Morning Flash 12 September 2016

Hong Kong/China Market Technical Strategy

Indices HSI

Riding on increased turnover volume, the HSI surged through a key resistance at 24000 points last Friday… HSI Future DJIA S&P 500 NASDAQ

Source: Bloomberg, VC Research

Note that 14-day RSI hit 80.3 and the benchmark index is already overbought.

Hong Kong Market Review •

Pares gains after hitting high. Despite the US and European markets softened generally on Thursday, the local bourse continued to gain due mainly to news report that the CIRC would allow mainland insurers to invest in Hong Kong shares. The HSI opened five points higher and moved up gradually to close at 24147 in the morning session. Rising momentum remained strong after lunch break. The HSI gained once by more than 400 points but selling pressure emerged at high levels. Ay close, the HSI was up 180 points, or 0.75%, to 24100. Turnover volume surged to HKD114bn.

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Mainland brokerage rises. That mainland insurers are allowed to invest in Hong Kong stocks is also expected to benefit mainland brokers and they rose across-the board on Friday. CGS (6881.HK) gained 2.86% to HKD7.91/share, and HTSC (6886.HK) rose 2.53% to HKD17.78/share. Citic Sec (6030.HK) was up 2.48% to HKD18.12/share, but Haitong (6837.HK) edged up only 0.57% to HKD14.1/share.

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Macau gaming rebounds further due to CE of the SAR expected GGR to resume single-digit growth in 2017. Melco Int’l Dev (200.HK) surged 7.12% to HKD10.82/share, while WYNN Macau (1128.HK) grew 4.14% to HKD13.06/share.

© 2016 VC Brokerage Limited. All rights reserved. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents herein. Further information on the companies mentioned in this report is available upon request.

Latest

Chg. Pts

24,100

180

23,804

-280

18,085

-394

2,128

-53

5,126

-134

H-share

10,058

50

Red-chip

4,086

38

Shanghai Comp

3,079

-17

Shenzhen Comp

2,035

-15

Morning Flash 12 September 2016

Economic News •

Fed officials divided as September policy meeting nears. U.S. Federal Reserve policymakers on Friday headed towards their policy meeting later this month divided on whether a rate rise is in the offing, with some of the permanent voting members appearing wary of supporting an immediate hike. Financial markets had started pricing in a greater chance of a rate hike on Sept. 21 on the back of a series of hawkish speeches. After Boston Federal Reserve President Eric Rosengren spoke on Friday, odds on a rate hike in September rose to 30 percent probability from 24 percent before his comments. After the more dovish Federal Reserve Governor Daniel Tarullo spoke, that had fallen to a 20 percent chance. (Reuters)

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Fed's Tarullo cautions against raising rates on too-low inflation: CNBC. Federal Reserve Governor Daniel Tarullo on Friday repeated his assertion that he wants to see more evidence of a sustained uptick in inflation before raising interest rates, dampening expectations of a rate hike by the U.S. central bank next week. "As inflation in my view shows that it's picking up in a sustainable way to be a target rather than being below where it's been for most of the last five or six years, then we'd raise rates," Tarullo said in a television interview with CNBC. (Reuters)

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Fed unlikely to raise U.S. rates too rapidly, Rosengren says. The Federal Reserve is unlikely to raise interest rates so rapidly that it causes a U.S. recession, Boston Fed President Eric Rosengren said on Friday. "I don't think recessions happen because it's been a long time ... but because of policy mistakes. Right now it is hard to see us raising rates too rapidly," Rosengren said at a business event, adding the probability of a U.S. recession at the moment is "quite low." (Reuters)

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Fed has put markets on notice for rate hike, Kaplan says. The case for raising U.S. interest rates has strengthened in recent months, a top Federal Reserve official said on Friday, but longterm headwinds to economic growth mean the central bank will raise rates only very slowly. "The Fed can afford to be patient and deliberate in its actions," Dallas Fed President Robert Kaplan told reporters in Austin on the sidelines of a conference sponsored by Mission Capital. Most importantly, he added, "the likely path of rates is going to be flatter, much flatter than we’ve ever experienced historically." (Reuters)

