.72% 29.65 24.11 1.43 0.00

354 HK Equity Chinasoft International Ltd 4.66 11,856 14.71% 0.54% 1.55% 3.58% 14.73 12.43 1.68 0.47

1521 HK Equity Frontage Holdings Corp 4.07 8,171 5.49% 0.53% 0.65% 1.07% 47.64 30.83 18.08 n.a.

535 HK Equity Gemdale Properties & Investment Corp Ltd 1.08 17,170 12.17% 0.47% 0.55% 0.52% 4.54 3.55 1.23 6.14

1772 HK Equity Ganfeng Lithium Co Ltd 21.15 51,394 5.19% 0.47% 0.87% 2.16% 34.77 23.32 3.11 0.57

1797 HK Equity Koolearn Technology Holding Ltd 27.2 25,527 13.65% 0.46% 1.74% 3.67% n.a. n.a. 8.85 0.00

Net buy since (% of market cap)

4

Hong Kong


Figure 5: Top 20 net reductions in Stock Connect positions


Figure 6: Top 20 net additions in Stock Connect positions (in terms of % increase)



(HK$)

Market cap

(HK$m)

Stake owned

by

southbound

investors

2019F P/E

(x)

2020F P/E

(x)P/BV (x)

Dividend

yield (%)

2 weeks

ago

1 month

ago

2 months

ago2018 HK Equity AAC Technologies Holdings Inc 57.05 68,945 5.68% -0.98% -0.71% 0.16% 26.66 19.67 3.41 1.81

958 HK Equity Huaneng Renewables Corp Ltd 3.15 33,285 0.85% -0.98% -1.57% -1.86% 7.80 7.03 1.00 2.00

1558 HK Equity YiChang HEC ChangJiang Pharmaceutical Co Ltd 44.65 20,040 12.76% -0.94% -1.66% -1.17% 11.13 9.60 4.49 3.57

425 HK Equity Minth Group Ltd 23.95 27,542 7.40% -0.90% -0.74% -0.89% 13.56 11.55 1.85 2.93

494 HK Equity Li & Fung Ltd 0.68 5,806 0.49% -0.87% -1.47% -0.87% 9.73 8.76 0.63 3.43

729 HK Equity FDG Electric Vehicles Ltd 0.183 535 5.48% -0.49% -0.50% -0.51% n.a. n.a. n.a. n.a.

3900 HK Equity Greentown China Holdings Ltd 9.32 20,233 17.10% -0.44% -0.41% -0.34% 7.30 7.12 0.66 3.16

2238 HK Equity Guangzhou Automobile Group Co Ltd 7.97 102,871 11.23% -0.39% -0.27% 0.76% 9.27 7.41 0.94 4.22

2380 HK Equity China Power International Development Ltd 1.49 14,612 7.99% -0.37% -0.76% -0.92% 6.77 5.66 0.44 7.94

880 HK Equity SJM Holdings Ltd 8.88 50,300 2.98% -0.33% -0.32% -0.31% 16.88 19.69 1.80 3.36

719 HK Equity Shandong Xinhua Pharmaceutical Co Ltd 4.42 5,281 12.25% -0.31% -0.35% -0.25% n.a. n.a. 0.86 n.a.

553 HK Equity Nanjing Panda Electronics Co Ltd 4.99 7,561 3.63% -0.30% -1.00% -1.36% n.a. n.a. 1.20 n.a.

2357 HK Equity AviChina Industry & Technology Co Ltd 3.18 19,859 5.65% -0.30% -0.58% -0.04% 11.83 9.91 1.04 1.29

3908 HK Equity China International Capital Corp Ltd 13.7 59,851 7.26% -0.29% -0.67% -0.94% 12.20 10.37 1.22 1.71

1573 HK Equity Southern Energy Holdings Group Ltd 0.72 517 12.89% -0.28% 0.84% 2.09% n.a. n.a. 0.36 n.a.

1177 HK Equity Sino Biopharmaceutical Ltd 10.72 134,947 7.37% -0.27% -0.33% -0.25% 37.28 31.99 3.99 0.67

906 HK Equity CPMC Holdings Ltd 2.83 3,285 3.43% -0.25% -0.38% -0.54% 10.23 9.48 0.60 4.69

175 HK Equity Geely Automobile Holdings Ltd 12.6 115,968 8.91% -0.25% -0.01% 0.07% 11.82 9.19 2.23 1.97

1610 HK Equity COFCO Meat Holdings Ltd 1.65 6,438 5.05% -0.23% 0.30% 0.75% 11.65 3.64 n.a. 0.00

976 HK Equity Chiho Environmental Group Ltd 0.485 778 14.60% -0.22% -0.25% -0.38% n.a. n.a. 0.15 n.a.

Net buy since (% of market cap)


