J. P Morgan - Eye On China by riteshbhansali

VIEWS: 58 PAGES: 31

More Info
									                                                                                                                                                                                 Asia Pacific Equity Research
                                                                                                                                                                                 25 September 2012




                                                                                                                                                                                 Director of Asia Pacific Equity
Eye On China                                                                                                                                                                     Research
                                                                                                                                                                                                    AC
                                                                                                                                                                                 Sunil Garg
QE3 Cannot Solve A Domestic Slowdown                                                                                                                                             (852) 2800-8518
                                                                                                                                                                                 sunil.garg@jpmorgan.com

                                                                                                                                                                                 J.P. Morgan Securities (Asia Pacific) Limited

 A weak domestic demand driven economic slowdown, in turn caused by overcapacity, is unlikely to be solved by                                                                   Rajiv Batra
                                                                                                                                                                                 (91-22) 6157-3568
  FED/ ECB actions. Risks to economic and earnings growth estimates remain elevated. We would prefer to see
                                                                                                                                                                                 rajiv.j.batra@jpmorgan.com
  reform than stimulus.                                                                                                                                                          J.P. Morgan India Private Limited
 Investor skepticism on earnings remain justified with likely cuts to 2013 estimates. The lack of visibility and
  shareholder value focus underpins the “China Discount”. MXCN and SHCOMP are barely surviving a major                                                                           Greater China Economist
                                                                                                                                                                                 Haibin Zhu
  breakdown - we await clarity from market moves.                                                                                                                                (852) 2800-7039
 Our proprietary “most popular research” data suggests increased interest in IT, utilities, financials, auto,                                                                   haibin.zhu@jpmorgan.com
  consumer, telecom and macro research readership. Gaming and infrastructure has faded in September. Our                                                                         JPMorgan Chase Bank, N.A., Hong Kong
  recently launched JPM Sentiment Index (JSI) shows substantial dispersion across sectors (See page 2).
                                                                                                                                                                                 Asia Pacific Equity Strategy
 Our highest-conviction recommendations                                                  Sectoral View                                                                           Adrian Mowat
  Company                                Ticker           Rating     Price      Target
                                                                                                                                                                                 (852) 2800-8599
  Top Picks
                                                                                         Forget The Macro is the message from our consumer team who has focused on a             adrian.mowat@jpmorgan.com
  21Vianet.                              VNET US           OW          10.9      16.3
  Baidu                                  BIDU US           OW          111       200     bottom up analysis of long-term earnings drivers to identify investment                 J.P. Morgan Securities (Asia Pacific) Limited
  Beijing Capital Int. Airport           694 HK            OW           5.2       8.3    opportunities. We see bottom up opportunities across property, shipping, tech,
  Beijing Enterprises                    392 HK            OW            52        60    consumer, gaming and healthcare.                                                        Table of Contents
  China Shenhua Energy                   1088 HK           OW            30        35                                                                                            Investment view on stock ideas ................. 3,4
  China Shipping Cont. Lines             2866 HK           OW           1.7      2.85    The outlook for index heavyweights, banks and energy is challenging. For                Valuation comps .......................................... 5
  China State Construction               3311 HK           OW           8.8      13.0                                                                                            Earnings revisions........................................ 6
                                                                                         banks, rising NPLs led by a manufacturing slowdown and the prospect of further
  China ZhengTong Auto                   1728 HK           OW           5.0       5.5                                                                                            Profit outlook ............................................ 7
  Country Garden                         2007 HK           OW           3.0      3.55    dividend cuts caps performance. For energy, the overcapacity amongst refiners is
                                                                                                                                                                                 Index valuation summary.............................. 8
  Galaxy                                 27 HK             OW          24.9      31.0    likely to be exported out and weigh on regional prices.                                 Valuation history and Fund flow ............... 9,10
  Golden Eagle Retail                    3308 HK           OW            15      19.5                                                                                            Key economic indicators........................ 11,12
  ICBC - H                               1398 HK           OW           4.6       5.8    Similarly, outlook for materials (steel and cement) is plagued by overcapacity and      Commodities prices and penetration...... 13,14
  Lenovo                                 992 HK            OW           6.3       8.1    signs of supply discipline are patchy at best. Sustaining recent supply cutbacks will   Energy and Materials sector ....................... 15
  Ping An Insurance                      2318 HK           OW            58        65                                                                                            Banks and Insurance sector ....................... 16
                                                                                         be critical in determining the medium-term investibility, although a short-term
  Sinopec                                386 HK            OW           7.2       9.0                                                                                            Real Estate sector...................................... 17
  United Labs                            3933 HK           OW           3.8       4.5
                                                                                         rebound appears underway. In the industrials complex, only railway construction         Consumer sector........................................ 18
  Stocks to Avoid                                                                        appears to be doing well, driven by renewed investment commitments.                     Telecom sector .......................................... 19
  Anta Sports                            2020 HK           UW           5.5       3.6                                                                                            Gaming sector ........................................... 20
  CHALCO                                 2600 HK           UW           3.3       2.7    The main problem for MSCI China earnings emanates from investment and                   Healthcare sector....................................... 21
  China Merchants Holdings               144 HK            UW            24        20    industrials where the incidence of overcapacity is most prevalent. The likelihood of    Infrastructure sector ................................... 22
  Glorious Property                      845 HK            UW          1.07      1.00    many of these industries exporting their surpluses is rising and this will weigh on     Transportation sector ................................. 23
  New China Life Insurance               601336 CH         UW            22        25                                                                                            P&L and balance sheet .............................. 24
  PetroChina                             857 HK            UW            10      8.75
                                                                                         pricing outlook for regional competitors. Opportunity to short China's oversupply
                                                                                                                                                                                 Manufacturing sector.........................25,26,27
 Source: J.P. Morgan estimates, Bloomberg. Pricing date is 21 September 2012.
                                                                                         may lie outside China.


See page 28 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect
the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
                                                                                                                                                                                    www.morganmarkets.com
Sunil Garg                                                 Asia Pacific Equity Research
(852) 2800-8518                                            25 September 2012
sunil.garg@jpmorgan.com

Figure 1: Most popular research


                                  Economics & Strategy                                                      Materials                        Transportation                    Energy




                                                                                                                                              Infrastructure
                                                                                                              Banks
                                     IT
                                                                                                                                                                             Consumer

                                                                                Utilities                                                                   Gaming
                                                                                                                   Health Care Insurance

                                                                                                     Auto
                              Real Estate
                                                                                                                      SMID-Cap                                        Others
                                                                                                                                        Telecom
 Source: Datastream. Note: Size of box shows % of publications by sector (in August). Red is where % email opens have fallen by 2% pts vs. 3mth avg. Green – where they have increased by 2%
pts or better and white is within =/- 2% pts


Figure 2: JSI breakdown by sector
             Construction                                                                                                                                100.0
                  Gaming                                                                                                     77.5
                      IPPs                                                                                                 75.0
                 Telecom                                                                                                72.2
                       Gas                                                                                              72.2
                     Water                                                                                     64.3
    Technology (hardware)                                                                                    62.5
           Transportation                                                                             58.3
                  property                                                                           57.5
              Healthcare                                                                           55.0
              Small Caps                                                                    50.0
               Consumer                                                                     50.0
                      Auto                                                                  50.0
                 Oil & gas                                                           41.7
                Insurance                                                            41.7
            China brokers                                                     37.5
          Petrochemicals                                               32.5
                 Tollroads                                   25.0
               Machinery                                     25.0
                    Banks                                    25.0
           metal & mining                                 22.5
                     Ports                              20.0
                  Cement                    10.0
             Shipbuilding             5.0
                            0.0                    20.0                     40.0                     60.0                    80.0                   100.0                   120.0
Source: J.P. Morgan


Figure 3: China funds average weightings rel. to MSCI benchmark                                    Figure 4: China+HK - Fund Manager Position rel. to MSCI EM

     2                                                                                                20
     1                                                                                                15
                                                                                                      10
     0
                                                                                                       5
    -1                                                                                                 0
    -2                                                                                                -5
    -3                                                                                               -10
    -4                                                                                               -15
                                                                                                     -20
    -5
         97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12                                             -25
                                                                                                       Dec-07 Jul-08 Feb-09 Sep-09 Apr-10 Nov-10 Jun-11 Jan-12

Source: MSCI, Datastream, EPFR Global..
                                                                                                   Source: MSCI, Datastream, EPFR Global




2
Sunil Garg                                 Asia Pacific Equity Research
(852) 2800-8518                            25 September 2012
sunil.garg@jpmorgan.com

Table 1: Investment view on our highest-conviction recommendations
Company, Sector, Analyst                Analyst Commentary
Top Picks
21Vianet Group Inc.                     Selling shovels: We've written many times that data is extremely hard for telecom operators to monetize profitably. Given that, play the major increase in data usage through
Sector: Internet Infrastructure         infrastructure providers. We think VNET is the best regional example of this theme.
Analyst: James R. Sullivan, CFA         EPS forecasts + valuation now supportive. We had previously stated that VNET shares may stall for a period of time due to a lack of earnings upgrades and no longer ‘cheap’
                                        valuations. Since that time, EPS forecasts were reduced too aggressively in our view (cut 44% since 2Q earnings despite in line guidance), we are now 20% ahead of street forecasts for
                                        2012 EPS.
Baidu.com                               Leveraged to potential macro improvement. Attractive valuation, with “monopoly” power, good corporate governance, and long-term search market growth. We believe Qihoo impact is
Sector: Internet                        small on Baidu, and Baidu to gradually increase its market share. In addition, we think concerns over mobile usage growth are overdone, and expect mobile search to boost profits for
Analyst: Dick Wei                       the company.

Beijing Capital International Airport   We believe BCIA is now reaching an inflection point with compelling valuation of EV/EBITDA <10x and11% EBITDA growth in the next 3 years, on our estimates. Key value drivers: (1)
Sector: Airports                        After taking into account potential capex related to the BJ #2 airport project but no incremental benefit, BCIA still looks undervalued to us. We think the stock has possibly
Analyst: Karen Li, CFA                  factored in all potential concerns on capex front. Removing all capex associated with new airport project could raise our PT to HK$13 by Dec-12. (2) BCIA aims to restore payout level
                                        of 2011, maintain consistent record in future. By FY14E, we estimate BCIA could potentially offer 7% yield with payout ratio of 45% all else being equal.

Beijing Enterprises                     Strong resilient gas demand from new gas fired power plants in Beijing thanks to the newly imposed “Environmental Air Quality Standards”, where big cities have to impose more
Sector: China Utilities                 stringent control on concentration of small particles (PM 2.5).We have seen more evidence of increased demand, as Beijing Jingneng (579 HK, NC) has recently raised its 2013 target
Analyst: Boris Kan                      gas-fired power capacity to ~4,600MW (from ~3,400MW previously) by fast-tracking its 1,200MW Beijing Shijingshan Co-Generation Plant. Overall, we expect a >30% gas sales volume
                                        CAGR in Beijing from 2012-15E. Other upsides include (1) strong gas demand on mid stream pipelines from newly connected areas in Shandong (2) BJE Water (earnings up (up 27%
                                        Y/Y, 8% of total) thanks to margin improvement on sewage operations (up from 49% to 54%). Overall, we expect a >25% EPS CAGR from 2012-14E.
China Shenhua Energy - H                Shenhua is the lowest cost coal producer in China, unique for its horizontally integrated rail and port infrastructure assets while its vertically integrated power assets (c25% of revenue)
Sector: Mining                          reduce exposure to the volatile spot price. We forecast organic volume growth of over 5%pa through to 2015 (+10% in FY12E) from existing operations with the potential of further
Analyst: Daniel Kang                    parent asset acquisition growth. Shenhua currently trades at a significant valuation discount to historical PE levels (c13x) on our estimates.
China Shipping Container Lines          CSCL provides unique exposure as the largest player in the domestic China shipping trade. Overcapacity risks are lower as CSCL’s newbuild vessel deliveries will be more than offset
Sector: Shipping                        by the return of chartered-in vessels. CSCL also has a lower unit cost structure than sector average. We expect CSCL to be profitable in 2H12 and see no equity-raising risk. Valuations
Analyst: Corrine Png                    at 0.6x FY12E P/B are attractive and have overly discounted the challenging industry outlook.
China State Construction                China State Construction (CSC) is the largest contractor in HK and largest contractor for affordable housing in China. An improvement in credit conditions has allowed CSC to finalize
Sector: Construction                    more build transfer projects in China. In the first eight months of the year, CSC had already achieved 94% of its target for new project additions, and 82% of our estimates, for 2012. We
Analyst: Leon Chik, CFA                 see evidence that the government has been offering more new affordable and infrastructure projects since June as the emphasis for economic stimulus increases. CSC is well
                                        capitalized to aggressively capture build transfer projects with high GPM sometimes exceeding 15%. We see new large scale projects to be the catalyst for CSC over the next 6-12
                                        months as more tenders come up for bidding in HK and Macau. The key risks to our PT are falling construction activity in China and lower than expected returns on long term projects in
                                        China. Another risk would be a shortage of workers or a hike in raw materials that could crimp margins.
China ZhengTong Auto                    Our recent visit in China suggests that the overall inventory and pricing pressure among dealers have gradually eased, thanks to automaker trimming sales target, providing support for
Sector: Auto                            dealers and also a sequential improvement in car sales. Margin as a result is expected to improve in 2H12 vs. the bottom in 2Q12. Momentum in luxury vehicle remains intact with BMW
Analyst: Nick Lai                       and Audi’s volume, for instance, both up by over 30% YTD vs. overall passenger vehicle of 8%. In the near term, 4Q is a peak season in China; we expect a strong sales volume toward
                                        year end.
Country Garden                          We like Country Garden because of its relatively strong balance sheet, which gives them the warchest to expand when its peers are deleveraging. Country Garden has bought plenty of
Sector: Property                        land in 1H2012, utilizing the money they raised in share placement, and this should allow them to gain market share under the current market. We expect Country Garden’s contracted
Analyst: Ryan Li, CFA                   sales to outperform its peers in 4Q2012 and 2013.
Galaxy                                  We like Galaxy for its 1)undemanding valuation at 13x 2013 P/E, 2) room for earnings upgrade. So far, Galaxy Macau (Galaxy's flagship casino) has been executing very well and
Sector: Gaming                          maintaining its market share despite a new competitor entering the market. We see further room for earning upgrades as a share price driver. Our 2012 EBITDA is 5 percent higher than
Analyst: Kenneth Fong , CFA             the street's consensus. 3) removal of overhang of shareholder selldown is a positive. On Aug 28th 2012, Permira (one of Galaxy majority shareholder) sold 7% of its stake in Galaxy. It
                                        now holds approximately 6% of Galaxy. Share placement by its majority shareholder has been one of the share overhang on the stock and we believe that the gradual selldown of
                                        shareholding removed the share price overhang.
Golden Eagle Retail                     Golden Eagle’s 1H result was weak on the back of new store openings and also weak SSSG. We do not expect a major recovery in 2H but given the long term bottom up drivers for this
Sector: Consumer                        name and given that short term weakness is priced in we reiterate our OW rating for Golden Eagle. The stock is trading at 17x 1-yr forward P/E, pricing in the short-term weakness
Analyst: Ebru Sener Kurumlu             already in our view. We believe it is one of the best-positioned department stores in China (given the positioning, regional dominance and property ownership) and we are looking for
                                        c25% earnings CAGR post 2012 driven largely by new store additions and SSSG (around 14% post 2012).

                                                                                                                                                                                                                                  3
Sunil Garg                                    Asia Pacific Equity Research
(852) 2800-8518                               25 September 2012
sunil.garg@jpmorgan.com

Company, Sector, Analyst                   Analyst Commentary
Top Picks
ICBC - H                                   ICBC is our top pick in the sector given its leading deposit franchise (50% demand deposits), strong capital position (T1 10.1%), and prudent growth, which produces leading ROEs
Sector: Banks                              through the cycle. ICBC is less affected by the recent rate cuts, yet we still see material NIM compression from easing and deregulation, alongside higher credit costs. We think the stock
Analyst: Josh Klaczek                      offers significant value at 1.1x book and 5.7x FY13E earnings, as prices increasingly reflect the structural challenges ahead.
Lenovo Group Limited                       We are gaining confidence that China PC market will return to double digit unit growth in 4Q this year, after 3 quarters of 0-5% Y/Y growth, thanks to 1) two major PC brands in China
Sector: Technology Hardware                toning up recently; 2) affordable broadband becoming reality; 3) 4Q11 base is low and availability of new products (Win 8 + Ultrabooks). Lenovo is also executing well on all fronts: 1)
Analyst: Gokul Hariharan                   We think they will likely overtake HPQ in next 2 quarters to become the No. 1 in PC segment globally; 2) We expect Lenovo 2Q margin to improve Y/Y and beat consensus estimates; 3)
                                           Pushing PC+ strategy in China (success in smartphones and servers already coming through). The recently announced acquisition of CCE in Brazil should also help narrow losses in its
                                           Emerging markets PC business in FY14.

Ping An Insurance Group - H                Ping An continues to have the best life insurance franchise in China in our view which is agency dominated. We think its non-life operation should weather the rise in a combined ratio
Sector: Insurance                          better than its close peers as it gains further economies of scale. The plan to raise up to Rmb26 billion of convertible debt should help to satisfy near-term capital need, alleviating the
Analyst: Bao Ling Chan                     need for equity capital raising.
Sinopec Corp - H                           We expect lower oil/higher product prices will turn refining losses to profits, generating good earnings growth. Increased likelihood of more frequent price adjustments will also benefit
Sector: Integrated Oils                    Sinopec and possibly rerate the stock on top of earnings growth. Petchem is very weak now, but next year if the global economy picks up, petchems could be an additional positive for
Analyst: Brynjar Eirik Bustnes, CFA        Sinopec's earnings. Sinopec trades at 0.9x 2013E book and should generate close to 14 pct roe going forward on our estimates, which indicates to us it is undervalued.
The United Laboratories                    Commodity prices are trending or stabilizing around 2012 high. With TUL highly levered with sales of commodity prices due to large fixed costs and high capacity, the businesses of
Sector: Pharmaceuticals                    intermediates and bulk medicines can become very profitable quickly. We think Antibiotics restriction is already priced in and finished product sales are rebounding back to 2H11 levels
Analyst: Sean Wu                           when price cuts and restriction of antibiotics use were not in effect. Current valuation does not reflect the great potential of the company’s human insulin franchise, in our view.