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U.S. wholesale inventories flat, boost to third-quarter growth seen modest. U.S. wholesale inventories were unchanged in July as previously reported and sales recorded their biggest drop in six months, suggesting a modest boost to third-quarter economic growth from inventory investment. An outright drop in inventory investment weighed heavily on economic growth in the second quarter and some economists believe the inventory correction is close to running its course. The Commerce Department said on Friday that the flat reading followed an upwardly revised 0.3 percent increase in June. Wholesale inventories were previously reported to have gained 0.2 percent in June. (Reuters)

© 2016 VC Brokerage Limited. All rights reserved. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents herein. Further information on the companies mentioned in this report is available upon request.

Morning Flash 12 September 2016

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China's Aug inflation trends point to stabilizing economy. China's consumer price inflation slowed to its weakest pace in almost a year in August, pulled down by abating food costs, although an encouraging moderation in producer price deflation added to growing evidence of a steadying economy. Indeed, the broader inflation trends shown in Friday’s data confirm recent signs of a more sure-footed recovery in the world’s secondbiggest economy, allowing authorities to resist any fresh monetary easing as they move to curb an unsustainable build up of credit in the financial system. (Reuters)

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Iranian oil output stagnates for third month amid OPEC bargaining. Iran's steep oil output growth has stalled in the past three months, new data showed, suggesting Tehran might be struggling to fulfill its plans to raise production to new highs while demanding to be excluded from any OPEC deals on supply curbs. Iran's oil output soared to 3.64 million barrels per day in June from an average of 2.84 million bpd in 2015 following the easing of Western sanctions on Tehran in January, adding to a global crude glut which has slashed oil prices. (Reuters)

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Brexit will be tough for European Investment Bank says its chief. Britain's exit from the European Union will create difficulties for the European Investment Bank (EIB), a lender owned by EU governments, the bank's president Werner Hoyer said on Saturday. The EIB [EIB.UL] is also a central tool for an investment program the European Commission estimated would generate 315 billion euros ($354 billion) of investment in the EU and which is set to be expanded. (Reuters)

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EU executive aims to boost investment co-funding scheme to 500 billion euros-plus. The European Commission will next week propose extending an EU-wide investment-generating scheme by two years to 2020 and increasing its scope to at least 500 billion euros, European officials said. In its current form the co-financing scheme - focused on infrastructure, energy, research and education - is using 21 billion euros of EU cash and guarantees to attract private investments for 15 times that amount up to 2018. (Reuters)

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Buying longer-dated bonds would boost QE's effectiveness: ECB paper. Buying bonds due to mature further into the future would boost the effectiveness of the European Central Bank's aggressive money-printing program, an ECB research paper said on Friday. The ECB is looking at options to ensure its the 80 billion-euros-a-month scheme, due to end in March at the earliest, can continue as inflation remains stubbornly low and eligible bonds in countries such as Germany risk becoming hard to find. (Reuters)

© 2016 VC Brokerage Limited. All rights reserved. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents herein. Further information on the companies mentioned in this report is available upon request.

Morning Flash 12 September 2016

Market News •

Wall St. drops amid worries over North Korea test, rate outlook. U.S. stocks dropped on Friday, giving the S&P 500 its worst day since June as investor nervousness increased following a nuclear test by North Korea and Federal Reserve officials' comments lifted rate hike bets. The CBOE Volatility index .VIX closed at its highest level since late June, while the S&P 500 index closed below its 50-day moving average for the first time also in about two months, a sign that further weakness may be ahead. The equity selloff also came as the U.S. Treasury yield curve continues to steepen. Long-dated yields reached more than two-month highs, after reports suggested Japan is considering measures to cut short- to medium-term yields, while lifting those of long-term bonds. (Reuters)