(HK$)

Market cap

(HK$m)

Stake owned

by

southbound

investors

2019F P/E

(x)

2020F P/E

(x)P/BV (x)

Dividend

yield (%)

2 weeks ago1 month

ago2 months ago

1131 HK Equity Agritrade Resources Ltd 0.187 1,192 10.63% 754.80% 1129.79% 904.83% n.a. n.a. 0.27 n.a.

1686 HK Equity SUNeVision Holdings Ltd 5.11 11,899 0.04% 94.38% 337.99% 40.28% 26.89 25.81 2.85 2.33

1890 HK Equity China Kepei Education Group Ltd 4.25 8,503 2.67% 86.70% 133.72% 106.69% 17.55 13.58 n.a. 2.19

2013 HK Equity Weimob Inc 4.1 9,259 6.28% 86.27% 209.05% 270.98% 44.66 50.09 n.a. n.a.

520 HK Equity Xiabuxiabu Catering Management China Holdings Co Ltd 7.82 8,451 4.63% 85.76% 187.81% 139.37% 17.54 13.89 3.30 2.35

1589 HK Equity China Logistics Property Holdings Co Ltd 3 9,703 0.01% 77.97% 84.21% 118.75% n.a. n.a. 0.82 n.a.

2343 HK Equity Pacific Basin Shipping Ltd 1.37 6,458 0.09% 70.84% -2.29% -9.67% 19.60 9.28 0.66 2.27

780 HK Equity Tongcheng-Elong Holdings Ltd 10.64 22,629 0.83% 60.76% 57.25% 72.12% 13.16 11.03 1.64 0.00

1316 HK Equity Nexteer Automotive Group Ltd 5.92 14,845 0.96% 57.49% 87.27% 118.80% 7.19 6.51 1.11 3.28

3759 HK Equity Pharmaron Beijing Co Ltd 50 48,042 0.37% 51.02% 509.01% n.a. 71.41 53.00 11.55 0.24

1052 HK Equity Yuexiu Transport Infrastructure Ltd 6.73 11,260 1.49% 35.09% 35.28% 39.75% 8.49 8.82 0.98 6.33

3669 HK Equity China Yongda Automobiles Services Holdings Ltd 8.16 15,015 1.16% 33.30% 3.57% -6.21% 8.87 7.18 1.49 3.69

1806 HK Equity Huifu Payment Ltd 2.46 3,177 2.96% 31.46% 72.54% 73.76% 9.55 7.34 1.32 n.a.

551 HK Equity Yue Yuen Industrial Holdings Ltd 21.35 34,420 0.14% 29.31% 75.53% 79.08% 14.03 12.06 n.a. 6.88

1951 HK Equity Jinxin Fertility Group Ltd 10.68 25,999 4.54% 27.18% 66.16% 89.46% 47.80 36.71 n.a. 0.87

2772 HK Equity Zhongliang Holdings Group Co Ltd 5.55 19,879 0.20% 26.37% 134.67% n.a. 4.31 3.56 n.a. 8.97

1347 HK Equity Hua Hong Semiconductor Ltd 19.38 24,977 4.10% 25.16% 30.43% 30.20% 17.57 16.97 1.47 1.56

468 HK Equity Greatview Aseptic Packaging Co Ltd 3.06 4,091 0.12% 23.16% 159.80% 250.99% 9.54 9.22 1.42 9.04

69 HK Equity Shangri-La Asia Ltd 7.16 25,672 0.21% 22.20% 29.35% 35.87% 20.95 20.04 0.53 2.39

3692 HK Equity Hansoh Pharmaceutical Group Co Ltd 29.2 169,027 0.20% 21.07% -8.29% -20.09% 56.41 45.13 n.a. 0.37

% change in shareholding compared

with

5

Hong Kong


Figure 7: Top 20 net reductions in Stock Connect positions (in terms of % decrease)