Stocks to Avoid
Anta Sports Products Ltd.                  We maintain our UW rating. We believe the sportswear sector is still struggling with inventory problems and heavy discounting. We have not yet seen any major consolidation taking
Sector: Footwear                           place in the sector and expect more shake-up as franchisees will in our view find it difficult to run profitable businesses given high discount levels. As partially seen in 1H results we
Analyst: Ebru Sener Kurumlu                believe current margins of the company are not sustainable and expect margin erosion to continue in 2012 and 2013.
Aluminum Corporation of China - H          We think Chalco will struggle to return to profit this year — we forecast a loss of Rmb2bn. The company’s diversification strategy (coal, iron ore and power) will add further pressure to
Sector: Metals                             an already stretched balance sheet. Meanwhile, Indonesia's recent policy changes to bauxite exports have impacted Chalco’s operations, forcing alumina output cut. With valuations still
Analyst: Daniel Kang                       well above historical trough levels, we recommend an UW position.
China Merchants Holdings Int'l             China’s weaker-than-expected industrial activity in May with a sharp decline in new export orders is a key driver for de-rating. We view CMHI as a proxy for China’s industrial activity and
Sector: Conglomerates & Multi-industry     containerized trade flow, with its key ports located in Shanghai (SIPG), Hong Kong (MTL) and Western Shenzhen. China’s NBS PMI eased more than expected to 50.4 in May, nearly
Analyst: Karen Li, CFA                     2.0-pt below market expectations and a sharp deceleration from the April reading (53.3). CMHI’s valuation–at 13x P/E FY12E and 50% premium to COSCO Pacific (“CP”)–does not look
                                           cheap to us. Despite the richer valuation compared to its peers, CMHI’s FY12E ROE is only on par with our estimate for CP, while dividend yield is lower than HPH Trust (CMHI at 3%
                                           vs. HPHT’s 10% on a 1-year forward basis).
Glorious Property                          Chairman of Glorious Property is alleged by US SEC to have engaged in potential insider trading. We expect the litigation to drag on for a period and would be a major investor concern.
Sector: Property                           Although contract sales run rates improved in Jun/Jul, Glorious would still need to roll-over Rmb5B of bank borrowings due in 2H12. We think the potential litigation may affect the
Analyst: Lucia Kwong, CFA                  company's access to loans especially offshore borrowings.
New China Life Insurance Company Ltd - A   We think New China Life is still trading at a demanding valuation, at 1.6x 2012E P/EV for the A-shares vs. peers’ of 1.3-1.6x (based on Sept 13, 2012 close). It has the weakest capital
Sector: Insurance - Life                   position among its listed peers with last reported solvency margin ratio of 159% (vs. peers’ 177%-271%). It also appears to be using a relatively aggressive set of investment yield
Analyst: Bao Ling Chan                     assumptions in view of its weak investment track record.
PetroChina                                 Petrochina trades at a 40 pct premium to Sinopec, meaning it is already pricing in refining profit turnaround and natural gas price reform in our view. Nat gas price reform is unlikely in
Sector: Integrated Oils                    the next 1-2 years, hence with increased imports of loss generating nat gas, we think Petrochina's earnings are capped. On top of this, we estimate an increase in capex which is
Analyst: Brynjar Eirik Bustnes, CFA        already at a very high level will likely result in sub-15 pct ROE. The stock trades at 1.3x 2013E book, which is overvalued, in our view
Source: J.P. Morgan                            Lan Deng’s role has been limited to assisting in gathering information for this report.




4
Sunil Garg                                                Asia Pacific Equity Research
(852) 2800-8518                                           25 September 2012
sunil.garg@jpmorgan.com

Table 2: Valuation comps for our highest-conviction recommendations
                                                                                        Mkt cap    Rating    Price     PT            P/E              P/B             ROE              DY
Company                                                      BB                CMP     (US$MM)              target   End date    FY12E FY13E     FY12E    FY13E   FY12E   FY13E    FY12E FY13E
Top Picks
21Vianet Group Inc.                                          VNET US           10.94         612    OW       16.3    31-Dec-13   129.7    80.0     7.7      7.2     5.6      9.3     0.0    0.0
Baidu.com                                                    BIDU US            111       38,731    OW       200     31-Dec-13    23.9    17.7     9.4      5.9    48.6     41.3     0.0    0.0
Beijing Capital International Airport                        694 HK              5.2       2,905    OW        8.3    31-Dec-12    13.1    10.7     1.2      1.1     9.3     10.5     1.1    1.4
Beijing Enterprises                                          392 HK            51.55       7,564    OW         60    30-Jun-13    19.2    14.3     1.2      1.1     6.6      8.2     1.6    2.1
China Shenhua Energy - H                                     1088 HK           30.05      69,707    OW         35    30-Jun-13    10.7     9.9     1.9      1.7    19.0     18.3     3.6    3.9
China Shipping Container Lines                               2866 HK            1.65       3,414    OW       2.85    31-Dec-13     NM     22.2     0.6      0.6    -1.0      2.7     0.0    0.0
China State Construction                                     3311 HK            8.79       4,407    OW       13.0    31-Dec-13    15.0    10.9     3.1      2.6    21.5     26.1     2.0    2.7
China ZhengTong Auto                                         1728 HK            5.04       1,436    OW        5.5    30-Jun-13    13.9    10.9     1.3      1.1     9.8     11.1     0.0    1.0
Country Garden                                               2007 HK            2.98       7,007    OW       3.55    30-Jun-13     7.6     6.8     1.2      1.1    17.4     16.7     5.1    5.8
Galaxy                                                       27 HK             24.85      13,438    OW         31    31-Dec-12    14.7    12.6     4.9      3.6    39.9     32.8     0.0    0.0
Golden Eagle Retail                                          3308 HK           14.96       3,729    OW       19.5    30-Jun-13    19.1    16.8     4.6      4.0    25.4     25.4     2.6    3.0
ICBC - H                                                     1398 HK            4.58     203,630    OW        5.8    31-Dec-12     5.9     6.0     1.2      1.0    21.3     18.3     5.4    5.4
Lenovo                                                       992 HK             6.25       8,289    OW        8.1    31-Mar-13    17.3    14.1     3.1      3.6    22.1     25.8     2.3    3.0
Ping An Insurance Group - H                                  2318 HK            58.1      53,493    OW         65    31-Dec-12    15.1    12.5     2.5      2.1    17.5     18.2     1.0    1.1
Sinopec Corp - H                                             386 HK             7.18      81,399    OW        9.0    31-Dec-12     6.9     6.3     1.0      0.9    14.6     14.4     3.4    3.8
The United Laboratories                                      3933 HK            3.79         795    OW        4.5    31-Dec-12    19.9    11.3     1.1      1.1     5.6      9.9     1.8    3.4
Stocks to Avoid
Anta Sports Products Ltd.                                    2020 HK            5.48       1,763    UW        3.6    30-Jun-13     7.7    11.5     1.6      1.6    21.9     13.9     7.9    5.3
Aluminum Corporation of China - H                            2600 HK            3.27       9,244    UW        2.7    30-Jun-13     NM    134.1     0.8      0.8    -9.3      0.6     0.0    0.0
China Merchants Holdings Int'l                               144 HK               24       7,707    UW         20    31-Dec-12    13.5    12.9     1.3      1.2     9.9      9.9     3.2    3.4
Glorious Property                                            845 HK             1.07       1,075    UW       1.00    31-Dec-12     4.7     4.9     0.4      0.4     8.0      7.4     0.0    0.0
New China Life Insurance Company Ltd - A                     601336 CH         22.34      10,388    UW         25    31-Dec-12    22.7    14.9     2.0      1.8     9.3     12.7     1.9    0.7
PetroChina                                                   857 HK            10.18     250,309    UW       8.75    31-Dec-12    10.0     9.6     1.4      1.3    14.6     13.9     4.5    4.7
Source: J.P. Morgan estimates, Bloomberg. Pricing date is 21 September 2012.




                                                                                                                                                                                                  5
Sunil Garg                                                               Asia Pacific Equity Research
(852) 2800-8518                                                          25 September 2012
sunil.garg@jpmorgan.com

Figure 5: Earnings growth vs. Earnings revisions momentum                                                                                          Figure 6: Trailing PE vs Forward Earnings growth
    10.0 3 month Earnings                                                                                                                          29
            revision (%)                                                                                                 Utilities                                    Trailing PE
     5.0                                                                                                                                                                                                                                     Cons. Staples
                                                                                                   Healthcare                                      24
     0.0                                                                   Financials                                                                                                                                                                          IT                                 Insurance
                                               Telecom                                                                                                                                                                                                              Healthcare
                                                                             Banks
     -5.0                                                                   Real Estate                                                            19
                                             China                                                                                                                                                                                                                                 Utilities
                                                IT                                                        2012 Earnings growth (%)
    -10.0                                               Cons. Staples
                                    Industrials                                                      Insurance
                                      Energy       Cons. Disc.                                                                                     14                                                                          Cons. Disc.
    -15.0                                                                                                                                                                                                       Industrials
                                                                                                                                                                         Telecom
                                                                                                                                                                                             China
    -20.0                                                                                                                                            9                    Energy                            Real Estate
    -25.0                                                                                                                                                                                            Materials
                                                                                                                                                                               Financials                                                                12 month Forward Earnings growth (%)
                           Materials                                                                                                                 4
    -30.0                                                                                                                                                         4                            9                          14                      19                               24                     29
            -40     -30       -20            -10       0                   10      20                 30            40     50                 60
Source: IBES, Datastream                                                                                                                           Source: MSCI, IBES, Datastream


Figure 7: 2012 Earnings growth vs. Earnings revisions momentum
        6                                                                                                                                                                                                                                                                                                                  56

                          3 month back             1 month back                  Current                   2012 EPS Growth (RHS)

        3                                                                                                                                                                                                                                                                                                                  49


                                                                                                                                                                                                                                                                                                                           42
        0

                                                                                                                                                                                                                                                                                                                           35
       -3

                                                                                                                                                                                                                                                                                                                           28
       -6
                                                                                                                                                                                                                                                                                                                           21

       -9
                                                                                                                                                                                                                                                                                                                           14

      -12
                                                                                                                                                                                                                                                                                                                           7


      -15                                                                                                                                                                                                                                                                                                                  0


      -18                                                                                                                                                                                                                                                                                                                  -7




                                                                                                                                                                                                                                                                     Real Estate
                                                                                   Cons. Staples
                                                           Cons. Disc.




                                                                                                                                                                                                                                                                                               Telecom
                                                                                                                                                     Healthcare




                                                                                                                                                                                                        Insurance
                                                                                                                                 Financials




                                                                                                                                                                               Industrials




                                                                                                                                                                                                                                             Materials
                  China




                                     Banks




                                                                                                                                                                                                                                                                                                               Utilities
                                                                                                                Energy




                                                                                                                                                                                                                               IT
Source: J.P. Morgan estimates, Bloomberg. Pricing date is 21 September 2012. Note: The bar shows the 3 month earnings revision (%) today (1D), last week (1W), 1 month back (1M) and 3 month back (3M). The red dots shows you 2012 earnings growth estimate
as of today




6
Sunil Garg                                                 Asia Pacific Equity Research
(852) 2800-8518                                            25 September 2012
sunil.garg@jpmorgan.com

Profit Outlook: Changes in 2012 and 2013 EPS Forecasts
                          MSCI China                                                  Consumer Discretionary                                                      Consumer Staples                                               Energy
                  2011         2012        2013                      26                2011         2012         2013                     120                 2011       2012        2013                 100           2011       2012      2013
8.0


7.5                                                                  23
                                                                                                                                          100                                                             90

7.0                                                                  20

                                                                                                                                           80                                                             80
6.5
                                                                     17
6.0
                                                                                                                                           60                                                             70
                                                                     14
5.5


5.0                                                                  11                                                                    40                                                             60
  Sep-10       Mar-11        Sep-11        Mar-12        Sep-12       Sep-10        Mar-11        Sep-11        Mar-12        Sep-12        Sep-10       Mar-11         Sep-11       Mar-12    Sep-12      Sep-10    Mar-11       Sep-11     Mar-12     Sep-12



                           Financials                                                          Industrials                                                            Materials                                                 Healthcare
 75                2011         2012         2013                     22                2011         2012         2013                    140                  2011        2012        2013                11            2011       2012      2013

                                                                                                                                          130
 70                                                                                                                                                                                                        10
                                                                      19                                                                  120
 65                                                                                                                                                                                                         9
                                                                                                                                          110
                                                                      16
 60                                                                                                                                       100                                                               8

 55                                                                                                                                        90                                                               7
                                                                      13
                                                                                                                                           80
 50                                                                                                                                                                                                         6
                                                                      10                                                                   70
 45                                                                                                                                                                                                         5
                                                                                                                                           60

 40                                                                    7                                                                   50                                                               4
  Sep-10        Mar-11        Sep-11        Mar-12        Sep-12       Sep-10        Mar-11         Sep-11        Mar-12        Sep-12      Sep-10        Mar-11         Sep-11       Mar-12     Sep-12     Sep-10   Mar-11        Sep-11     Mar-12     Sep-12



                               IT                                                               Telecom                                                                Utilities
10.5               2011         2012         2013                    13.0               2011         2012         2013                     40                  2011         2012        2013

                                                                                                                                           38
                                                                     12.5
 9.5
                                                                                                                                           36
                                                                     12.0                                                                  34
 8.5
                                                                                                                                           32
                                                                     11.5
 7.5                                                                                                                                       30
                                                                     11.0
                                                                                                                                           28
 6.5
                                                                     10.5                                                                  26
                                                                                                                                           24
 5.5                                                                 10.0
                                                                                                                                           22
 4.5                                                                  9.5                                                                  20
   Sep-10       Mar-11        Sep-11        Mar-12        Sep-12        Sep-10       Mar-11         Sep-11        Mar-12        Sep-12      Sep-10        Mar-11         Sep-11       Mar-12    Sep-12

Source: I/B/E/S, Datastream.
Notes: The dashboard aims to show changes in earnings expectations. All year ends are for December.
These numbers are directly from IBES aggregate and may differ from those in the growth expectations pages where adjustments are made for exceptional items.



                                                                                                                                                                                                                                                    7
Sunil Garg                                                   Asia Pacific Equity Research
(852) 2800-8518                                              25 September 2012
sunil.garg@jpmorgan.com



Value: China Sector Valuations
                                                                                                       P/E (x)                                       Div. Yield (%)                                 P/BV (x)                               ROE (%)
                             21-Sep-12        Avg.      Current      12m              Prospective                  Avg.      Current            Prospective                   Avg.      Current            Prospective
                               Index          2010      Trailing     Fwd         2011    2012E         2013E       2010      Trailing       2011 2012E 2013E                  2010      Trailing      2011 2012E 2013E       2010      2011     2012E   2013E
Consumer Disc                  184.7          22.7        12.2       12.0       11.9      12.2          11.4        1.1        2.0          2.0     2.0       2.3              3.8        2.0         2.2      1.9     1.7   28.3      18.5      15.8    15.0
Consumer Staples              1,178.4         22.7        25.4       23.7       26.6      25.0          20.4        1.4        1.5          1.6     1.5       1.8              4.1        3.4         3.6      3.3     3.1   15.4      13.6      13.3    15.0
Energy                         698.1          13.8        9.4         9.4       9.2        9.4          9.5         2.7        3.5          3.2     3.6       3.2              2.2        1.5         1.7      1.5     1.3   18.0      18.0      15.7    14.2
Financials                     383.9          15.5        7.1         6.9       7.5        7.0          6.8         2.4        4.2          4.0     4.3       4.5              2.4        1.2         1.3      1.2     1.0   17.0      17.8      16.6    15.1
Health Care                    121.7          48.6        22.8       21.0       25.1      22.2          18.3        0.4        0.9          1.0     0.9       1.1              8.2        2.4         2.5      2.3     2.1   12.2      10.1      10.5    11.6
Industrials                    111.5          25.4        11.3       11.0       10.2      11.8          9.3         1.5        3.2          3.2     3.2       2.9              1.8        1.0         1.0      1.0     0.9   14.3      10.2      8.2     9.7
IT                             131.5           na         26.6       24.7       24.8      27.2          19.2        0.4        0.7          0.6     0.7       0.8              5.7        4.4         4.8      4.3     3.6   20.9      19.4      15.8    18.8
Materials                      681.2          44.9        10.4       10.7       7.9       11.6          8.7         1.1        2.8          2.3     2.9       2.6              2.2        1.2         1.2      1.2     1.0   14.2      15.8      10.0    12.1
Telecom                        138.0          12.8        12.7       12.6       12.8      12.7          12.2        3.3        3.4          3.3     3.4       3.4              2.1        1.7         1.8      1.6     1.5   14.9      14.4      12.8    12.4
Utilities                      414.5          20.9        14.0       12.4       18.7      13.0          10.9        2.2        1.7          1.9     1.6       2.4              1.9        1.6         1.7      1.5     1.4   10.0      8.9       11.8    12.8
MSCI China                      54.6          14.0        9.8         9.6       9.8        9.7          9.2         2.6        3.2          3.1     3.3       3.3              2.2        1.5         1.6      1.4     1.3   16.4      16.3      14.6    14.0
Source: I/B/E/S, MSCI, J.P. Morgan Estimates.
For all sectors and market, forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using J.P. Morgan estimates for covered stocks and I/B/E/S estimates for the rest.
Companies with different yearends are calendarised to December yearends and are free float adjusted for aggregation.