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Dollar starts week on the defensive, risk aversion lifts yen. The dollar began the week on the back foot on Monday as a bout of risk aversion underpinned the yen, though the U.S. currency garnered some support on renewed talk of a possible rate hike by the Federal Reserve as early as this month. The perceived safehaven yen benefited from a drop in global equities. The dollar was down 0.2 percent at 102.50 yen JPY=, while the euro slipped 0.1 percent to 115.21 yen EURJPY=. (Reuters)

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Oil falls 4 percent; U.S. crude draw seen as glitch. Oil prices fell 4 percent on Friday, paring most of the previous session's rise as traders noted that a tropical storm was behind this week's unexpected slump in U.S. crude inventories. The market ended up around 3 percent, its first gain in three weeks. Traders cited hopes for a global deal on stabilizing crude output after Saudi Arabia, the leading oil producer inside OPEC, and Russia, the biggest producer outside the group, agreed on Monday to cooperate in oversupplied markets. (Reuters)

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China to blacklist rumor-spreading property agents. China's housing ministry said on Saturday it would blacklist property agents, and in serious cases, shut down real estate agencies that spread rumors about government policy on the property market. State media said on Friday that police had detained seven property agents in Shanghai for spreading rumors of plans for a new government regulation that sparked a rash of divorces and a rush to buy new homes. The agents were alleged to have spread rumors online that a new regulation would require higher minimum down payments and mortgage interest rates for home buyers who have been divorced for less than a year, the Xinhua state news agency said. (Reuters)

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Iran tells OPEC its August oil output was steady at 3.63 million bpd: source. Iran has told OPEC it pumped 3.63 million barrels of oil per day (bpd) in August, up 10,000 bpd from July, an OPEC source said, marking a slowdown in the rapid growth that followed the lifting of Western sanctions in January. Iran has been the main factor preventing an output deal between OPEC and non-OPEC Russia to boost prices, as Tehran has said it should be excluded before its production recovers. Renewed talks on an output pact are under way. (Reuters)

© 2016 VC Brokerage Limited. All rights reserved. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents herein. Further information on the companies mentioned in this report is available upon request.

Morning Flash 12 September 2016

Company Announcements


Pou Sheng Int'l (03813): Aug operating revenue RMB1.223B. Pou Sheng International (03813) announced that its net consolidated operating revenue was RMB1.223 billion for August 2016, and RMB10.745 billion for the eight months through August 2016. (Infocast News)




Belle Int'l (01880): Q2 footwear business SSS down 10%. Belle International (01880) today announced operational data of its retail business in Mainland China for the second quarter of Financial Year 2016/17 (three months from June 2016 to August 2016). (Infocast News)




SIM Tech (02000): Jan-Aug revenue $1.737B, up 5.5%. SIM Technology (02000) announced that the unaudited monthly revenue of the group for the month of August 2016 is approximately HK$212.4 million - up 12.0% on year. (Infocast News)




CC Securities (01375): Aug net profit up 25% on month. Central China Securities (01375) announced that in August 2016, its operating income was RMB153.639 million, and net profit was RMB35.598 million - up 25.34% on month but down 70.12% on year. (Infocast News)




Poly Property (00119): Jan-Aug contract sales RMB23B. Poly Property Group (00119) announced that for the eight months ended 31 August 2016, its group companies recorded contracted sales of approximately RMB23 billion, with the contracted area sold totalling approximately 1.916 million square metres. (Infocast News)




Yue Yuen Ind (00551): Jan-Aug operating revenue up 0.2%. Yue Yuen Industrial (00551) announced that its net consolidated operating revenue was US$681.66 million for August 2016 - up 2.4% on year, and US$5.618 billion for the eight months through August 2016 - up 0.2% on year. (Infocast News)




China Res Power (00836): 8-mth power generation up 1.5%. China Resources Power (00836) today announced that the total net generation of its subsidiary power plants in August 2016 increased by 8.5% on year to 14.399 million MWh, and in the first eight months of 2016 increased by 1.5% on year to 98.943 million MWh. (Infocast News)