Figure 8: Top 20 Stock Connect positions by value



(HK$)

Market cap

(HK$m)

Stake owned

by

southbound

investors

2019F P/E

(x)

2020F P/E

(x)P/BV (x)

Dividend

yield (%)

2 weeks ago1 month

ago2 months ago

494 HK Equity Li & Fung Ltd 0.68 5,806 0.49% -63.99% -75.00% -63.81% 9.73 8.76 0.63 3.43

958 HK Equity Huaneng Renewables Corp Ltd 3.15 33,285 0.85% -53.58% -64.90% -68.61% 7.80 7.03 1.00 2.00

6100 HK Equity Wise Talent Information Technology Co Ltd 17.18 8,945 0.03% -37.00% -87.17% 16.43% 55.87 30.58 2.75 n.a.

347 HK Equity Angang Steel Co Ltd 2.61 27,822 0.31% -31.91% -35.86% -31.05% 8.55 7.13 0.43 3.05

1031 HK Equity Kingston Financial Group Ltd 0.88 11,981 0.00% -25.60% -25.60% -31.62% n.a. n.a. 0.55 n.a.

341 HK Equity Cafe de Coral Holdings Ltd 17.24 10,098 0.30% -24.34% -11.10% 129.12% 23.71 19.88 3.51 4.30

45 HK Equity Hongkong & Shanghai Hotels Ltd/The 7.86 12,847 0.00% -23.48% -23.48% -24.06% 25.77 24.18 0.33 1.84

4 HK Equity Wharf Holdings Ltd/The 19.02 58,000 0.07% -23.40% 41.19% 27.79% 8.79 8.39 0.41 3.45

200 HK Equity Melco International Development Ltd 17.1 25,894 0.45% -23.37% -24.24% -19.72% 16.29 12.94 1.56 0.65

683 HK Equity Kerry Properties Ltd 21.55 31,388 0.25% -20.26% -7.11% 6.29% 5.82 5.93 0.31 6.27

590 HK Equity Luk Fook Holdings International Ltd 21.05 12,359 0.21% -17.61% -13.54% 8.50% 11.05 9.26 1.20 4.54

729 HK Equity FDG Electric Vehicles Ltd 0.183 535 5.48% -16.39% -16.59% -16.97% n.a. n.a. n.a. n.a.

2282 HK Equity MGM China Holdings Ltd 10.96 41,648 0.64% -16.34% 3.64% 95.25% 18.30 14.00 4.22 2.24

606 HK Equity China Agri-Industries Holdings Ltd 4.18 21,990 0.38% -16.26% -33.73% -89.44% 18.17 14.56 0.75 1.60

2018 HK Equity AAC Technologies Holdings Inc 57.05 68,945 5.68% -14.64% -11.06% 2.87% 26.66 19.67 3.41 1.81

1128 HK Equity Wynn Macau Ltd 16.78 87,206 0.46% -13.80% 23.91% 14.17% 17.02 14.97 42.05 5.98

1929 HK Equity Chow Tai Fook Jewellery Group Ltd 7.1 71,000 0.41% -12.94% -9.79% 1.74% 15.47 13.22 2.69 5.01

688 HK Equity China Overseas Land & Investment Ltd 25.35 277,740 0.29% -12.29% -29.28% -9.27% 6.27 5.32 0.92 4.30

270 HK Equity Guangdong Investment Ltd 15.68 102,513 0.51% -11.52% -7.99% 4.68% 20.13 17.96 2.54 3.67

883 HK Equity CNOOC Ltd 11.68 521,482 0.27% -11.02% 8.13% 12.87% 8.16 7.85 1.09 5.63

% change in shareholding compared

with


(HK$)

Market cap

(HK$m)

Stake owned by

southbound

investors

2019F P/E

(x)

2020F P/E

(x)P/BV (x)

Dividend

yield (%)

29/1/2020 2 weeks ago 1 month ago 2 months ago

1398 HK Equity Industrial & Commercial Bank of China Ltd 5.26 2,072,810 5.66% 106,037 111,244 115,174 112,494 5.51 5.22 0.70 5.47