Regional and Country Valuations
                                                                         P/E (x)                                                   Div. Yield (%)                                               P/BV (x)                              ROE (%)
                          21-Sep-12          Avg.       Current       12m             Prospective                 Avg.      Current           Prospective                  Avg.      Current           Prospective
                          MSCI Index         2010       Trailing      Fwd       2011     2012E 2013E              2010      Trailing 2011 2012E 2013E                      2010      Trailing     2011    2012E 2013E    2010       2011   2012E     2013E
Global                      354.1            15.1         13.1        11.9       13.7     12.9    11.5             2.7        2.8        2.7      2.8     3.1               1.7        1.7         1.7     1.6     1.5   12.8       13.1    13.0      13.6
USA                        1392.4            16.3         14.7        13.3       15.4     14.4    12.9             2.2        2.1        1.9      2.2     2.4               1.9        2.1         2.3     2.0     1.9   14.2       15.2    14.9      15.0
Europe                     1127.4            13.4         11.8        10.9       11.6     11.9    10.5             3.6        3.9        3.9      3.9     4.2               1.5        1.5         1.5     1.5     1.4   13.2       13.1    12.6      13.5
Asia Pacific                 93.3            16.4         11.9        10.8       12.6     11.7    10.5             2.7        3.1        3.0      3.1     3.4               1.6        1.3         1.4     1.3     1.2   11.3       11.3    11.3      11.8
Asia Pacific ex-JP          425.1            15.3         12.8        11.5       13.6     12.5    11.1             2.8        3.1        3.1      3.1     3.3               2.0        1.6         1.7     1.6     1.5   14.3       13.3    13.2      13.7
Pacific ex-Japan            334.0            14.9         13.3        12.5       13.3     13.2    12.2             3.8        4.4        4.3      4.4     4.7               1.8        1.5         1.6     1.5     1.4   12.4       12.4    11.8      12.1
EMF Asia                    630.5            14.7         12.3        10.8       13.2     11.9    10.5             2.4        2.5        2.6      2.5     2.8               1.9        1.7         1.8     1.6     1.5   15.2       14.1    14.1      14.6
Japan                       464.6             NM          19.1        14.6       15.1     21.3    13.0             2.1        2.7        2.6      2.8     3.0               1.1        0.9         0.9     0.9     0.8    4.2        6.2     4.2       6.5
Australia                   896.1            17.1         14.1        13.1       14.5     13.9    12.8             4.0        4.8        4.7      4.8     5.0               2.0        1.7         1.8     1.7     1.6   12.6       12.6    12.5      13.0
China                        54.6            14.0          9.8         9.6        9.8      9.7     9.2             2.6        3.2        3.1      3.3     3.3               2.2        1.5         1.6     1.4     1.3   16.4       16.3    14.6      14.0
Hong Kong                  11594.1           15.8         15.3        14.8       14.1     15.7    14.5             2.8        3.0        3.1      3.0     3.2               1.4        1.3         1.3     1.3     1.2   10.2        9.8     8.2       8.5
India                       729.7            22.5         16.6        14.5       18.3     16.1    14.0             1.3        1.5        1.4      1.6     1.7               3.0        2.6         2.8     2.5     2.2   14.5       16.6    16.3      16.4
Indonesia                  5094.4            16.7         15.9        14.0       15.9     15.9    13.4             2.4        2.6        2.4      2.7     3.0               4.1        3.6         3.9     3.4     3.0   26.1       26.8    23.0      23.8
Korea                       575.5            12.2         10.4         8.7       12.4      9.8     8.3             1.0        1.0        1.0      1.0     1.0               1.6        1.4         1.5     1.3     1.2   15.1       12.8    14.6      15.1
Malaysia                    578.2            17.1         15.9        14.3       16.9     15.5    13.8             3.0        2.9        2.9      2.9     3.3               2.2        2.2         2.3     2.1     2.0   14.2       14.0    14.3      14.8
Philippines                 866.5            17.8         18.0        15.8       19.5     17.4    15.2             2.8        2.4        2.4      2.4     2.7               2.6        2.7         2.9     2.7     2.4   17.4       15.9    16.0      16.6
Singapore                   355.9            15.8         13.9        13.4       13.7     14.0    13.2             3.4        3.4        3.5      3.4     3.7               1.7        1.5         1.6     1.5     1.4   12.4       11.8    10.8      10.8
Taiwan                      276.0            16.5         18.0        14.7       18.9     17.7    13.9             3.1        3.6        4.2      3.4     3.5               2.0        1.8         1.9     1.8     1.7   14.3       10.0    10.3      12.4
Thailand                    486.1            13.2         12.9        11.4       14.2     12.4    11.0             3.5        3.3        2.9      3.4     3.9               2.1        2.3         2.5     2.2     2.0   18.2       18.7    18.9      18.9
Source: I/B/E/S, MSCI, J.P. Morgan Estimates.




8
Sunil Garg                                            Asia Pacific Equity Research
(852) 2800-8518                                       25 September 2012
sunil.garg@jpmorgan.com

Stock Market Valuation
                     MSCI China Forward P/E Band                                               MSCI China Forward P/B Band                                                MSCI China Trailing P/E ratio

120     Current=8.6 vs                                                       140 Current=1.3 vs                                                     120      Current=9.2 vs
100     Avg 14.2 with stdev 6.1                                              120 Avg 2.1 with                                                       100      Avg 15.4 with stdev 4.8
 80                                                                          100 stdev 0.7                                                           80
                                                                              80                                                                     60
 60
                                                                              60
 40                                                                                                                                                  40
                                                                              40
 20                                                                                                                                                  20
                                                                              20
   0                                                                           0                                                                     0
   Aug-02       Aug-04        Aug-06      Aug-08     Aug-10    Aug-12          Aug-04   Aug-06               Aug-08        Aug-10          Aug-12    Aug-04            Aug-06           Aug-08         Aug-10               Aug-12
            MSCI China                  10x                   12x                        MSCI China           1.6x                    2x                            MSCI China               10x                        12x
            14x                         16x                                              2.4x                 2.8x                                                  14x                      16x


                         MSCI China EPS forecast                                                      MSCI China ROE (%)                                                  Industrial Enterprises' ROE
8.0                    2011             2012          2013
                                                                               18                                                                                              ROE (left)             Pre-tax Margin (right)
                                                                                                                                                    30%                                                                             12%
7.5                                                                                                                                                 25%                                                                             10%
                                                                               17
7.0                                                                                                                                                 20%                                                                             8%
                                                                               16
6.5                                                                                                                                                 15%                                                                             6%
                                                                               15
6.0                                                                                                                                                 10%                                                                             4%
                                                                               14
                                                                                                                                                    5%                                                                              2%
5.5
                                                                               13                                                                   0%                                                                               0%
5.0                                                                             Aug-04         Aug-06        Aug-08        Aug-10          Aug-12         Jul-06              Jul-08               Jul-10                      Jul-12
  Sep-10           Mar-11           Sep-11          Mar-12          Sep-12

         MSCI China Performance vs MSCI Emerging Markets                                          H-share Forward P/E Band                                                Red-chip Forward P/E Band

  170                                                                        25,000        Current=7.3 vs                                           8,000      Current=11.1vs
                                                                                           Avg 11.9 with                                            7,000      Avg 15.4 with stdev
                                                                             20,000        stdev 4.6                                                           6.6
  150                                                                                                                                               6,000
                                                                             15,000                                                                 5,000
  130                                                                                                                                               4,000
                                                                             10,000                                                                 3,000
  110                                                                                                                                               2,000
                                                                             5,000
                                                                                                                                                    1,000
   90                                                                            0                                                                      0
                                                                                 Aug-04         Aug-06       Aug-08        Aug-10          Aug-12       Aug-04     Aug-06   Aug-08                          Aug-10             Aug-12
   70
    Sep-04           Sep-06            Sep-08       Sep-10      Sep-12                      H-share            18x                  16x                            Red-chip                 20x                       18x
                                                                                            14x                12x                                                 16x                      14x
Source: CEIC, Datastream, Bloomberg, J.P. Morgan.




                                                                                                                                                                                                                                          9
Sunil Garg                                                  Asia Pacific Equity Research
(852) 2800-8518                                             25 September 2012
sunil.garg@jpmorgan.com

Market Valuation and Fund Flow
                 Lagging P/E Ratio for Shanghai A                                                                                                   Lagging P/B ratio for Shanghai A share
                                                                         12m Forward P/E for Shanghai A, and H share                                                                                             MSCI index returns since Jan 1 2001
                               and H share                                                                                                                         and H share

 70                                          Shanghai A shares                                                                              7                                                                                              % MSCI index returns since
                                                                                  Shanghai A share                       H share                                                                      550%
                                                                                                                                            6                                                                                                  January 1, 2001
 60                                                                                                                                                                                                             424%
                                                                    60                                                                                                                                450%
 50                                                                                                                                         5
                         H shares                                   50                                                                                                                                350%              314%
 40                                                                                                                                         4                                                                                      263%
 30                                                                 40                                                                      3                                                         250%                                  187%
                                                                    30                                                                                                                                                                              141%
 20                                                                                                                                         2                                                         150%
 10                                                                 20                                                                      1                                                                                                               11%
                                                                                                                                                                                                       50%
  0                                                                 10                                                                      0
  Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12                                                                                                 Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12                 -50%                                                   -43%
                                                                      0                                                                                                                                         RUSSIA INDIA BRAZIL EM             CHINA USA JAPAN
                                                                      Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12                                               Shanghai A          H share
                       Shanghai A shares         H Share



                                                                                                                                            Monthly cumulative net foreign investment into the           Monthly Net foreign investment into the Chinese
                    New open-end fund in China                                         A-share IPO (Rmb bn)
                                                                                                                                                            Chinese stock (US$bn)                                                stocks (US$MM)
      (Rmb bn)

  500                                                               600                                                                     35                                                                                                                          110
                                                                                                                                                                                                      3,000
                 402                                       409                                                         491.1                                                                                                                                            100
                         396                                        500                            447.0                                    30
  400                                  358                                                                                                                                                            2,000                                                             90
                                              315                   400                                                                     25                                                                                                                          80
                                                                                                                                                                                                      1,000
                                                    268                                                                                                                                                                                                                 70
  300                                                                                                                        272.0
                                                                    300                                                                     20                                                             0                                                            60
                                                                                                                202.2               183.3                                                                                                                               50
  200                           171                                 200                      164.3                                          15                                                        (1,000)                                                           40
                                                                                                          103.4
                                                                    100                                                                     10                                                        (2,000)                                                           30
                                                                           45.4 35.3
  100                                                                                  5.8                                                                                                                                                                              20
                                                                                                                                                5                                                     (3,000)                                                           10
                                                                      0
                                                                            03   04    05     06     07    08     09    10     11    12                                                                      Nov-04     Jul-06       Mar-08        Dec-09   Aug-11   Jul-12
      0                                                                                                                                     -
                 2006 2007 2008 2009 2010 2011 2012                                                                                  ytd        Jul-04    Jul-06       Jul-08    Jul-10      Jul-12                    Foreigners' Net Buy (L)
                                                ytd                                                                                                                                                                    MSCI China (R)

Source: CEIC, Wind, EPFR Global, J.P. Morgan.




10
Haibin Zhu                                                  Asia Pacific Emerging Markets Research
(852) 2800-7039                                             25 September 2012
haibin.zhu@jpmorgan.com

                                                                                                                                                                                     Haibin ZhuAC
 Key Economic Data                                                                                                                                                                   (852) 2800 7039, haibin.zhu@jpmorgan.com
                                                                                                                                                                                     JPMorgan Chase Bank, N.A., Hong Kong

                      Real GDP growth                                              China: manufacturing PMIs                                           IP (%oya, 3mma)                                      FAI (%oya, 3mma)
               % oya ( LHS)               % q/q, saar (RHS)
                                                                        65                                                         20                                                50
17                                                         25                                Markit PMI             NBS PMI
                                                                        60                                                                                                           40
15                                                            20                                                                   16
13                                                                      55
                                                              15                                                                   12                                                30
11                                                                      50
                                                              10                                                                    8                                                20
 9                                                                      45
 7                                                            5         40                                                          4                                                10

 5                                                            0         35                                                         0                                                  0
  06Q2 07Q2 08Q2 09Q2 10Q2 11Q2 12Q2                                     Aug-04       Aug-06          Aug-08    Aug-10    Aug-12   Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12          Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12



                 Retail Sales (%oya, 3mma)                                          Exports & Imports (%oya, 3mma)                                 Trade Balance (USD, eop)                          Electricity production (% oya)

  25                                                                         70                    Exports      Imports             40,000                                            30.0
                                                                                                                                                                                      25.0
                                                                             50                                                     30,000
  20                                                                                                                                                                                  20.0
                                                                             30                                                     20,000                                            15.0
  15                                                                                                                                                                                  10.0
                                                                             10                                                     10,000                                             5.0
  10                                                                                                                                                                                   0.0
                                                                         -10                                                               0
                                                                                                                                                                                      -5.0
                                                                         -30                                                       -10,000                                           -10.0
     5
     Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12                             Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12                     Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12



                   Inflation (% oya, 3mma)                                                           Core CPI                                  Nominal interest rates (%p.a., eop)                   Real interest rates (%p.a., eop)

                  CPI ( LHS)               PPI (RHS)                                                                                                  Deposit rate (%p.a., eop)       China: real interest rates
 10                                                               10         3.0                                                   8
                                                                                                                                                                                      % pa
                                                                             2.0                                                   7                  Lend rate (%p.a., eop)
  5                                                               5                                                                                                                   10                    1-year lending rate
                                                                                                                                   6                                                                                                   1-year deposit rate
                                                                             1.0
                                                                                                                                   5
  0                                                               0          0.0                                                                                                       5
                                                                                                                                   4
                                                                         -1.0                                                      3
  -5                                                              -5
                                                                                                                                                                                       0
                                                                         -2.0                                                      2
-10                                                               -10    -3.0                                                      1
       01 02 03 04 05 06 07 08 09 10 11 12 13                                                                                           01 02 03 04 05 06 07 08 09 10 11 12 13        -5
                                                                                                                                                                                           04   05     06     07     08      09   10      11     12     13

Source: CEIC, J.P. Morgan economics estimates. Highlighted part in grey color are forecast data.


                                                                                                                                                                                                                                        11
Haibin Zhu                                                      Asia Pacific Emerging Markets Research
(852) 2800-7039                                                 25 September 2012
haibin.zhu@jpmorgan.com

Key Economic Data (monthly indicators)
Reserve requirement ratios for financial institutions                       Financial institutions' new loan creation                                    Total social financing and bank’s new loan creation                                                                  M2 (%oya, 3mma)
                                                                         billion yuan, nsa
 China: reserve requirement ratios for financial institutions                                         2010        2011          2012                     Total social financing and bank's new loan creation
                                                                         1600                                                                                                                                                                       30
 %                                                         JPMorgan                                                                                      Trillion yuan                                                                              28
                                                            forecast     1400
 25                                                                                                                                                      16                                   Total social financing                                26
                                RRR for large banks                                                                                                                                                                                                 24
                                                                         1200
 20                                                                                                                                                      12                   Bank new loan                                                         22
                                                                                                                                                                                creation
                                                                         1000                                                                                                                                                             1H12      20
 15                                                                                                                                                       8                                                                                         18
                                                                          800
                                                                                                                                                                                                                                                    16
 10                                                                                                                                                       4                                                                                         14
                                    RRR for medium                        600
                                    and small banks                                                                                                                                                                                                 12
  5                                                                       400                                                                             0                                                                                          Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12
        03        05          07           09            11                        Jan Feb Mar Apr May Jun               Jul   Aug Sep Oct Nov Dec              02       03    04      05    06      07     08        09     10     11    12


                       Chinese Yuan (CNY)                                                                     FDI (%oya)                                                         Forex Reserve (USD bn)                                                            Government Surplus/Deficit (12mrs)

  8.5                                                                    200                                                                             4,000
                                                                                                                                                                                                                                                            Aug-02          Aug-04     Aug-06       Aug-08   Aug-10   Aug-12
                                                                         150                                                                                                                                                                              500
  8.0                                                                                                                                                    3,000
  7.5        JPMorgan forecast:                                          100                                                                                                                                                                                   0
                                                                                                                                                         2,000
             end Dec 12: 6.30
  7.0                                                                     50                                                                                                                                                                             -500
                                                                                                                                                         1,000
  6.5                                                                        0                                                                                                                                                                           -1000
                                                                                                                                                              0
  6.0                                                                    -50                                                                                  Aug-04             Aug-06              Aug-08                Aug-10          Aug-12
                                                                                                                                                                                                                                                         -1500
        01 02 03 04 05 06 07 08 09 10 11 12                                Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12



              Consumer Confidence Index                                                       Business Confidence Index                                                  Urban/Rural Income (RMB, 12mma)                                                            Urban/Rural Income Growth Rate

  130                                                                     160                                                                            2400                   Urban(L)                  Rural (R)                           900   40                      Urban           Rural
  125                                                                     150                                                                                                                                                                 800
                                                                                                                                                         2000                                                                                 700   30
  120                                                                     140                                                                                                                                                                 600
  115                                                                     130                                                                            1600                                                                                 500   20
  110                                                                     120                                                                                                                                                                 400
                                                                                                                                                         1200                                                                                       10
  105                                                                                                                                                                                                                                         300
                                                                          110
  100                                                                                                                                                     800                                                                                 200    0
                                                                          100                                                                                                                                                                 100
   95
   90                                                                      90                                                                             400                                                                                 0     -10
                                                                            Jun-02           Jun-04          Jun-06       Jun-08       Jun-10   Jun-12      Jun-02            Jun-04        Jun-06        Jun-08           Jun-10        Jun-12       Jun-06       Jun-07     Jun-08    Jun-09      Jun-10   Jun-11   Jun-12
    Aug-02      Aug-04     Aug-06      Aug-08         Aug-10    Aug-12



Source: CEIC.