China Jinmao (00817): Jan-Aug contract sales RMB21.169B. China Jinmao Holdings (00817) announced that in August 2016, the group achieved property contracted sales of RMB3.348 billion with a contracted sales gross floor area (GFA) of 159,366 square metres. For the eight months ended 31 August 2016, the group achieved accumulative property contracted sales of RMB21.169 billion with an accumulative contracted sales GFA of 908,003 square metres. (Infocast News)




Shimao Property (00813): 8-mth contract sales up 13%. Shimao Property (00813) announced that in August 2016, the group's contracted sales amounted to approximately RMB5.22 billion - up 24.3% on year, with the contracted sold area amounted to 392,764 square metres - up 13.2% on year. (Infocast News)

© 2016 VC Brokerage Limited. All rights reserved. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents herein. Further information on the companies mentioned in this report is available upon request.

Morning Flash 12 September 2016

Today’s Sector Focus The CIRC indicated that mainland insurers are now allowed to participate in the SH-HK Stock Connect. It is expected that Rmb1610bn mainland capital would be freed to trade Hong Kong stocks as a result. The local brokerage sector is considered to be a major beneficiary. HKEX (0388.HK)

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Soared through a strong resistance at HKD200/share on hefty turnover.

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HKEX is overbought.

already

Source: Bloomberg, VC Research

Quam (0952.HK)

Source: Bloomberg, VC Research

© 2016 VC Brokerage Limited. All rights reserved. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents herein. Further information on the companies mentioned in this report is available upon request.

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Re-strengthened after building a support the 50day MA.

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Re-tested a key resistance at HKD0.8/share last Friday.

Morning Flash 12 September 2016

Bright Smart (1428.HK)

Source: Bloomberg, VC Research

Hang Seng Composite Sectors Sector Hang Seng Index (HSI) Hang Seng Composite HSCI Utilities HSCI Industrial Goods HSCI Materials HSCI Conglomerates HSCI Telecommunication HSCI Property & Construction HSCI Info Technology HSCI Consumer Goods HSCI Financials HSCI Services HSCI Energy HS Mainland 100 HS China Enterprises HS China H-Financial HS China Affiliated Corps HS HK 35 HS HK Large Cap HS HK MidCap HS HK Small Cap

Index 24,099.70 3,249.17

Day (%) Week (%) MTD (%) 0.75 3.58 4.89 0.59 3.65 4.79

YTD (%) 9.97 7.54

7,245.60 1,192.88 5,287.36 2,766.14 1,990.80 3,282.21 8,180.26 4,195.45 3,419.19 3,240.39 7,630.78

0.43 0.21 0.60 0.57 1.53 0.89 -0.61 -0.81 1.16 1.50 -0.51

3.31 4.31 4.02 1.59 2.69 4.76 5.10 2.40 3.53 5.45 1.65

2.51 5.32 3.97 3.54 2.53 5.52 5.18 3.59 5.55 8.91 1.66

4.96 0.27 19.64 -2.72 10.24 13.42 30.90 0.27 2.44 7.57 12.36

6,978.71 10,057.97 16,098.08 4,085.85

0.43 0.50 1.13 0.94

3.76 3.83 4.76 3.78

4.61 5.41 6.95 4.37

7.59 4.11 2.65 0.83

2,823.19 1,945.73 4,424.54 2,027.98

1.17 0.65 0.36 0.54

3.89 3.59 4.00 3.44

5.42 4.76 4.99 4.52

10.75 9.20 3.47 -2.52

Source: Bloomberg

© 2016 VC Brokerage Limited. All rights reserved. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents herein. Further information on the companies mentioned in this report is available upon request.

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Skyrocketed after breaching the HKD2.7/share resistance.

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Turnover volume surged in recent weeks.

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14-day RSI indicates the share is already overbought.

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© 2016 VC Brokerage Limited. All rights reserved. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents herein. Further information on the companies mentioned in this report is available upon request.