939 HK Equity China Construction Bank Corp 6.01 1,513,244 6.39% 96,044 99,618 102,298 93,389 5.13 4.85 0.66 5.89

5 HK Equity HSBC Holdings PLC 56.5 1,147,722 7.81% 88,419 91,038 92,519 92,773 10.22 10.68 0.78 7.02

700 HK Equity Tencent Holdings Ltd 380 3,629,994 2.03% 73,411 73,693 69,965 63,118 34.91 28.53 8.12 0.29

1918 HK Equity Sunac China Holdings Ltd 38.8 180,092 19.78% 33,821 35,388 36,226 35,612 5.97 4.75 2.46 3.60

981 HK Equity Semiconductor Manufacturing International Corp 14.72 74,625 24.04% 17,837 16,891 13,894 11,544 54.15 55.74 1.57 0.00

3690 HK Equity Meituan Dianping 99.5 578,471 3.10% 17,644 16,571 15,394 12,963 314.51 75.21 5.97 0.00

3988 HK Equity Bank of China Ltd 3.04 1,053,812 1.95% 17,450 16,687 16,685 15,105 4.45 4.24 0.43 6.91

2601 HK Equity China Pacific Insurance Group Co Ltd 26.4 301,402 6.76% 16,183 17,155 17,633 16,884 7.42 7.78 1.33 5.97

1288 HK Equity Agricultural Bank of China Ltd 3.02 1,282,782 1.49% 15,793 16,712 16,681 15,466 4.55 4.31 0.56 6.59

1810 HK Equity Xiaomi Corp 12.02 288,556 4.24% 12,052 10,907 6,927 2,150 23.42 19.79 3.27 0.00

2382 HK Equity Sunny Optical Technology Group Co Ltd 128.4 140,836 8.50% 11,976 12,201 12,760 13,253 36.53 26.14 12.74 0.71

2318 HK Equity Ping An Insurance Group Co of China Ltd 87.6 1,583,490 0.73% 11,715 13,242 14,596 15,797 9.14 9.12 2.26 2.84

175 HK Equity Geely Automobile Holdings Ltd 12.6 115,968 8.91% 10,088 11,022 11,801 11,840 11.82 9.19 2.23 1.97

1336 HK Equity New China Life Insurance Co Ltd 29.5 131,025 10.88% 10,011 10,649 11,133 10,830 6.20 6.66 1.09 4.23

1177 HK Equity Sino Biopharmaceutical Ltd 10.72 134,947 7.37% 9,959 10,907 10,792 10,420 37.27 31.98 3.99 0.67

1088 HK Equity China Shenhua Energy Co Ltd 13.72 338,093 3.62% 9,873 10,284 10,857 9,660 5.60 6.04 0.70 7.14

3968 HK Equity China Merchants Bank Co Ltd 38.15 974,412 0.98% 9,422 9,987 10,968 10,973 9.60 8.47 1.55 3.13

2238 HK Equity Guangzhou Automobile Group Co Ltd 7.97 102,871 11.23% 9,157 10,047 10,808 9,885 9.27 7.41 0.94 4.22

2269 HK Equity Wuxi Biologics Cayman Inc 99.65 129,285 7.44% 9,090 8,879 8,384 8,039 111.36 76.41 13.06 0.00

Stake owned by southbound investors

(HK$m)

6

Hong Kong


Figure 9: Top 20 companies with the highest level of Stock Connect ownership



(HK$)

Market cap

(HK$m)

Stake owned

by

southbound

investors

2019F P/E

(x)

2020F P/E

(x)P/BV (x)

Dividend

yield (%)

2 weeks

ago

1 month

ago

2 months

ago

861 HK Equity Digital China Holdings Ltd 3.93 6,567 45.20% 45.35% 45.51% 45.49% 35.73 17.09 0.74 0.97

3823 HK Equity Tech Pro Technology Development Ltd 0.068 544 35.22% 35.22% 30.18% 30.18% n.a. n.a. 0.60 n.a.

607 HK Equity Fullshare Holdings Ltd 0.15 2,956 28.67% 28.77% 28.63% 29.91% n.a. n.a. 0.15 n.a.

996 HK Equity Carnival Group International Holdings Ltd 0.011 261 26.18% 26.27% 26.30% 26.64% n.a. n.a. 0.04 n.a.

3888 HK Equity Kingsoft Corp Ltd 24.15 33,151 24.50% 24.14% 10.62% 0.44% n.a. 80.27 2.56 0.10

981 HK Equity Semiconductor Manufacturing International Corp 14.72 74,625 24.04% 22.02% 19.22% 17.90% 54.15 55.74 1.57 0.00