12
Daniel Kang                                                         Asia Pacific Equity Research
(852) 2800 8570                                                     25 September 2012
daniel.kang@jpmorgan.com

Commodities Prices
                      Coal Price (US$/ton)                                                     Steel Spot Price (US$/ton)                                Aluminium Price (US$/ton)                                 Copper Price (US$/ton)
                          QHD (5500Kc, RMB/t)                                 1,300                              China Export Equiv. HRC                   LME Aluminium                                            LME Copper
                                                                                                                 Europe HRC                  3,500         SHFE Aluminium US$/t equivalent            9800        SHFE Copper US$/t equivalent
                          Richards Bay (6000Kc, USD/t) - RHS
                                                                              1,100
                                                                                                                 US HRC                                                                               8800
                          Newcastle (6600Kc, USD/t) - RHS                                                        East Asia HRC
1100                                                                    200                                                                  3,000                                                    7800
1000                                                                    175    900                                                                                                                    6800
 900                                                                    150                                                                  2,500                                                    5800
 800                                                                    125
 700                                                                           700                                                                                                                    4800
                                                                        100                                                                  2,000                                                    3800
 600
 500                                                                    75     500                                                                                                                    2800
 400                                                                    50                                                                   1,500
                                                                                                                                                                                                      1800
 300                                                                    25     300                                                                                                                     800
                                                                                                                                             1,000
       Sep-02


                 Sep-04


                               Sep-06


                                         Sep-08


                                                   Sep-10


                                                               Sep-12




                                                                                      Aug-06




                                                                                                     Aug-08




                                                                                                                    Aug-10




                                                                                                                                    Aug-12
                                                                                                                                                 Sep-02 Sep-04 Sep-06 Sep-08 Sep-10 Sep-12               Sep-02 Sep-04 Sep-06 Sep-08 Sep-10 Sep-12



                          Oil Price (USD/barrel)                                                Rubber (RMB/ton, China)                                        Sugar (US$/lb)                                      Cotton (RMB/ton, China)

    160                                 Brent                                 45,000                                                         0.42                                                     35000
    140                                                                       40,000                                                         0.36
                                                                              35,000                                                                                                                  30000
    120
                                                                              30,000                                                          0.3
    100                                                                                                                                                                                               25000
                                                                              25,000                                                         0.24
       80
                                                                              20,000                                                         0.18                                                     20000
       60                                                                     15,000
       40                                                                     10,000                                                         0.12                                                     15000
       20                                                                      5,000                                                         0.06                                                     10000
        Sep-06               Sep-08           Sep-10           Sep-12              Sep-06          Sep-08        Sep-10        Sep-12           Sep-06       Sep-08        Sep-10            Sep-12       Sep-06       Sep-08       Sep-10        Sep-12


                  Soybean (RMB/ton, China)                                                       Corn (RMB/ton, China)                                        Water (RMB/ton)                                      Electricity (RMB/100KW)

  6000                                                                         2600                                                          2.2                                                      54
  5400                                                                         2400                                                          2.1                                                      53
                                                                               2200                                                            2
  4800                                                                                                                                       1.9                                                      52
                                                                               2000
  4200                                                                                                                                       1.8                                                      51
                                                                               1800
  3600                                                                                                                                       1.7                                                      50
                                                                               1600                                                          1.6
  3000                                                                         1400                                                          1.5                                                      49
  2400                                                                         1200                                                          1.4                                                      48
     Sep-06                 Sep-08            Sep-10           Sep-12             Sep-06           Sep-08        Sep-10         Sep-12        Aug-06        Aug-08         Aug-10            Aug-12    Aug-06       Aug-08        Aug-10          Aug-12

Source: CEIC, Bloomberg Mysteel.




                                                                                                                                                                                                                                             13
Sunil Garg                                                     Asia Pacific Equity Research
(852) 2800-8518                                                25 September 2012
sunil.garg@jpmorgan.com

China’s share of global commodity demand
                                         Aluminum                           Nickel                  Copper            Iron Ore                Coal                  Oil
2015E                                           48                              41                      42                  52                  32                  11
2010                                            40                              33                      37                  53                  34                  10
2005                                            22                              15                      23                  36                   6                   8
2000                                            13                                                      12                  20                  1*                   7
Source: J.P. Morgan. Note: Coal includes thermal + coking coal. * Data for 2001.

Intensity of cement use; per-capita consumption of cement (tonnes) vs. adjusted per-
capita nominal GDP
                                                                                                                                      Russia (1991-2010)
  Cement consumption per capita (tonnes)                                                                                              Brazil (1985-2010)
 1.7                                    1997: per capita cement consumption                                                           India (1985-2010)
                                                  peaked in Korea                                                                     China (1985-2010)
                                                                                                                                      US (1930-2010)
 1.5                                                                                                                                  UK (1985-2010)
                                                                                        1993: per capita cement
                                                                                                                                      Germany (1985-2010)
                                                                                                                                      Japan (1985-2010)
 1.3                                                                                                                                  Taiwan (1985-2010)
                                                                                                                                      South Korea (1985-2010)
                                                                                                                                      Mexico (1985-2010)
 1.1                                                                                                                                  Spain (1985-2010)
                                                                                                S. Korea 2010                         Indonesia (1985-2010)
 0.9                                                                                                         Spain                     Japan 2009

 0.7
                            Russia 2010                                                                                                      Germany 2010
 0.5                                                                                  Taiwan 2010
                  Mexico

 0.3

 0.1                   Indonesia 2010                   Brazil 2010                                                                                  US 2010
                 India 2010                                                                               UK 2010

-0.1
        0                   6000                   12000                  18000                 24000        30000           36000           42000          48000
                                                                                                    GDP per capita (USD)
Source: US Geological Survey and J.P. Morgan estimates.
Note: The GDP per capita is restated for today’s dollars by adjusting the deflator series.

Intensity of steel use; per-capita consumption of steel (lbs) vs. adjusted per-capita
nominal GDP
  Per cap ita consumption of steel (lbs)
                                                                                                                                     South Korea (1970 - 2010)
 3,000                 1993: p er capita steel consumption peaked i n
                                                                                                                                     Un ited States (1950 -
                                                                         2008: per capita steel consumption peaked                   2010)
                                                                                         in Korea                                    Taiwan (1977 - 2010)
 2,500                                                                                                                               Japan (1956 - 2010)
                                                                                                                                     Germany (1968 - 2010)

 2,000                                                                                       S. Korea 2009                           Ch ina (1983 - 2010)



 1,500                                                                           Taiwan 2009                                            Japan 2009



 1,000

                                          China 2009
                                                                                                                  German y 2009
     500
                                                                                                                                 U.S. 2009


                             Ind i a 2009
         0
             0              5000             10000             15000             20000    25000     30000              35000         40000      45000       50000
                                                                                   GDP per capita (US$)

Source: CRU and J.P. Morgan estimates.
Note: The GDP per capita is restated for today’s dollars by adjusting the deflator series.

                                                               :



14
Brynjar Eirik Bustnes, CFA                                      Asia Pacific Equity Research
(852) 2800-8578                                                 25 September 2012
brynjar.e.bustnes@jpmorgan.com

Energy and Materials Sector
                Total petroleum products demand (yoy)                                                             Production: Crude Steel (yoy,%)                                                 Production: Aluminium (yoy,%)
  30%
  25%                                                                                   50                                                                                        70
                                                                                                                                                                                  60
  20%                                                                                   40                                                                                        50
  15%                                                                                                                                                                             40
                                                                                        30
  10%                                                                                                                                                                             30
   5%                                                                                   20                                                                                        20
   0%                                                                                                                                                                             10
                                                                                        10                                                                                         0
  -5%
                                                                                         0                                                                                       -10
 -10%                                                                                                                                                                            -20
 -15%                                                                                   -10                                                                                      -30
     Aug-04          Aug-06              Aug-08             Aug-10            Aug-12                                                                                                Jul-06   Jul-07     Jul-08     Jul-09    Jul-10     Jul-11      Jul-12
                                                                                        -20
                              Apparent demand petroleum products                          Aug-06       Aug-07         Aug-08     Aug-09     Aug-10      Aug-11      Aug-12



                  Production: Electricity Power (yoy,%)                                                              Production : Coal (yoy,%)                                                        Production : Copper (yoy,%)

   50                                                                                     70                                                                                     60
   40                                                                                     60                                                                                     50
                                                                                          50                                                                                     40
   30
                                                                                          40                                                                                     30
   20                                                                                     30
                                                                                                                                                                                 20
   10                                                                                     20
                                                                                                                                                                                 10
    0                                                                                     10
                                                                                           0                                                                                      0
  -10                                                                                                                                                                           -10
                                                                                         -10
  -20                                                                                    -20                                                                                       Jul-06    Jul-07     Jul-08     Jul-09    Jul-10     Jul-11      Jul-12
    Aug-06     Aug-07     Aug-08       Aug-09      Aug-10          Aug-11    Aug-12        Aug-06      Aug-07         Aug-08     Aug-09     Aug-10      Aug-11      Aug-12



                     Coal import & export ('000 tons)                                                                   Spot China iron ore                                                       Steel Export & Import ('000 tons)
                                                                                        200                            Spot China iron ore (62% Fe)
8000                              export               import                                                          3-mth iron ore futures (62% Fe)                          9000
                                                                                        175                                                                                                                       Import                export
7000                                                                                                                                                                            8000
6000                                                                                    150                                                                                     7000
5000                                                                                                                                                                            6000
                                                                                        125
4000                                                                                                                                                                            5000
                                                                                        100                                                                                     4000
3000
                                                                                         75                                                                                     3000
2000                                                                                                                                                                            2000
1000                                                                                     50                                                                                     1000
                                                                                                         Mar-10




                                                                                                                                   Mar-11




                                                                                                                                                           Mar-12
                                                                                              Sep-09




                                                                                                                        Sep-10




                                                                                                                                               Sep-11




                                                                                                                                                                       Sep-12
   0                                                                                                                                                                               0
   Aug-06      Aug-07     Aug-08         Aug-09      Aug-10         Aug-11     Aug-12                                                                                              Aug-06    Aug-07      Aug-08     Aug-09     Aug-10      Aug-11      Aug-12


Source: CEIC, Bloomberg. ..




                                                                                                                                                                                                                                                             15
Josh Klaczek                                                 Asia Pacific Equity Research
(852) 2800-8534                                              25 September 2012
josh.klaczek@jpmorgan.com

Bao Ling Chan
(852) 2800-8592
baoling.chan@jpmorgan.com

Bank & Insurance Sector
                                    Bank loans (%yoy)                                                      Bank deposits (%yoy)                                                        Market Share
                                                                                                                                                                                       Chinal Life                  Ping An
 35                                                                                30                                                                      60%
                                                                                                                                                                                       CPIC Life                    New China Life
 30                                                                                                                                                        50%                         Taiping Life
                                                                                   25
 25                                                                                                                                                        40%
                                                                                   20
 20                                                                                                                                                        30%

 15                                                                                15                                                                      20%

 10                                                                                10                                                                      10%
  Aug-06           Aug-07     Aug-08      Aug-09    Aug-10    Aug-11     Aug-12     Aug-06       Aug-07   Aug-08   Aug-09   Aug-10    Aug-11     Aug-12     0%
                                                                                                                                                              Jul-06    Jul-07      Jul-08     Jul-09     Jul-10      Jul-11     Jul-12



                             New Loan creation (RMB bn)                                                   Short term loan (% yoy)                                          No of issued bank cards ( million)

2000                                                                                25                                                                    3400

1500                                                                                20                                                                    2900
                                                                                    15
1000                                                                                                                                                      2400
                                                                                    10
 500                                                                                                                                                      1900
                                                                                        5
      0                                                                                 0                                                                 1400
      Aug-06        Aug-07     Aug-08     Aug-09    Aug-10   Aug-11      Aug-12         Aug-06   Aug-07   Aug-08   Aug-09    Aug-10   Aug-11     Aug-12      Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12




                   Property insurance premiums (%yoy)                                                 Life insurance premiums (%yoy)                       Shanghai Comp index vs 10-Y government bond yield
                                                                                                      ping an                     CPIC Life
  90                         CPIC             Ping An             PICC             160                New China Life              Taiping Life            7000                   SHCOMP index                10-y bond yield         5
                                                                                                      China life                                          6000
                                                                                   120                                                                                                                                               4
  60                                                                                                                                                      5000
                                                                                   80                                                                     4000                                                                       3
  30
                                                                                   40                                                                     3000                                                                       2
      0                                                                                                                                                   2000
                                                                                    0                                                                                                                                                1
                                                                                                                                                          1000
  -30                                                                              -40                                                                       0                                                                      0
          Jul-10            Jan-11         Jul-11        Jan-12           Jul-12      Jul-06     Jul-07   Jul-08   Jul-09    Jul-10   Jul-11     Jul-12      Sep-06    Sep-07     Sep-08     Sep-09     Sep-10     Sep-11      Sep-12



Source: CEIC.


16
Lucia Kwong, CFA                                                                                        Asia Pacific Equity Research
(852) 2800-8526                                                                                         25 September 2012
lucia.yk.kwong@jpmorgan.com

Real Estate Sector
       Residential primary sales volume in 8 major cities (MM sqm)1                                                                                           Centaline secondary price index (up to Aug-12)                                                                                                                        Housing inventory in major cities1,2
14.0         Mth avg vol (mil sqm)                                                                                                        450                                                                                                                                     MM sqm                                                                                                                                                                                           No of mths
             2005 = 6.7 2006 = 8.0
12.0         2007 = 8.5 2008 = 5.1                                                                                                        400                                                                                                                             386.7     mn sqm                                                                                                                                                                                                      No. of months
             2009 = 9.9 2010 = 6.8                                                                                                                                                                                                                                                   70             6868                                                                                                                                                                                                      35
             2011 = 5.4                                                                                                                   350                                                                                                                             319.4                66          67
10.0
                                                                                                                                                                                                                                                                                          64                                                                                                                                                                                                                  30
                                                                                                                                                                                                                                                                          308.0      65                         63                                                                                                                                                        636262
                                                                                                                                          300                                                                                                                                                                        61
 8.0                                                                                                                                                                                                                                                                      297.6                                                                                                                                                                                      61
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              25
                                                                                                                                                                                                                                                                                     60                                                                                                                                                                         58
                                                                                                                                          250                                                                                                                             242.5                                           57                                                                                                                               57                           57
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   56        56 56
 6.0                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 55 55    20
                                                                                                                                          200                                                                                                                                        55                                                                                                                                                               54
                                                                                                                                                                                                                                                                                                                               53                                                                                                             52 52
                                                                                                                                                                                                                                                                                                                                                                                                                                         51                                                                   15
 4.0                                                                                                                                                                                                                                                                                                                                50
                                                                                                                                          150                                                                                                                                        50                                                  49        49
                                                                                                                                                                                                                                                                                                                                              47                                                                                    47                                                                        10
 2.0                                                                                                                                                                                                                                                                                                                                                    45                                          46          46
                                                                                                                                          100                                                                                                                                                                                                                          44                                4444        44        44
                                                                                                                                                                                                                                                                                     45                                                                      44                      4343
                                                                                                                                                                                                                                                                                                                                                                  42                        43 43                         43                                                                                  5




                                                                                                                                                                                                  Nov/07




                                                                                                                                                                                                                                Nov/09
                                                                                                                                                                              Jun/06




                                                                                                                                                                                                           Jul/08




                                                                                                                                                                                                                                          Jul/10
                                                                                                                                                 May/04

                                                                                                                                                            Feb/05

                                                                                                                                                                     Oct/05




                                                                                                                                                                                         Feb/07




                                                                                                                                                                                                                       Mar/09




                                                                                                                                                                                                                                                   Apr/11

                                                                                                                                                                                                                                                            Dec/11

                                                                                                                                                                                                                                                                       Aug/12
                                                                                                                                                                                                                                                                                                                                                                            414142
 0.0
       Jan-05




                                                                                                    Jun-10
                              Feb-06



                                               Mar-07




                                                                                    May-09




                                                                                                                     Jul-11
                                                                Apr-08




                                                                                                                                 Aug-12
                                                                                                                                                                                                                                                                                     40                                                                                                                                                                                                                       -




                                                                                                                                                                                                                                                                                          Oct/08


                                                                                                                                                                                                                                                                                          Jan/09




                                                                                                                                                                                                                                                                                          Jun/09
                                                                                                                                                                                                                                                                                           Jul/09


                                                                                                                                                                                                                                                                                          Oct/09


                                                                                                                                                                                                                                                                                          Jan/10




                                                                                                                                                                                                                                                                                          Jun/10
                                                                                                                                                                                                                                                                                           Jul/10


                                                                                                                                                                                                                                                                                          Oct/10


                                                                                                                                                                                                                                                                                          Jan/11




                                                                                                                                                                                                                                                                                          Jun/11
                                                                                                                                                                                                                                                                                           Jul/11


                                                                                                                                                                                                                                                                                          Oct/11


                                                                                                                                                                                                                                                                                          Jan/12




                                                                                                                                                                                                                                                                                          Jun/12
                                                                                                                                                                                                                                                                                           Jul/12
                                                                                                                                                                                                                                                                                          Sep/08

                                                                                                                                                                                                                                                                                          Nov/08
                                                                                                                                                                                                                                                                                          Dec/08

                                                                                                                                                                                                                                                                                          Feb/09
                                                                                                                                                                                                                                                                                          Mar/09

                                                                                                                                                                                                                                                                                          May/09


                                                                                                                                                                                                                                                                                          Aug/09
                                                                                                                                                                                                                                                                                          Sep/09

                                                                                                                                                                                                                                                                                          Nov/09
                                                                                                                                                                                                                                                                                          Dec/09

                                                                                                                                                                                                                                                                                          Feb/10
                                                                                                                                                                                                                                                                                          Mar/10

                                                                                                                                                                                                                                                                                          May/10


                                                                                                                                                                                                                                                                                          Aug/10
                                                                                                                                                                                                                                                                                          Sep/10

                                                                                                                                                                                                                                                                                          Nov/10
                                                                                                                                                                                                                                                                                          Dec/10

                                                                                                                                                                                                                                                                                          Feb/11
                                                                                                                                                                                                                                                                                          Mar/11

                                                                                                                                                                                                                                                                                          May/11


                                                                                                                                                                                                                                                                                          Aug/11
                                                                                                                                                                                                                                                                                          Sep/11

                                                                                                                                                                                                                                                                                          Nov/11
                                                                                                                                                                                                                                                                                          Dec/11

                                                                                                                                                                                                                                                                                          Feb/12
                                                                                                                                                                                                                                                                                          Mar/12

                                                                                                                                                                                                                                                                                          May/12


                                                                                                                                                                                                                                                                                          Aug/12
                                                                                                                                                                                                                                                                                          Apr/09




                                                                                                                                                                                                                                                                                          Apr/10




                                                                                                                                                                                                                                                                                          Apr/11




                                                                                                                                                                                                                                                                                          Apr/12
                                                        Primary Volume                            Mth avg (L)                                             Shen zhen                    Guangzhou                    Beijing              Sh anghai                   Tianjin                                                                  GFA available for sale (L)                                              Inventory months (R)



                 Residential real estate inv vs. housing starts (Y/Y chg)                                                                   Private home sales vs. supply (starts of 12-mth ago) (MM sqm)                                                                                                                 Residential land sales in 300 major cities
                                                                                                                                           200                                                                                                                                       (MM Sqm)                                                                                                                                                                                       (Rmb psm)
    80%                                                                                                                                                                                                                                                     Forecasts
    70%                                Residentail RE Investments                                                                          180                                                                                                                                      200                                                                                                                                                                                                                3,000
                                                                                                                                           160                                                                                                                                      180
    60%
                                       Construction starts                                                                                 140                                                                                                                                      160
    50%
                                                                                                                                           120                                                                                                                                      140                                                                                                                                                                                                                2,000
    40%
                                                                                                                                           100
                                                                                                                                                                                                                                                                                    120
    30%                                                                                                                                                                                                                                                                             100
                                                                                                                                11%         80
    20%                                                                                                                                                                                                                                                                              80
                                                                                                                                            60                                                                                                                                                                                                                                                                                                                                                         1,000
    10%                                                                                                                                                                                                                                                                              60
                                                                                                                                            40
     0%                                                                                                                        -11%                                                                                                                                                  40
                                                                                                                                            20
   -10%                                                                                                                                                                                                                                                                              20
                                                                                                                                             0                                                                                                                                        0                                                                                                                                                                                                  0
   -20%                                                                                                                                       Jan-07                          Aug-08                       Apr-10                         Dec-11                        Aug-13
   -30%                                                                                                                                                                                                                                                                                Jan-08                                  Dec-08                                   Nov-09                            Oct-10                                 Sep-11                             Aug-12
                01/07 06/07 11/07 04/08 09/08 03/09 08/09 01/10                          06/10 11/10 04/11 10/11 03/12 08/12                                                     Private hse sales                              Private hse starts
                                                                                                                                                                                                                                                                                                                                         Planned GFA Sold (LHS)                                                                                   A.V. (RHS)



                                 Quarterly new mortgage loans, net basis                                                                  Funding of real estate industry vs. construction starts, YTD Y/Ychg                                                                                                        Housing affordability for first home buyers 3
       600 bn
       Rmb                                                 New mortgage loans                                                              80%                                                                                                                                     120.0%                                                                                                                                                                                                                    12x
                                                                                                   528                                     70%
                                                                                             490
       500                                                                                      452 441                                    60%
                                                                                                                                                                                                                                                                                   100.0%                                                                                                                                                                                                                    10x
                                                                                                                                           50%
                                                                                     370                                                                                                                                                                                                                                                                                                                   Less affordable
       400                                                                                                       363                       40%
                                                                                                                                                                                                                                                                                   80.0%                                                                                                                                                                                                                     8x
                                                                                                                                           30%                                                                                                                                                                                                                                                                                                                                      6.0X
       300                                               260                                                   254                         20%
                                                                                                         229226                                                                                                                                                                    60.0%                                                                                                                                                                                                       6.0X 6x
                                                                                                                            211 197        10%
                                                  190                                                                    188
       200
                                                            140156                                                             157
                              144                                                                                                          0%                                                                                                                                                                                                                                                                                                                                      39.1%
                                               140                                 140                                                                                                                                                                                             40.0%                                                                                                                                                                                                                     4x
                                    120                           121                                                                     -10%
                                 100
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              35.5%
       100 72            63               50                                  50                                                          -20%                                                                                                                                                                                                                                                              More affordable
                    39                                                   23                                                                                                                                                                                                        20.0%                                                                                                                                                                                                                     2x
                                                                                                                                          -30%
         0
                 2Q05
                 3Q05
                 4Q05
                 1Q06
                 2Q06
                 3Q06
                 4Q06
                 1Q07
                 2Q07
                 3Q07
                 4Q07
                 1Q08
                 2Q08
                 3Q08
                 4Q08
                 1Q09
                 2Q09
                 3Q09
                 4Q09
                 1Q10
                 2Q10
                 3Q10
                 4Q10
                 1Q11
                 2Q11
                 3Q11
                 4Q11
                 1Q12
                 2Q12




                                                                                                                                                                                                                                                                                    0.0%                                                                                                                                                                                                                     0x
                                                                                                                                                                                                                                                                                                    92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12E
                                                                                                                                                                                     ing
                                                                                                                                                                     Developers' fund Y/Y% chg                           Total construction starts Y/Y%chg
                       10% 10% 10% 11% 11% 11% 10% 11% 13% 13% 13% 13% 13%
                 9%9%10% 10% 10% 10% 11% 11% 11% 10% 12% 13% 13% 13% 13.2% 13%                                                                                                                                                                                                                                            Affordability index (L)                                                                     Household income multiple (R)


Notes: 1) Combined figures for Shanghai, Beijing, Guangzhou, Shenzhen, Hangzhou, Chongqing Chengdu, Tianjin. 2) Defined as units (completed and under plan) with presale permits granted and unsold. 3) Assume 0.9x PBoC benchmark rate, ASP at 5M12
nationwide average. Source: Soufun CREIS, CEIC, National Bureau of Statistics, Centaline China, PBoC, J.P. Morgan estimates.




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   17
Ebru Sener Kurumlu                                             Asia Pacific Equity Research
(852) 2800-8521                                                25 September 2012
ebru.sener@jpmorgan.com

Consumer Sector
                       Total Car Sales (yoy,%)                        Passenger car sales and Commercial car sales (yoy, %)                                   Heavy truck Sales (Unit)                                                    Price: Pork (RMB per 500g)

  140                                                                       200               Passenger                Commercial            140,000              Heavy truck (including semi-tractor)                     18.0
  120
                                                                                                                                             120,000
                                                                            150                                                                                                                                            16.0
  100
                                                                                                                                             100,000
     80                                                                                                                                                                                                                    14.0
                                                                            100
     60                                                                                                                                       80,000
                                                                                                                                                                                                                           12.0
     40
                                                                             50                                                               60,000
     20
                                                                                                                                                                                                                           10.0
                                                                                                                                              40,000
       0                                                                      0
     -20                                                                                                                                      20,000                                                                        8.0

     -40                                                                    -50
                                                                              Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12
                                                                                                                                                    0                                                                       6.0
       Aug-06 Aug-07      Aug-08 Aug-09    Aug-10 Aug-11     Aug-12
                                                                                                                                                    Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12                          Aug-06   Aug-07   Aug-08   Aug-09   Aug-10    Aug-11    Aug-12



             Price: Rice Wine (RMB per Bottle)                                    Price: Grape Wine (RMB per Bottle)                                   Price: Public bus (RMB per single ticket)                                           Price: Milk (RMB per 500g)

 190                                                                   46                                                                    1.20                                                                          5.5

 170                                                                                                                                                                                                                       5.0

                                                                       43                                                                    1.15
 150                                                                                                                                                                                                                       4.5

 130                                                                                                                                                                                                                       4.0
                                                                       40                                                                    1.10
 110                                                                                                                                                                                                                       3.5

  90                                                                                                                                                                                                                       3.0
                                                                       37                                                                    1.05

  70                                                                                                                                                                                                                       2.5

  50                                                                   34                                                                    1.00                                                                          2.0
    Jul-06    Jul-07     Jul-08   Jul-09   Jul-10   Jul-11   Jul-12      Jul-06   Jul-07   Jul-08    Jul-09   Jul-10     Jul-11     Jul-12      Aug-06   Aug-07     Aug-08       Aug-09       Aug-10     Aug-11   Aug-12     Aug-06    Aug-07   Aug-08   Aug-09    Aug-10    Aug-11    Aug-12


Source: CEIC.




18
Lucy Liu                                            Asia Pacific Equity Research
(852) 2800-8566                                     25 September 2012
lucy.y.liu@jpmorgan.com

Telecommunications Sector
                 Telecom Revenue growth (monthly, yoy)                                        Market share by 3G subscribers                                                Fixed Line Subscribers (millions)


 25%                                                                                                                                                       400
                                                                                       China Mobile            China Unicom              China Telecom
                                                                           50%
 20%                                                                                                                                                       370
                                                                           45%
 15%                                                                       40%
                                                                                                                                                           340
                                                                           35%
 10%                                                                       30%                                                                             310
                                                                           25%
  5%                                                                                                                                                       280
                                                                           20%
  0%                                                                          Jul-10          Jan-11           Jul-11         Jan-12            Jul-12
                                                                                                                                                           250
    Jul-06      Jul-07   Jul-08   Jul-09   Jul-10   Jul-11   Jul-12                                                                                          Jul-06    Jul-07   Jul-08    Jul-09   Jul-10   Jul-11   Jul-12


                Mobile Net Subscribers (millions, monthly)                                            Mobile MOU (millions)                                           Monthly Broadband Net Subscribers (millions)


  14                                                                      500                                                                              4.0
  12                                                                      450                                                                              3.5
                                                                          400                                                                              3.0
  10                                                                                                                                                       2.5
                                                                          350
   8                                                                                                                                                       2.0
                                                                          300
   6                                                                                                                                                       1.5
                                                                          250
                                                                                                                                                           1.0
   4                                                                      200                                                                              0.5
   2                                                                      150                                                                              0.0
   Jul-06       Jul-07   Jul-08   Jul-09   Jul-10   Jul-11   Jul-12         Jul-06      Jul-07        Jul-08   Jul-09    Jul-10        Jul-11     Jul-12     Jul-06    Jul-07   Jul-08    Jul-09   Jul-10   Jul-11   Jul-12


Source: CEIC.




                                                                                                                                                                                                                              19
Kenneth Fong , CFA                                                                                                                              Asia Pacific Equity Research
(852) 2800-8597                                                                                                                                 25 September 2012
kenneth.kc.fong@jpmorgan.com

Gaming Sector
                                      Macau monthly gaming revenue growth                                                                                                                                          Macau monthly junkets rolling chips volume and growth                                                                                                                                                                   JPM Macau Profitability Index and growth *
                            Monthly Gaming Revenue (MOP bn)                                                                  yoy change (R.H.S)                                                      MOP bn                                                                                                                                                                                                       5.00                                                         Sector profitability HK$bn                                                               70%
30                                                                                                                                                                                        100%                                                                  Monthly VIP rolling chip s                                                    yoy change (R.H.S.)
                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Profitability yoy chg in % (R.H.S.)
                                                                                                                                                                                                      700                                                                                                                                                                                                  100%
                                                                                                                                                                                                                                                                                                                                                                                                                  4.50
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        60%
25                                                                                                                                                                                                    600                                                                                                                                                                                                         4.00
                                                                                                                                                                                          80%                                                                                                                                                                                                              80%
                                                                                                                                                                                                                                                                                                                                                                                                                  3.50                                                                                                                                                  50%
                                                                                                                                                                                                      500
20
                                                                                                                                                                                          60%
                                                                                                                                                                                                                                                                                                                                                                                                           60%    3.00                                                                                                                                                  40%
                                                                                                                                                                                                      400
15                                                                                                                                                                                                                                                                                                                                                                                                                2.50
                                                                                                                                                                                                                                                                                                                                                                                                           40%
                                                                                                                                                                                                                                                                                                                                                                                                                  2.00                                                                                                                                                  30%
                                                                                                                                                                                          40%         300
10                                                                                                                                                                                                                                                                                                                                                                                                         20%    1.50
                                                                                                                                                                                                      200
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        20%
                                                                                                                                                                                          20%                                                                                                                                                                                                                     1.00
 5                                                                                                                                                                                                    100
                                                                                                                                                                                                                                                                                                                                                                                                           0%                                                                                                                                                           10%
                                                                                                                                                                                                                                                                                                                                                                                                                  0.50
 0                                                                                                                                                                                        0%              0                                                                                                                                                                                                -20%   0.00                                                                                                                                                  0%




                                                                                                                                                                                                                                                                           Nov 10




                                                                                                                                                                                                                                                                                                                                                      Nov 11
                                                                                                                                                                                                                Jan 10



                                                                                                                                                                                                                                       May 10




                                                                                                                                                                                                                                                                                       Jan 11

                                                                                                                                                                                                                                                                                                   Mar11

                                                                                                                                                                                                                                                                                                               May 11




                                                                                                                                                                                                                                                                                                                                                                   Jan 12



                                                                                                                                                                                                                                                                                                                                                                                       May 12
                                                                                                                                                                                                                           Mar 10



                                                                                                                                                                                                                                                   Jul 10

                                                                                                                                                                                                                                                               Sep 10




                                                                                                                                                                                                                                                                                                                            Jul 11

                                                                                                                                                                                                                                                                                                                                         Sep 11




                                                                                                                                                                                                                                                                                                                                                                             Mar 12



                                                                                                                                                                                                                                                                                                                                                                                                 Jul 12
                                                            Nov 10


                                                                                  Mar11
                                                                                           May 11
                                                                                                      Jul 11




                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Nov 10
                Mar 10
                           May 10
                                      Jul 10




                                                                       Jan 11




                                                                                                                 Sep 11
                                                                                                                            Nov 11


                                                                                                                                                  Mar 12
                                                                                                                                                             May 12
                                                                                                                                                                        Jul 12




                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Jan 11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Mar11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                May 11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Jul 11
     Jan 10




                                                 Sep 10




                                                                                                                                       Jan 12




                                                                                                                                                                                                                                                                                                                                                                                                                         Jan 10
                                                                                                                                                                                                                                                                                                                                                                                                                                  Mar 10
                                                                                                                                                                                                                                                                                                                                                                                                                                           May 10
                                                                                                                                                                                                                                                                                                                                                                                                                                                    Jul 10




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  Sep 11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Nov 11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Jan 12
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Mar 12
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      May 12
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Jul 12
                                                                                                                                                                                                                                                                                                                                                                                                                                                             Sep 10
          Luck adjusted JPM Macau Profitability Index and growth *                                                                                                                                                                                                Macau VIP gaming revenue                                                                                                                                                                   Macau mass gaming revenue
 5.00                                                                           Sector profitability HK$bn                                                                                     60%    MOP bn                                                Monthly VIP revenue                                                      yoy change (R.H.S.)                                                            MOP bn                             Monthly Mass revenue                                          yoy change (R.H.S.)
                                                                                Profitability yoy chg in % (R.H.S.)
 4.50                                                                                                                                                                                                25                                                                                                                                                                                                   140%
                                                                                                                                                                                                                                                                                                                                                                                                                  8.0                                                                                                                                                   50%
                                                                                                                                                                                               50%
 4.00                                                                                                                                                                                                                                                                                                                                                                                                     120%    7.0                                                                                                                                                   45%
                                                                                                                                                                                                     20                                                                                                                                                                                                                                                                                                                                                                 40%
 3.50                                                                                                                                                                                                                                                                                                                                                                                                     100%
                                                                                                                                                                                               40%                                                                                                                                                                                                                6.0
 3.00                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   35%
                                                                                                                                                                                                     15                                                                                                                                                                                                   80%     5.0                                                                                                                                                   30%
 2.50                                                                                                                                                                                          30%
                                                                                                                                                                                                                                                                                                                                                                                                          60%     4.0                                                                                                                                                   25%
 2.00                                                                                                                                                                                                10                                                                                                                                                                                                   40%     3.0                                                                                                                                                   20%
                                                                                                                                                                                               20%
 1.50                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   15%
                                                                                                                                                                                                                                                                                                                                                                                                          20%     2.0
 1.00                                                                                                                                                                                                5                                                                                                                                                                                                                                                                                                                                                                  10%
                                                                                                                                                                                               10%
                                                                                                                                                                                                                                                                                                                                                                                                          0%      1.0                                                                                                                                                   5%
 0.50
 0.00                                                                                                                                                                                          0%    0                                                                                                                                                                                                    -20%    0.0                                                                                                                                                   0%




                                                                                                                                                                                                                                                                                                                                                                                                                         Nov 10
                                                                                                                                                                                                                                                                                                                                                                                                                         Dec 10




                                                                                                                                                                                                                                                                                                                                                                                                                          Oct 11
                                                                                                                                                                                                                                                                        Nov 10




                                                                                                                                                                                                                                                                                                                                                                                                                          Apr 10




                                                                                                                                                                                                                                                                                                                                                                                                                          Jan 11
                                                                                                                                                                                                                                                                                                                                                                                                                          Mar11
                                                                                                                                                                                                                                                                                                                                                                                                                         May 11
                                                                                                                                                                                                                                                                                                                                                                                                                          Jun 11
                                                                                                                                                                                                                                                                                                                                                                                                                           Jul 11
                                                                                                                                                                                                                                                                                                                                                                                                                         Aug 11
                                                                                                                                                                                                                                                                                                                                                                                                                         Sep 11
                                                                                                                                                                                                                                                                                                                                                                                                                         Nov 11
                                                                                                                                                                                                                                                                                                                                                                                                                         Dec 11


                                                                                                                                                                                                                                                                                                                                                                                                                          Apr 12
                                                                                                                                                                                                                                                                                    Jan 11
                                                                                                                                                                                                                                                                                                Mar11
                                                                                                                                                                                                                                                                                                           May 11
                                                                                                                                                                                                                                                                                                                        Jul 11
                                                                                                                                                                                                                                                                                                                                     Sep 11
                                                                                                                                                                                                                                                                                                                                                  Nov 11




                                                                                                                                                                                                                                                                                                                                                                                                                         Jan 10
                                                                                                                                                                                                                                                                                                                                                                                                                         Feb 10
                                                                                                                                                                                                                                                                                                                                                                                                                         Mar 10
                                                                                                                                                                                                                                                                                                                                                                                                                         May 10
                                                                                                                                                                                                                                                                                                                                                                                                                         Jun 10
                                                                                                                                                                                                                                                                                                                                                                                                                          Jul 10

                                                                                                                                                                                                                                                                                                                                                                                                                         Oct 10




                                                                                                                                                                                                                                                                                                                                                                                                                         Jan 12
                                                                                                                                                                                                                                                                                                                                                                                                                         Feb 12
                                                                                                                                                                                                                                                                                                                                                                                                                         Mar 12
                                                                                                                                                                                                                                                                                                                                                                                                                         May 12
                                                                                                                                                                                                                                                                                                                                                                                                                         Jun 12
                                                                                                                                                                                                                                                                                                                                                                                                                          Jul 12
                                                                                                                                                                                                              Jan 10
                                                                                                                                                                                                                         Mar 10
                                                                                                                                                                                                                                    May 10
                                                                                                                                                                                                                                                Jul 10
                                                                                                                                                                                                                                                            Sep 10




                                                                                                                                                                                                                                                                                                                                                               Jan 12
                                                                                                                                                                                                                                                                                                                                                                        Mar 12
                                                                                                                                                                                                                                                                                                                                                                                  May 12
                                                                                                                                                                                                                                                                                                                                                                                            Jul 12




                                                                                                                                                                                                                                                                                                                                                                                                                         Aug 10
                                                                                                                                                                                                                                                                                                                                                                                                                         Sep 10



                                                                                                                                                                                                                                                                                                                                                                                                                         Feb 11
                                                                                                                                                                                                                                                                                                                                                                                                                          Apr 11




                                                                                                                                                                                                                                                                                                                                                                                                                         Aug 12
                                               Jul 10




                                                                                                                                     Nov 11




                                                                                                                                                                                 Jul 12
              Jan 10


                                    May 10


                                                          Sep 10
                                                                     Nov 10




                                                                                                                                                Jan 12


                                                                                                                                                                      May 12
                         Mar 10




                                                                                Jan 11
                                                                                          Mar11
                                                                                                    May 11
                                                                                                               Jul 11
                                                                                                                          Sep 11




                                                                                                                                                           Mar 12




Source: J.P. Morgan., DICJ. In assessing the net earnings impact of a decelerating VIP revenue growth and accelerating mass segment growth, we came up with a quick and simple way to assess the sector profitability. As we know that the EBITDA margin for the
sector is around 10% for VIP, 35-40% for mass and 40-45% for slot, we created a proxy for the industry’s profitability (naming it the J.P. Morgan Macau Profitability Index) by applying different margins (10% for VIP, 35% for mass and 45% for slot) to the respective
industry revenue to arrive at the overall profitability of the sector. We acknowledge that this is an overly simplified model as we did not take into account the change in cost structure, addition of industry supply, operating leverage improvement and SJM franchise casino
which only generates 3-5% margin. However, instead of absolute profitability, we believe that this would be a quick and simple way to assess the overall industry profitability trend instead of looking at the headline number which is distorted by the low margin VIP
segment that contributes 70% of the headline.