1269 HK Equity China First Capital Group Ltd 0.246 1,237 21.41% 20.43% 17.33% 5.02% n.a. n.a. 0.42 n.a.

1918 HK Equity Sunac China Holdings Ltd 38.8 180,092 19.78% 19.77% 0.25% 0.24% 5.97 4.75 2.46 3.60

2186 HK Equity Luye Pharma Group Ltd 4.96 16,214 17.81% 18.00% 0.01% 0.01% 9.27 8.20 1.71 1.43

2666 HK Equity Genertec Universal Medical Group Co Ltd 5.41 9,285 17.26% 17.25% 7.70% 7.70% 5.37 4.71 0.80 5.72

3900 HK Equity Greentown China Holdings Ltd 9.32 20,233 17.10% 17.52% 4.65% 15.92% 7.30 7.12 0.66 3.16

1108 HK Equity Luoyang Glass Co Ltd 2.29 4,968 15.18% 15.00% 15.83% 15.81% n.a. n.a. 0.90 n.a.

1999 HK Equity Man Wah Holdings Ltd 5.48 20,924 14.84% 14.95% 0.10% 0.07% 13.60 11.37 3.39 2.55

354 HK Equity Chinasoft International Ltd 4.66 11,856 14.71% 13.71% 12.71% 10.68% 14.73 12.43 1.68 0.47

976 HK Equity Chiho Environmental Group Ltd 0.485 778 14.60% 14.83% 14.85% 14.98% n.a. n.a. 0.15 n.a.

3800 HK Equity GCL-Poly Energy Holdings Ltd 0.295 5,853 14.47% 13.32% 1.73% 0.35% n.a. 10.26 0.25 0.00

1302 HK Equity Lifetech Scientific Corp 1.33 5,746 14.39% 14.41% 14.53% 14.28% 32.50 25.58 3.82 n.a.

1797 HK Equity Koolearn Technology Holding Ltd 27.2 25,527 13.65% 13.18% 11.90% 9.97% n.a. n.a. 8.85 0.00

968 HK Equity Xinyi Solar Holdings Ltd 5.53 44,693 13.50% 12.90% 12.31% 13.04% 18.56 14.07 3.32 2.60

2001 HK Equity China New Higher Education Group Ltd 2.59 3,991 13.27% 11.54% 36.82% 39.98% 9.29 7.16 1.53 3.07

Stake owned by southbound investors

Morning Note | China/Hong Kong | February 4, 2020

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Galaxy International Securities may have served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the last 12 months, significant advice or investment services in relation to the investment concerned or a related investment or investment banking services to the company(ies) mentioned in this report.

Furthermore, Galaxy International Securities may have received compensation for investment banking services from the company(ies) mentioned in this report within the preceding 12 months and may currently seeking investment banking mandate from the subject company(ies).

China Galaxy International has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of Galaxy International Securities and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately.

Analyst Certification The analyst who is primarily responsible for the content of this report, in whole or in part, certifies that with respect to the securities or issuer covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject, securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by the analyst in this report.

Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the securities covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the securities covered in this research report three business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong-listed companies covered in this report; and (4) have any financial interests in the Hong Kong-listed companies covered in this report.

We are transferring the rating mechanism from “BUY, SELL, HOLD” to “ADD, REDUCE, HOLD”. Please refer to the definitions below.

Explanation on Equity Ratings (Existing mechanism (will be replaced by new mechanism by 01/09/19))

BUY : share price will increase by >20% within 12 months in absolute terms

SELL : share price will decrease by >20% within 12 months in absolute terms

HOLD : no clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to outright SELL

Explanation on Equity Ratings (New mechanism)

ADD : The stock’s total return is expected to exceed 10% over the next 12 months.

REDUCE : The stock’s total return is expected to fall below 0% or more over the next 12 months.

HOLD : The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.

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China Galaxy International Securities (Hong Kong) Co. Limited, CE No.AXM459

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