20
Sean Wu                                               Asia Pacific Equity Research
(852) 2800-8538                                       25 September 2012
sean.wu@jpmorgan.com

Healthcare Sector
                      Industry output for manufacturing of medical products                                                Profit for the industry of medical product manufacturing

                                  Sales (RMB mm)              yoy growth                                                             Profit (RMB mm)                       yoy growth

 35%                                                                                        1600     60%                                                                                                   160

 30%                                                                                        1400                                                                                                           140
                                                                                                     50%
 25%                                                                                        1200                                                                                                           120
                                                                                                     40%
                                                                                            1000                                                                                                           100
 20%
                                                                                            800      30%                                                                                                    80
 15%
                                                                                            600                                                                                                             60
                                                                                                     20%
 10%                                                                                        400                                                                                                             40
   5%                                                                                                10%
                                                                                            200                                                                                                             20
   0%                                                                                       0         0%                                                                                                   0




                                           7 – ACA price                                                                                6 – APA and Amoxicilin price
 1000                                          7-ACA                                                 240

   900
                                                                                                     220
   800

   700                                                                                               200

   600
                                                                                                     180
   500
                                                                                                     160
   400

   300                                                                                               140
   200
                                                                                                     120
   100

     0                                                                                               100
   2010-10-19   2011-1-27     2011-5-7   2011-8-15   2011-11-23   2012-3-2   2012-6-10   2012-9-18   2010 -10-1 9   2011-1 -27   2011-5-7    2011 -8-15      2011-11 -23      2012-3 -2   2012-6 -10   2012-9-1 8


                                                 7 -A C A                                                                                        6 -A P A   Amoxicilin


Source: CEIC, Healthoo.com.




                                                                                                                                                                                                                    21
Karen Li, CFA                                                                                                                                                                                      Asia Pacific Equity Research
(852) 2800-8589                                                                                                                                                                                    25 September 2012
karen.yy.li@jpmorgan.com

Chapman Deng, CFA
(852) 2800-8577
chapman.zw.deng@jpmorgan.com

Infrastructure Sector
                                   China coal mining monthly FAI and yoy growth                                                                                                                                                                                                             China transportation infrastructure FAI and yoy growth                                                                                                                                                                                                                                                                                                                     Transportation FAI breakdown
 80,000                                                                                                                                                                                                                                                         200%      500,000                                                                                                                                                                                                                                                                                100%            100%                            6%                                 5%                                    5%                                6%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    3%                                    4%                                                                   7%                                  8%                                     8%                            11%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 4%                                                                                                         5%                                 4%                                  3%                                     3%                                                                  15%
 70,000                                                                                                                                                                                                                                                                   450,000                                                                                                                                                                                                                                                                                                                                8%                                 9%                                    9%                                                                                                       7%                                                                    3%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  80%                                                                                                                                                       9%                                 8%                                                                         7%                             7%                                    4%
                                                                                                                                                                                                                                                                150%      400,000                                                                                                                                                                                                                                                                                                80%                             6%                                 6%                                    8%                                                                   8%                                  9%                                     8%                                                                   7%
 60,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     8%                                                                                                                                           8%                                    0%
                                                                                                                                                                                                                                                                          350,000                                                                                                                                                                                                                                                                                 60%
 50,000                                                                                                                                                                                                                                                         100%      300,000                                                                                                                                                                                                                                                                                                60%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  40%
 40,000                                                                                                                                                                                                                                                                   250,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                           47%                                    45%                               46%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              65%                                   63%                              56%                                 54%                                                                                                                                            49%                                   60%
                                                                                                                                                                                                                                                                          200,000                                                                                                                                                                                                                                                                                 20%            40%
 30,000                                                                                                                                                                                                                                                         50%
                                                                                                                                                                                                                                                                          150,000                                                                                                                                                                                                                                                                                0%
 20,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          20%
                                                                                                                                                                                                                                                                0%        100,000
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 -20%                                                                                                                                                                                       26%                                    29%                               27%
 10,000                                                                                                                                                                                                                                                                    50,000                                                                                                                                                                                                                                                                                                                                                                   14%                              18%                                 18%                                                                                                                                            21%                                   15%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              12%
        -                                                                                                                                                                                                                                                       -50%           -                                                                                                                                                                                                                                                                                 -40%              0%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              2004                                  2005                            2006                                2007                                2008                                   2009                             2010                                2011 8M2012
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Railway Transport FAI                                                                                                                                                       Highway Transport FAI
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Urban Public Transit FAI                                                                                                                                                    Waterway Transport FAI
                                                        China Coalmining Monthly FAI (Rmb mn)                                                                                                         YoY (RHS)                                                                                                  China Transportation Infrastrucutre FAI ( Rmb mn)                                                                                                                                YoY Change (RHS)                                                                        Air Transport FAI                                                                                                                                                           Other Transportation Infrastrucutre FAI


                                                                                               China Raiway FAI                                                                                                                                                                                                                                       Raiway passenger and freight                                                                                                                                                                                                                                                                                     Highway passenger and freight
                                                                                                                                                                                                                                                                                                                                                  China Railway Passenger Kilometer Carried (Person-Km mn)                                                                                                                                                                       600,000                                                            China Highway Passenger Kilometer Carried ( Person-Km mn)                                                                                                                                                                                                          250%
 250,000                                                                                                                                                                                                                                                          500%    300,000                                                                 China Railway Cargo Ton Kilometer Carried (ton Km mn)                                                                                                                                                          30%
                                                                                                                                                                                                                                                                                                                                                  China Railway Passenger Kilometer Carried YoY (RHS)                                                                                                                                                                                                                                               China Highway Freight Ton Kilometer Carried (ton Km mn)
                                                                                                                                                                                                                                                                  400%                                                                            China Railway Cargo Ton Kilometer Carried YoY (RHS)                                                                                                                                                            25%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 500,000                                                            China Highway Passenger Kilometer Carried YoY (RHS   )                                                                                                                                                                                                             200%
 200,000                                                                                                                                                                                                                                                                  250,000
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 20%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    China Highway Freight Ton Kilometer Carried YoY (RHS)
                                                                                                                                                                                                                                                                  300%
 150,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         400,000                                                                                                                                                                                                                                                                                                                               150%
                                                                                                                                                                                                                                                                  200%    200,000                                                                                                                                                                                                                                                                                15%

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 10%
 100,000                                                                                                                                                                                                                                                          100%                                                                                                                                                                                                                                                                                                           300,000                                                                                                                                                                                                                                                                                                                               100%
                                                                                                                                                                                                                                                                          150,000
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 5%
                                                                                                                                                                                                                                                                  0%
 50,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          200,000                                                                                                                                                                                                                                                                                                                               50%
                                                                                                                                                                                                                                                                          100,000                                                                                                                                                                                                                                                                                0%
                                                                                                                                                                                                                                                                  -100%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 -5%
            -                                                                                                                                                                                                                                                     -200%                                                                                                                                                                                                                                                                                                          100,000                                                                                                                                                                                                                                                                                                                               0%
                                                                                                                                                                                                                                                                            50,000
                                                           Oct-08




                                                                                                             Oct-09




                                                                                                                                                               Oct-10




                                                                                                                                                                                                                   Oct-11
                    Jan-08




                                                                         Jan-09




                                                                                                                         Jan-10




                                                                                                                                                                              Jan-11




                                                                                                                                                                                                                             Jan-12
                                   Apr-08
                                              Jul-08




                                                                                   Apr-09
                                                                                                Jul-09




                                                                                                                                        Apr-10
                                                                                                                                                   Jul-10




                                                                                                                                                                                         Apr-11
                                                                                                                                                                                                     Jul-11




                                                                                                                                                                                                                                          Apr-12
                                                                                                                                                                                                                                                       Jul-12




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 -10%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          -                                                                                                                                                                                                                                                                                                                            -50%
                                                                          China Railway FAI: Capital Construction (Rmb mn)                                                                                                                                                           -                                                                                                                                                                                                                                                                           -15%




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Feb-08
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          May-08



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Feb-09
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          May-09



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Feb-10
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        May-10



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Feb-11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      May-11



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Feb-12
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          May-12
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Aug-08
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Nov-08



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Aug-09
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Nov-09



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Aug-10
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Nov-10



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Aug-11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Nov-11



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Aug-12
                                                                                                                                                                                                                                                                                                              May-08


                                                                                                                                                                                                                                                                                                                                         Nov-08


                                                                                                                                                                                                                                                                                                                                                                    May-09


                                                                                                                                                                                                                                                                                                                                                                                               Nov-09


                                                                                                                                                                                                                                                                                                                                                                                                                          May-10


                                                                                                                                                                                                                                                                                                                                                                                                                                                     Nov-10


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                May-11


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Nov-11


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      May-12
                                                                                                                                                                                                                                                                                                 Feb-08


                                                                                                                                                                                                                                                                                                                            Aug-08


                                                                                                                                                                                                                                                                                                                                                       Feb-09


                                                                                                                                                                                                                                                                                                                                                                                  Aug-09


                                                                                                                                                                                                                                                                                                                                                                                                             Feb-10


                                                                                                                                                                                                                                                                                                                                                                                                                                        Aug-10


                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Feb-11


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Aug-11


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Feb-12


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Aug-12
                                                                          China Railway FAI: Non-Capital Construction (Rmb mn)
                                                                          China Railway FAI: Capital Construction YoY (RHS)


                                                  China passenger carried : Civil Aviation                                                                                                                                                                                                                                                        China port container throughout                                                                                                                                                                                                                                                                         China construction machinery sales
 80%                                                                                                                                                                                                                                                                      16,000                                                                                                                                                                                                                                                                                          60%    50,000                                                                                                                                                                                                                                                                                                                                          300%

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 45,000                                                                                                                                                                                                                                                                                                                                          250%
                                                                                                                                                                                                                                                                          14,000                                                                                                                                                                                                                                                                                          50%
 60%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 40,000
                                                                                                                                                                                                                                                                          12,000                                                                                                                                                                                                                                                                                          40%                                                                                                                                                                                                                                                                                                                                                    200%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 35,000
 40%
                                                                                                                                                                                                                                                                          10,000                                                                                                                                                                                                                                                                                          30%    30,000                                                                                                                                                                                                                                                                                                                                          150%

 20%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             25,000                                                                                                                                                                                                                                                                                                                                          100%
                                                                                                                                                                                                                                                                           8,000                                                                                                                                                                                                                                                                                          20%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 20,000                                                                                                                                                                                                                                                                                                                                          50%
  0%                                                                                                                                                                                                                                                                       6,000                                                                                                                                                                                                                                                                                          10%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 15,000
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 0%
                                                                                                                                                                                                                                                                           4,000                                                                                                                                                                                                                                                                                          0%     10,000
 -20%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            -50%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  5,000
                                                                                                                                                                                                                                                                           2,000                                                                                                                                                                                                                                                                                          -10%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     -                                                                                                                                                                                                                                                                                                                                           -100%
 -40%




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Mar-07
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              May-07
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       J ul-07




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Mar-08
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       May-08
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                J ul-08




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Mar-09
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                May-09
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         J ul-09




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Mar-10
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          May-10
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   J ul-10




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Mar-11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    May-11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             J ul-11




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Mar-12
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              May-12
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       J ul-12
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          J an-07




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Sep-07
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Nov -07
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    J an-08




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Sep-08
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Nov -08
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             J an-09




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Sep-09
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            Nov -09
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      J an-10




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Sep-10
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Nov -10
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                J an-11




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Sep-11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Nov -11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           J an-12
                                                                                                                                                                                                                                                                              -                                                                                                                                                                                                                                                                                           -20%
        Jan-08


                          May-08




                                                       Nov-08
                                                                Jan-09


                                                                                  May-09




                                                                                                             Nov-09
                                                                                                                      Jan-10


                                                                                                                                          May-10




                                                                                                                                                                     Nov-10
                                                                                                                                                                               Jan-11


                                                                                                                                                                                                 May-11




                                                                                                                                                                                                                            Nov-11
                                                                                                                                                                                                                                     Jan-12


                                                                                                                                                                                                                                                       May-12
                 Mar-08


                                    Jul-08
                                             Sep-08




                                                                         Mar-09


                                                                                           Jul-09
                                                                                                    Sep-09




                                                                                                                               Mar-10


                                                                                                                                                   Jul-10
                                                                                                                                                            Sep-10




                                                                                                                                                                                        Mar-11


                                                                                                                                                                                                          Jul-11
                                                                                                                                                                                                                   Sep-11




                                                                                                                                                                                                                                              Mar-12


                                                                                                                                                                                                                                                                Jul-12




                                                                                                                                                                                                                                                                                                              Oct-05




                                                                                                                                                                                                                                                                                                                                                  Oct-06




                                                                                                                                                                                                                                                                                                                                                                                      Oct-07




                                                                                                                                                                                                                                                                                                                                                                                                                          Oct-08




                                                                                                                                                                                                                                                                                                                                                                                                                                                              Oct-09




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  Oct-10




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Oct-11
                                                                                                                                                                                                                                                                                   Jan-05


                                                                                                                                                                                                                                                                                                     Jul-05


                                                                                                                                                                                                                                                                                                                       Jan-06


                                                                                                                                                                                                                                                                                                                                         Jul-06


                                                                                                                                                                                                                                                                                                                                                           Jan-07


                                                                                                                                                                                                                                                                                                                                                                             Jul-07


                                                                                                                                                                                                                                                                                                                                                                                               Jan-08


                                                                                                                                                                                                                                                                                                                                                                                                                 Jul-08


                                                                                                                                                                                                                                                                                                                                                                                                                                   Jan-09


                                                                                                                                                                                                                                                                                                                                                                                                                                                     Jul-09


                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Jan-10


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Jul-10


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Jan-11


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Jul-11


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Jan-12


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Jul-12
                                                                                                                                                                                                                                                                                            Apr-05




                                                                                                                                                                                                                                                                                                                                Apr-06




                                                                                                                                                                                                                                                                                                                                                                    Apr-07




                                                                                                                                                                                                                                                                                                                                                                                                        Apr-08




                                                                                                                                                                                                                                                                                                                                                                                                                                            Apr-09




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Apr-10




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Apr-11




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Apr-12




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             China Digging & Excavating Machine Sales ( units)                                                                                                     China Loader Sales ( units)
                          China Passenger Carried: Civil Aviation: YoY                                                                             China Passenger Carried: Civil Aviation: YoY: Domestic
                          China Passenger Carried: Civil Aviation: YoY: Regional                                                                   China Passenger Carried: Civil Aviation: YoY: International
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              )
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             China Digging & Excavating Machine Sales YoY ( RHS                                                                                                    China Loader Sales YoY (RHS)
                                                                                                                                                                                                                                                                                                                                                              China Coastal Port Container Throughput ( '000 TEU)                                                               YoY (RHS)

Source: CEIC.



22
Corrine Png                                                                                                                             Asia Pacific Equity Research
(65) 6882-1514                                                                                                                          25 September 2012
corrine.ht.png@jpmorgan.com

Transportation Sector
                                China-Rest of the World Spot Freight Rates                                                                                                                                                                  China-Europe Spot Freight Rates                                                                                                                                                  China-US West Coast Spot Freight Rates
1,800                                                                                                                                                                   50%          2,500                                                                                                                                                                                    140%          3,000                                                                                                                                                   100%
                                                                                                                                                                        40%                                                                                                                                                                                                   120%                                                                                                                                                                  80%
1,500                                                                                                                                                                                2,000                                                                                                                                                                                    100%          2,500
                                                                                                                                                                        30%                                                                                                                                                                                                   80%                                                                                                                                                                   60%
1,200                                                                                                                                                                   20%          1,500                                                                                                                                                                                    60%           2,000                                                                                                                                                   40%
  900                                                                                                                                                                   10%                                                                                                                                                                                                   40%
                                                                                                                                                                                                                                                                                                                                                                                            1,500                                                                                                                                                   20%
                                                                                                                                                                        0%                                                                                                                                                                                                    20%
                                                                                                                                                                                     1,000                                                                                                                                                                                    0%                                                                                                                                                                    0%
 600                                                                                                                                                                    -10%                                                                                                                                                                                                  -20%          1,000
                                                                                                                                                                        -20%          500                                                                                                                                                                                     -40%                                                                                                                                                                  -20%
 300                                                                                                                                                                                                                                                                                                                                                                          -60%            500                                                                                                                                                   -40%
                                                                                                                                                                        -30%
       0                                                                                                                                                                -40%                0                                                                                                                                                                                 -80%              0                                                                                                                                                   -60%




                                                                                                                                                                                                   Nov-09




                                                                                                                                                                                                                                                           Nov-10




                                                                                                                                                                                                                                                                                                                       Nov-11
                                                                                                                                                                                                                     Feb-10

                                                                                                                                                                                                                                 May-10




                                                                                                                                                                                                                                                                         Feb-11

                                                                                                                                                                                                                                                                                           May-11




                                                                                                                                                                                                                                                                                                                                         Feb-12

                                                                                                                                                                                                                                                                                                                                                      May-12
                                                                                                                                                                                                                                               Aug-10




                                                                                                                                                                                                                                                                                                        Aug-11




                                                                                                                                                                                                                                                                                                                                                                  Aug-12




                                                                                                                                                                                                                                                                                                                                                                                                        Nov-09




                                                                                                                                                                                                                                                                                                                                                                                                                                       Aug-10

                                                                                                                                                                                                                                                                                                                                                                                                                                                  Nov-10




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Aug-11

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Nov-11




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Aug-12
                                                                                                                                                                                                                                                                                                                                                                                                                              May-10




                                                                                                                                                                                                                                                                                                                                                                                                                                                                            May-11




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           May-12
                                                                                                                                                                                                                                                                                                                                                                                                                    Feb-10




                                                                                                                                                                                                                                                                                                                                                                                                                                                              Feb-11




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Feb-12
                            Feb-10
                                         May-10




                                                                       Feb-11
                                                                                    May-11




                                                                                                                                    Feb-12
                                                                                                                                                May-12
              Nov-09




                                                     Aug-10
                                                              Nov-10




                                                                                                   Aug-11
                                                                                                                  Nov-11




                                                                                                                                                             Aug-12
                                                   Y/Y change (%)                                           Composite Index                                                                                    Y/Y change (%)                                              Shanghai-Europe avg freight rate (US$/TEU)                                                                                            Y/Y change (%)                               Shanghai-US WC avg freight rate (US$/FEU)




                                              China Bulk Shipping Freight Index                                                                                                                                  Chinese Airlines: Passengers Carried (% chg y/y)                                                                                                                                                   Chinese Airlines: Cargo Traffic FTK (% chg y/y)
                                                                                                                                                                                     70%                                                                                                                                                                                                    80%
2,100                                                                                                                                                                  30%
                                                                                                                                                                                     60%                                                                                                                                                                                                    70%
                                                                                                                                                                                                                                               Total Passengers Carried
                                                                                                                                                                       20%                                                                     Domestic                                                                                                                                     60%
1,800                                                                                                                                                                  10%           50%
                                                                                                                                                                                                                                               HK/Macau/Taiwan                                                                                                                              50%
                                                                                                                                                                                     40%                                                       International
                                                                                                                                                                       0%                                                                                                                                                                                                                   40%
1,500                                                                                                                                                                                30%                                                                                                                                                                                                    30%
                                                                                                                                                                       -10%
                                                                                                                                                                                     20%                                                                                                                                                                                                    20%
1,200                                                                                                                                                                  -20%                                                                                                                                                                                                                 10%
                                                                                                                                                                       -30%          10%
                                                                                                                                                                                                                                                                                                                                                                                             0%
     900                                                                                                                                                               -40%           0%                                                                                                                                                                                                    -10%
                                                  Jan-11




                                                                                                                  Jan-12
              Jul-10




                                                                           Jul-11




                                                                                                                                                         Jul-12
                                Oct-10




                                                              Apr-11




                                                                                                Oct-11




                                                                                                                                       Apr-12




                                                                                                                                                                                     -10%                                                                                                                                                                                                   -20%

                                                                                                                                                                                     -20%                                                                                                                                                                                                   -30%




                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Dec-08
                                                                                                                                                                                                                                                                                                                                                                                                   Jan-06




                                                                                                                                                                                                                                                                                                                                                                                                                             Mar-07


                                                                                                                                                                                                                                                                                                                                                                                                                                        Oct-07


                                                                                                                                                                                                                                                                                                                                                                                                                                                     May-08




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Jul-09


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Feb-10




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Nov-11


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Jun-12
                                                                                                                                                                                                                                                                                                                                                                                                                 Aug-06




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Sep-10


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Apr-11
                                                                                                                                                                                     -30%
                                                                                                                                                                                                                                   Mar-07




                                                                                                                                                                                                                                                                May-08




                                                                                                                                                                                                                                                                                                    Jul-09


                                                                                                                                                                                                                                                                                                                  Feb-10
                                                                                                                                                                                               Jan-06


                                                                                                                                                                                                                 Aug-06




                                                                                                                                                                                                                                                  Oct-07




                                                                                                                                                                                                                                                                                  Dec-08




                                                                                                                                                                                                                                                                                                                                     Sep-10


                                                                                                                                                                                                                                                                                                                                                       Apr-11


                                                                                                                                                                                                                                                                                                                                                                     Nov-11


                                                                                                                                                                                                                                                                                                                                                                                   Jun-12
                                                      Y/Y Chg (%)                                        Composite Index                                                                                                                                                                                                                                                                                                                    Total             Domestic                    Regional              International




                       Chinese Airlines: Passenger Load Factor & Y/Y chg                                                                                                                                               Chinese Airlines: Cargo Load Factor & Y/Y chg                                                                                                                                                 China: Ticket Price Index (excl fuel surcharges)
90                                                                                                                                                                             10    76                                                                                                                                                                                                10   50%
                                                                                                                                                                               8                                                                                                                                                                                                       8
                                                                                                                                                                                     74                                                                                                                                                                                                     40%
85                                                                                                                                                                             6
                                                                                                                                                                                                                                                                                                                                                                                       6
                                                                                                                                                                               4     72                                                                                                                                                                                                     30%
                                                                                                                                                                                                                                                                                                                                                                                       4
                                                                                                                                                                               2     70                                                                                                                                                                                                     20%
80
                                                                                                                                                                               0                                                                                                                                                                                                       2
                                                                                                                                                                                     68                                                                                                                                                                                                     10%
                                                                                                                                                                               -2                                                                                                                                                                                                      0
75                                                                                                                                                                                   66                                                                                                                                                                                                      0%
                                                                                                                                                                               -4
                                                                                                                                                                                                                                                                                                                                                                                       -2
                                                                                                                                                                               -6    64                                                                                                                                                                                                     -10%
70                                                                                                                                                                                                                                                                                                                                                                                     -4
                                                                                                                                                                               -8
                                                                                                                                                                                     62                                                                                                                                                                                                -6   -20%
                                                                                                                                                                               -10
65                                                                                                                                                                             -12   60                                                                                                                                                                                                -8   -30%
                                                                                                                                                                                          Jan-06


                                                                                                                                                                                                            Aug-06




                                                                                                                                                                                                                                             Oct-07


                                                                                                                                                                                                                                                           May-08


                                                                                                                                                                                                                                                                          Dec-08


                                                                                                                                                                                                                                                                                              Jul-09




                                                                                                                                                                                                                                                                                                                                Sep-10


                                                                                                                                                                                                                                                                                                                                                  Apr-11


                                                                                                                                                                                                                                                                                                                                                                Nov-11


                                                                                                                                                                                                                                                                                                                                                                              Jun-12
     Jan-06


                   Aug-06




                                                   Oct-07


                                                              May-08


                                                                        Dec-08


                                                                                       Jul-09




                                                                                                                           Sep-10


                                                                                                                                             Apr-11


                                                                                                                                                           Nov-11


                                                                                                                                                                      Jun-12




                                                                                                                                                                                                                                                                                                                                                                                                   Jan-08

                                                                                                                                                                                                                                                                                                                                                                                                   May-08
                                                                                                                                                                                                                                                                                                                                                                                                    Jul-08
                                                                                                                                                                                                                                                                                                                                                                                                   Sep-08
                                                                                                                                                                                                                                                                                                                                                                                                   Nov-08
                                                                                                                                                                                                                                                                                                                                                                                                   Jan-09

                                                                                                                                                                                                                                                                                                                                                                                                   May-09
                                                                                                                                                                                                                                                                                                                                                                                                    Jul-09
                                                                                                                                                                                                                                                                                                                                                                                                   Sep-09
                                                                                                                                                                                                                                                                                                                                                                                                   Nov-09
                                                                                                                                                                                                                                                                                                                                                                                                   Jan-10

                                                                                                                                                                                                                                                                                                                                                                                                   May-10
                                                                                                                                                                                                                                                                                                                                                                                                    Jul-10
                                                                                                                                                                                                                                                                                                                                                                                                   Sep-10
                                                                                                                                                                                                                                                                                                                                                                                                   Nov-10




                                                                                                                                                                                                                                                                                                                                                                                                   Nov-11
                                                                                                                                                                                                                                                                                                                                                                                                   Jan-12

                                                                                                                                                                                                                                                                                                                                                                                                   May-12
                                                                                                                                                                                                                                                                                                                                                                                                    Jul-12
                                                                                                                                                                                                                              Mar-07




                                                                                                                                                                                                                                                                                                             Feb-10
                                     Mar-07




                                                                                                         Feb-10




                                                                                                                                                                                                                                                                                                                                                                                                   Mar-08




                                                                                                                                                                                                                                                                                                                                                                                                   Mar-09




                                                                                                                                                                                                                                                                                                                                                                                                   Mar-10




                                                                                                                                                                                                                                                                                                                                                                                                   Jan-11
                                                                                                                                                                                                                                                                                                                                                                                                   Mar-11
                                                                                                                                                                                                                                                                                                                                                                                                   May-11
                                                                                                                                                                                                                                                                                                                                                                                                    Jul-11
                                                                                                                                                                                                                                                                                                                                                                                                   Sep-11



                                                                                                                                                                                                                                                                                                                                                                                                   Mar-12
                                                                       Y/Y Chg (ppts)                       PLF                                                                                                                                                          Y/Y Chg (ppts)                          CLF                                                                                                                             Domestic              HK/ Macau/ Taiwan                       International


Source: Shanghai Shipping Exchange, CEIC database.




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              23
Sunil Garg                                                Asia Pacific Equity Research
(852) 2800-8518                                           25 September 2012
sunil.garg@jpmorgan.com


     P & L in FY11 for MSCI China
                                                Rmb mn                   Operating                    Pretax                                                           Margin
                                           Sales revenue                   income                    income                Net profit                                  OP                          NP
     Consumer Discretionary                       524,955                   45,129                    52,922                  41,372                                   9%                          8%
     Consumer Staples                             428,822                   25,609                    28,357                  19,259                                   6%                          4%
     Energy                                    5,109,046                   494,751                   494,227                 354,735                                  10%                          7%
     Banks & insurance                         3,968,128                 1,101,866                 1,103,780                 842,212                                  28%                         21%
     Real Estate                                  396,705                  124,420                   155,935                  87,381                                  31%                         22%
     Health Care                                  162,547                    8,060                    10,800                   7,889                                   5%                          5%
     Industrials                               2,297,381                   116,756                   130,496                  91,012                                   5%                          4%
     Materials                                    838,624                   95,609                    90,628                  62,299                                  11%                          7%
     Information Technology                       355,440                   26,544                    26,396                  20,992                                   7%                          6%
     Telecom                                   1,035,714                   192,325                   196,834                 148,714                                  19%                         14%
     Utilities                                    319,683                   38,714                    23,795                  15,005                                  12%                          5%
     MSCI China                               15,437,046                 2,269,781                 2,314,170               1,690,869                                  15%                         11%

     Balance sheet in FY11 for MSCI China
                                                                           Current             Current                                                Current       Net debt to               Asset
     (RMB mm)                                      Total assets              Asset           liabilities    Total Equity           Net Debt             ratio       equity ratio           turnover
     Consumer Discretionary                            515,325             308,662             237,518          237,753             -21,157               1.3             -8.9%                 1.0
     Consumer Staples                                  350,203             167,235             161,347          157,848               1,147               1.0              0.7%                 0.8
     Energy                                          4,267,986           1,088,300           1,248,591        2,339,942             461,867               0.9             19.7%                 0.8
     Banks & insurance                              69,046,579                  NA                   NA       4,560,421          -6,920,889               NA           -151.8%                 17.4
     Real Estate                                     1,733,113           1,296,176             829,590          517,742             337,332               1.6             65.2%                 4.4
     Health Care                                       133,522             101,174              63,971            61,575             -4,512               1.6             -7.3%                 0.8
     Industrials                                     3,303,104           1,919,822           1,693,891          960,223             564,374               1.1             58.8%                 1.4
     Materials                                       1,149,794             431,852             419,439          493,300             320,297               1.0             64.9%                 1.4
     Information Technology                            368,271             236,783             190,902          116,323               3,725               1.2              3.2%                 1.0
     Telecom                                         1,866,103             512,241             636,417        1,129,320            -192,250               0.8            -17.0%                 1.8
     Utilities                                         833,543             132,286             258,277          236,088             435,587               0.5           184.5%                  2.6
     MSCI China                                     83,567,543                 NA                    NA      10,810,534          -5,014,478               NA             -46.4%                 5.4
     MSCI China ex bank & insurance                 14,520,964           6,194,531           5,739,943        6,250,113           1,906,410               1.1             30.5%                 1.3

     MSCI China's earnings growth components
                                                                         Weight                              Earnings growth (%)                            Contribution to growth (%)
     Sector                                                               (%)                            2012E                2013E                        2012E                 2013E
     Consumer Discretionary                                               5.1                              -2.9                 7.3                         -0.1                   0.3
     Consumer Staples                                                     5.8                              6.2                 22.7                          0.1                   0.5
     Energy                                                               17.9                             -2.1                -0.4                         -0.4                   -0.1
     Financials                                                           36.4                             6.9                  2.3                          3.3                   1.2
     Health Care                                                          1.0                              13.3                21.2                          0.1                   0.1
     Industrials                                                          6.3                             -13.4                26.7                         -0.8                   1.4
     Information Technology                                               6.7                              -8.8                41.9                         -0.2                   1.0
     Materials                                                            4.6                             -32.5                33.7                         -1.9                   1.3
     Telecom                                                              13.5                             1.0                  3.6                          0.1                   0.4
     Utilities                                                            2.7                              43.9                19.1                          0.6                   0.4
     MSCI China                                                          100.0                             0.8                  6.5                          0.8                   6.5
     Source: Bloomberg, J.P. Morgan. Updated as of September 21, 2012. For all sectors and market, forecast numbers are derived from bottom-up calculations of each individual MSCI
     constituents using J.P. Morgan estimates for covered stocks and I/B/E/S estimates for the rest. Companies with different yearends are calendarised to December yearends and are free float
     adjusted for aggregation.



     Figure 8: Manufacturing Sector: Sales growth                                                          Figure 9: Manufacturing Sector: Pre-tax Profit Margins
       45%                                                                                                  8.0%
       40%                                                                                                  7.0%
       35%                                                                                                  6.0%
       30%                                                                                                  5.0%
       25%                                                                                                  4.0%
       20%                                                                                                  3.0%
       15%
                                                                                                            2.0%
       10%
                                                                                                            1.0%
        5%
        0%                                                                                                  0.0%
                                                                                                                   1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Jul-12
              2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011 Jul-12


                                                                                                           Source: CEIC.
     Source: CEIC.




24
Sunil Garg                                                   Asia Pacific Equity Research
(852) 2800-8518                                              25 September 2012
sunil.garg@jpmorgan.com

Manufacturing Sector: Pre-tax Profit Margins
                                                                                                                                                          Pre-tax Profit Margin
                                                                       1999          2000          2001           2002           2003          2004           2005         2006            2007           2008           2009          2010           2011         Jul-12
Total                                                                  3.3%          5.2%          5.1%           5.3%           5.8%          6.0%           6.0%         6.2%            6.8%           6.1%           6.4%          7.6%           6.5%          5.4%
Total ex oil & gas                                                     2.9%          4.0%          4.1%           4.6%           5.1%          5.2%           4.9%         5.2%            6.0%           5.3%           6.1%          7.3%           6.1%          4.9%
Coal Mining                                                                                        2.8%           4.3%           5.7%          8.4%           9.5%         9.3%           10.7%          15.3%          12.7%         14.6%          13.3%         11.2%
Petroleum & Natural Gas                                              15.7%          39.4%         36.8%          34.6%          36.2%         38.8%         48.1%        46.9%            41.6%          41.6%          24.1%         28.5%          32.4%         38.3%
Ferrous Metals Mining                                                 3.2%           4.3%          5.0%           4.9%           7.4%         16.2%         13.9%        12.5%            16.8%          19.3%          12.2%         14.6%          12.8%         10.8%
Non Ferrous Metals Mining                                             6.9%           8.2%          7.6%           7.5%           9.6%         14.5%         18.7%        20.7%            19.1%          15.1%          11.9%         14.9%          15.4%         12.7%
Non-Metal Minerals Mining                                             2.4%           3.3%          4.0%           4.0%           5.1%          5.4%           8.0%         8.0%            8.4%           9.3%           8.3%          9.2%           8.4%          7.1%
Other Mining                                                          6.3%           3.7%          3.5%           2.9%           8.0%          2.7%         13.0%          4.7%            4.3%           5.9%           4.2%          6.5%          10.9%         10.4%
Agricultural & Sideline Food                                          0.3%           2.0%          2.5%           2.6%           3.0%          3.1%           3.8%         4.5%            5.2%           5.2%           5.4%          6.8%           5.4%          4.5%
Food Manufacturing                                                    2.8%           4.0%          4.4%           4.5%           5.2%          4.9%           5.6%         5.9%            6.7%           6.6%           8.1%          9.1%           7.9%          7.5%
Beverage Manufacturing                                                5.5%           5.9%          6.0%           6.4%           7.0%          6.5%           7.2%         7.7%            8.9%           9.1%           9.8%         10.8%          10.2%         10.4%
Tobacco Processing                                                    9.3%          10.0%         10.1%          10.7%          12.4%         14.2%         14.3%        14.7%            16.3%          16.7%          13.4%         13.0%          12.5%         15.0%
Textile Industry                                                      0.9%           2.8%          2.5%           3.1%           3.3%          2.7%           3.5%         3.8%            4.2%           4.5%           4.9%          6.0%           5.4%          4.5%
Garment & Other Fiber Products                                        3.3%           4.1%          4.2%           4.1%           4.1%          4.1%           4.3%         4.6%            4.9%           5.4%           6.0%          7.1%           6.1%
Leather, Fur, Down & Related                                          2.3%           2.8%          2.9%           3.4%           3.7%          3.8%           4.2%         4.4%            5.1%           5.9%           6.6%          7.9%           6.9%
Timber Processing, etc                                                1.9%           2.9%          3.0%           3.1%           3.6%          3.9%           4.7%         5.0%            5.7%           6.3%           6.1%          7.2%           6.5%           5.5%
Furniture Manufacturing                                               3.9%           4.6%          4.3%           4.0%           4.2%          4.4%           4.5%         4.7%            4.6%           4.7%           5.5%          6.5%           5.8%           5.2%
Paper Making & Paper Products                                         2.9%           4.0%          3.7%           5.0%           4.8%          4.8%           4.8%         5.3%            6.2%           5.8%           6.3%          7.1%           5.6%           4.5%
Printing & Record Reproduction                                        7.1%           8.0%          7.9%           7.6%           7.5%          7.6%           6.7%         7.0%            7.6%           7.7%           8.2%          8.9%           8.4%           7.4%
Cultural, Educational & Sport Article                                 3.9%           3.9%          4.0%           4.3%           4.0%          3.4%           3.6%         3.4%            3.6%           3.2%           4.5%          5.4%           4.9%
Processing of Petroleum, Coking & Nuclear Fuel                        0.8%           0.1%         -0.3%           1.0%           1.9%          3.2%          -1.0%        -2.1%            1.2%          -4.4%           4.4%          4.2%           0.2%          -1.5%
Raw Chemical Materials                                                1.7%           3.2%          2.6%           4.0%           5.2%          7.0%           6.1%         5.6%            6.9%           5.8%           6.0%          7.7%           6.6%           4.7%
Medical & Pharmaceutical                                              7.4%           8.4%          8.7%           8.8%           9.4%          9.1%           8.4%         7.9%            9.7%          10.7%          10.9%         11.7%          10.3%           9.8%
Chemical Fiber Industry                                               3.6%           5.3%          2.1%           2.7%           4.1%          2.4%           1.8%         2.2%            4.0%           2.1%           4.5%          7.2%           5.1%           2.3%
Rubber Products                                                       1.1%           1.4%          3.3%           4.2%           4.8%          4.3%           4.9%         4.3%            5.3%           4.3%           6.9%          6.8%           5.6%
Plastic Products                                                      3.4%           3.9%          4.5%           4.7%           4.4%          4.3%           4.4%         4.4%            5.1%           5.3%           5.7%          6.8%           5.7%
Non Metal Minerals Products                                           1.3%           2.9%          3.4%           3.7%           5.5%          5.9%           4.8%         5.5%            6.9%           7.3%           7.7%          9.1%           8.2%           6.1%
Smelting & Pressing of Ferrous Metal                                  0.9%           3.2%          3.6%           4.6%           6.0%          6.5%           4.9%         5.3%            6.0%           3.4%           3.1%          3.9%           2.6%           1.0%
Smelting & Pressing of NonFerrous Metal                               1.8%           3.0%          3.0%           3.2%           4.4%          5.1%           5.4%         6.8%            6.6%           4.1%           4.4%          5.6%           4.5%           2.7%
Metal Products                                                        2.6%           3.0%          3.7%           4.0%           4.5%          4.7%           4.9%         4.7%            4.8%           5.2%           5.5%          6.9%           5.5%           4.6%
Ordinary Machinery                                                    2.5%           3.4%          3.8%           4.8%           5.5%          5.8%           6.1%         6.3%            6.6%           6.7%           6.7%          7.9%           7.0%           6.0%
Special Purpose Equipment                                             2.3%           3.0%          3.6%           4.7%           4.7%          5.3%           5.5%         6.2%            7.5%           7.2%           7.2%          8.7%           7.7%           6.6%
Transport Equipment                                                   2.8%           3.7%          4.8%           6.1%           7.0%          5.8%           4.3%         5.0%            6.3%           6.5%           7.5%          8.8%           8.0%
Electric Machinery & Equipment                                        3.7%           4.3%          4.6%           5.0%           5.0%          4.7%           4.8%         4.8%            5.3%           6.2%           6.7%          7.4%           5.8%           4.7%
Electronic & Communication Equipment                                  5.5%           6.8%          5.2%           4.3%           3.9%          3.7%           3.3%         3.4%            3.7%           3.6%           4.0%          5.2%           4.0%           2.7%
Instrument & Office Machinery                                         3.0%           4.5%          5.2%           4.8%           5.4%          4.9%           5.6%         5.8%            6.6%           6.7%           7.6%          8.5%           7.5%
Handicraft & Other Manufacturing                                                                                                 4.0%          4.4%           4.6%         4.9%            5.1%           5.6%           5.7%          6.5%           5.5%
Waste Resources & Materials Recovery & Processing                                                                                1.7%          3.0%           2.9%         3.3%            3.6%           3.5%           4.6%          4.8%           5.4%           2.9%
Production & Supply of Electric & Heat Power                           5.5%          6.7%           6.9%           6.4%          6.3%          5.8%           6.2%         7.6%            7.6%           1.7%           3.8%          4.9%           3.2%           4.0%
Production & Supply of Gas                                            -3.8%         -1.6%          -0.3%          -0.3%          1.7%          2.6%           2.5%         3.4%            6.6%           7.9%           9.4%         10.1%           9.4%           8.8%
Production & Supply of Water                                           8.3%          3.0%           2.8%           1.3%          0.4%          1.3%          -0.3%         3.6%            4.1%           3.1%           2.6%          5.3%           6.4%           2.0%
Source: CEIC. Note: Business Survey of 5000 Principal Enterprises. The business survey encompasses monthly statistics of financial indicators of industrial enterprises and quarterly conducted questionnaire research of business conditions of these enterprises. The
state-owned large-and medium-size industrial enterprises constitute the majority of surveyed enterprises with some representative collectively-owned enterprises and conglomerates of handsome economic scale also being included in the samples. Since 1993, some
joint venture, foreign-funded and share-holding industrial enterprises have entered into the survey successively. The surveyed enterprises involve 27 industries and the structure of sample enterprises is commensurate with that of China's industrial enterprises. The
outcome of the business survey can basically reflect the business conditions of China's industry.
.




                                                                                                                                                                                                                                                                        25
Sunil Garg                                                   Asia Pacific Equity Research
(852) 2800-8518                                              25 September 2012
sunil.garg@jpmorgan.com

Manufacturing Sector: Pre-tax profit growth
                                                                                                                                                            Pre-tax Profit ytd yoy growth
                                                                        2000            2001           2002            2003           2004           2005        2006          2007        2008                     2009             2010        2011       CAGR 01-11      Jul-12
Total                                                                   92%              8%            22%             44%            43%            24%          32%          39%         13%                       13%             54%           3%             28%         -4%
Total ex oil & gas                                                      63%             16%            30%             46%            43%            16%          34%          49%         10%                       26%             53%           1%             30%         -5%
Coal Mining                                                                                           102%             66%           150%            60%          23%          48%        130%                       -6%             56%          26%             59%        -10%
Petroleum & Natural Gas                                                286%             -15%            -7%            34%            43%            70%          23%           -3%        30%                      -59%             59%          34%             15%         -1%
Ferrous Metals Mining                                                   52%              38%           17%            148%           350%            16%          26%         102%        101%                      -37%            103%          19%             61%         -7%
Non Ferrous Metals Mining                                               36%              -5%           10%             64%           120%            81%          70%          20%          -5%                     -17%             69%          36%             39%         -3%
Non Metal Minerals Mining                                               34%              29%           15%             49%            29%            94%          34%          38%         55%                       10%             49%          18%             37%          8%
Other Mining                                                           -15%              21%          -59%           1799%           -85%           562%         -81%         110%         36%                        4%            236%         -28%             27%         32%

Agricultural & Sideline Food                                           525%             41%             19%             50%           43%            61%          42%             58%              36%               24%             56%           1%                 38%     14%
Food Manufacturing                                                      66%             21%             25%             37%           20%            52%          32%             44%              24%               46%             42%           8%                 32%     27%
Beverage Manufacturing                                                  13%              6%             17%             24%            4%            43%          36%             48%              25%               30%             36%          21%                 28%     23%
Tobacco Processing                                                      12%             24%             20%             30%           33%            11%          15%             31%              17%               -9%             13%          12%                 17%     31%
Textile Industry                                                       255%             -4%             40%             34%           10%            60%          29%             36%              21%               18%             56%           3%                 30%     -8%
Garment & Other Fiber Products                                          40%             16%             10%             19%           17%            33%          33%             31%              36%               25%             39%          -5%                 23%       na
Leather, Fur, Down & Related                                            41%             18%             40%             39%           26%            38%          29%             43%              30%               23%             50%           1%                 31%       na
Timber Processing, etc                                                  85%             13%             20%             39%           55%            58%          42%             64%              53%               17%             49%          12%                 40%     20%
Furniture Manufacturing                                                 40%             11%             11%             47%           69%            26%          39%             27%              28%               32%             53%           3%                 32%     11%
Paper Making & Paper Products                                           67%              4%             58%             19%           31%            26%          35%             45%              14%               16%             44%          -9%                 27%     -4%
Printing & Record Reproduction                                          23%             13%             10%             25%           21%             5%          24%             35%              29%               18%             31%          -1%                 19%      9%
Cultural, Educational & Sports Articles                                 12%             13%             22%             16%           12%            29%           9%             28%               7%               48%             43%          -3%                 20%       na
Processing of Petroleum, Coking & Nuclear Fuel                         -90%               na              na           142%          130%              na           na              na               na                na            31%         -94%                  NA       na
Raw Chemical Materials                                                 120%             -7%             75%             69%           87%            12%          15%             61%               5%               14%             66%           9%                 38%    -20%
Medical & Pharmaceutical                                                35%             23%             20%             29%            6%            23%          10%             56%              36%               25%             34%          12%                 24%     17%
Chemical Fiber Industry                                                 89%            -68%             42%             99%          -21%             1%          51%            131%             -49%              109%            110%         -11%                 32%    -53%
Rubber Products                                                         32%            154%             54%             43%           28%            42%           9%             55%               1%               78%             24%           0%                 31%       na
Plastic Products                                                        37%             29%             23%             17%           34%            23%          26%             48%              27%               18%             53%          -5%                 25%       na
Non Metal Minerals Products                                            140%             29%             23%             87%           44%             0%          47%             68%              43%               25%             54%          14%                 38%    -14%
Smelting & Pressing of Ferrous Metals                                  342%             28%             46%            107%           81%            -3%          28%             53%             -25%              -13%             56%         -19%                 24%    -55%
Smelting & Pressing of Non Ferrous Metals                              100%              8%             19%             89%           97%            40%         106%             34%             -28%                9%             75%           6%                 38%    -30%
Metal Products                                                          34%             35%             27%             37%           39%            34%          26%             35%              41%               15%             59%          -5%                 30%     13%
Ordinary Machinery                                                      56%             28%             55%             56%           57%            33%          34%             40%              35%               12%             52%           6%                 37%    -17%
Special Purpose Equipment                                               49%             27%             61%             40%           50%            25%          47%             62%              30%               17%             57%           6%                 38%     -4%
Transport Equipment                                                     56%             53%             64%             58%            1%           -15%          51%             68%              26%               44%             59%           5%                 33%       na
Electric Machinery & Equipment                                          43%             20%             21%             31%           36%            26%          31%             47%              47%               20%             44%          -8%                 28%      0%
Electronic & Telecom Equipment                                          62%             -7%              1%             32%           36%             6%          28%             27%               7%               14%             64%         -12%                 19%     -2%
Instrument Office Machinery                                             82%             26%              9%             65%           24%            43%          32%             37%              17%               15%             43%           1%                 27%       na
Handicraft & Other Manufacturing                                                                                                      44%            29%          36%             36%              33%               12%             48%           0%                  NA       na
Waste Resources & Materials Recovery & Processing                                                                                    600%            38%          75%             72%              65%               64%             73%          35%                  NA      1%

Production & Supply of Electric & Heat Power                            50%             16%              9%             21%           27%            30%           46%            17%             -74%              154%             52%         -28%                 10%     39%
Production & Supply of Gas                                                na              na              na              na         116%            21%           77%           153%              66%               42%             43%          17%                  NA     -2%
Production & Supply of Water                                           -63%             -2%            -48%            -68%          322%              na            na           27%             -12%               -6%            138%          24%                 23%    -41%
Source: CEIC. Note: Business Survey of 5000 Principal Enterprises. The business survey encompasses monthly statistics of financial indicators of industrial enterprises and quarterly conducted questionnaire research of business conditions of these enterprises. The
state-owned large-and medium-size industrial enterprises constitute the majority of surveyed enterprises with some representative collectively-owned enterprises and conglomerates of handsome economic scale also being included in the samples. Since 1993, some
joint venture, foreign-funded and share-holding industrial enterprises have entered into the survey successively. The surveyed enterprises involve 27 industries and the structure of sample enterprises is commensurate with that of China's industrial enterprises. The
outcome of the business survey can basically reflect the business conditions of China's industry.




26
Sunil Garg                                                   Asia Pacific Equity Research
(852) 2800-8518                                              25 September 2012
sunil.garg@jpmorgan.com

Manufacturing Sector: Sales growth
                                                                                                                                                                   Sales ytd yoy growth
                                                                         2000            2001          2002              2003            2004           2005          2006          2007              2008           2009             2010      2011        CAGR 01-11       Jul-12
Total                                                                    20%             11%            17%              31%             39%            25%            26%          27%               25%              9%             29%        21%              25%           9%
Total ex oil & gas                                                       20%             12%            17%              31%             39%            25%            26%          28%               25%              9%             29%        21%              25%           9%
Coal Mining                                                                7%            23%            30%              27%             68%            42%            26%          29%               60%             13%             36%        38%              36%           8%
Petroleum & Natural Gas                                                  54%              -9%           -1%              28%             33%            37%            27%           9%               30%            -28%             34%        17%              17%          -7%
Ferrous Metals Mining                                                    13%             17%            21%              64%            106%            36%            39%          51%               75%             -1%             70%        35%              47%           7%
Non Ferrous Metals Mining                                                14%               2%           12%              28%             45%            41%            53%          31%               21%              6%             34%        31%              29%          16%
Non-Metal Minerals Mining                                                 -1%              6%           14%              17%             23%            30%            35%          30%               41%             23%             34%        29%              27%          12%
Other Mining                                                             45%             29%           -52%             596%            -55%            38%           -47%         128%                -1%            46%            114%       -57%              13%          39%

Agricultural & Sideline Food                                               8%            10%            18%              30%             39%            27%            22%              35%           38%             17%             25%        27%                  28%      19%
Food Manufacturing                                                        14%            12%            20%              19%             28%            32%            26%              27%           28%             19%             26%        26%                  25%      14%
Beverage Manufacturing                                                     5%             5%             8%              13%             13%            28%            28%              27%           23%             22%             23%        28%                  21%      15%
Tobacco Processing                                                         4%            23%            14%              11%             16%            11%            11%              18%           14%             14%             16%        17%                  14%      15%
Textile Industry                                                          16%             8%            16%              24%             34%            23%            21%              21%           14%              8%             25%        17%                  20%      -3%
Garment & Other Fiber Products                                            15%            13%            13%              19%             17%            26%            24%              24%           24%             12%             18%        10%                  19%        na
Leather, Fur, Down & Related                                              13%            15%            18%              28%             24%            25%            21%              24%           15%             10%             24%        15%                  20%        na
Timber Processing, etc                                                    21%             9%            14%              23%             41%            32%            34%              44%           38%             21%             28%        24%                  29%      18%
Furniture Manufacturing                                                   18%            19%            20%              41%             61%            24%            32%              29%           27%             12%             28%        16%                  28%      10%
Paper Making & Paper Products                                             23%            12%            17%              24%             33%            25%            23%              24%           22%              7%             27%        16%                  22%       7%
Printing & Record Reproduction                                             8%            16%            14%              27%             19%            19%            19%              23%           27%             11%             21%         6%                  18%      16%
Cultural, Educational & Sport Article                                     13%            10%            14%              25%             29%            22%            19%              19%           19%              6%             19%         7%                  18%        na
Processing of Petroleum, Coking & Nuclear Fuel                            67%             1%             6%              30%             42%            34%            25%              19%           26%             -6%             38%        26%                  23%       7%
Raw Chemical Materials                                                    19%            11%            16%              29%             41%            27%            26%              30%           26%              9%             31%        27%                  26%      10%
Medical & Pharmaceutical                                                  18%            18%            18%              21%             10%            33%            17%              26%           24%             23%             26%        27%                  22%      18%
Chemical Fiber Industry                                                   27%           -20%            14%              30%             34%            36%            23%              27%           -2%             -2%             32%        26%                  21%       5%
Rubber Products                                                            6%            10%            19%              26%             43%            24%            24%              27%           23%             12%             26%        23%                  24%        na
Plastic Products                                                          18%            13%            16%              25%             39%            20%            26%              27%           22%             10%             28%        15%                  23%        na
Non Metal Minerals Products                                               10%             9%            15%              26%             34%            24%            28%              32%           36%             18%             30%        27%                  27%      10%
Smelting & Pressing of Ferrous Metal                                      22%            15%            15%              58%             67%            26%            19%              36%           31%             -4%             24%        23%                  28%       6%
Smelting & Pressing of NonFerrous Metal                                   20%             8%            13%              39%             68%            32%            64%              39%           15%              2%             39%        29%                  33%       5%
Metal Products                                                            17%            11%            17%              20%             35%            28%            30%              33%           31%              7%             27%        20%                  25%      23%
Ordinary Machinery                                                        15%            13%            24%              36%             50%            26%            31%              34%           34%             12%             29%        19%                  29%     -10%
Special Purpose Equipment                                                 12%             8%            22%              39%             34%            21%            30%              33%           38%             17%             29%        20%                  28%       7%
Transport Equipment                                                       16%            19%            29%              37%             22%            16%            29%              32%           24%             25%             34%        16%                  26%        na
Electric Machinery & Equipment                                            23%            13%            13%              30%             45%            23%            32%              32%           27%             10%             30%        18%                  26%       8%
Electronic & Communication Equipment                                      32%            21%            23%              45%             42%            19%            23%              18%           11%              2%             25%        15%                  22%       8%
Instrument & Office Machinery                                             23%            10%            17%              48%             36%            25%            28%              20%           15%              2%             28%        14%                  23%        na
Handicraft & Other Manufacturing                                                                                                         29%            25%            27%              32%           22%             10%             29%        20%                   NA        na
Waste Resources & Materials Recovery & Processing                                                                                       289%            42%            52%              59%           70%             25%             64%        21%                   NA       1%

Production & Supply of Electric & Heat Power                              23%            13%            16%              24%              37%           22%            20%              18%           15%             12%             20%         8%                  19%     18%
Production & Supply of Gas                                                29%             8%            28%              21%              39%           21%            33%              29%           40%             19%             33%        25%                  29%      4%
Production & Supply of Water                                               2%             5%             9%              15%              20%           11%            24%              11%           18%             10%             18%         2%                  14%      3%
Source: CEIC. Note: Business Survey of 5000 Principal Enterprises. The business survey encompasses monthly statistics of financial indicators of industrial enterprises and quarterly conducted questionnaire research of business conditions of these enterprises. The
state-owned large-and medium-size industrial enterprises constitute the majority of surveyed enterprises with some representative collectively-owned enterprises and conglomerates of handsome economic scale also being included in the samples. Since 1993, some
joint venture, foreign-funded and share-holding industrial enterprises have entered into the survey successively. The surveyed enterprises involve 27 industries and the structure of sample enterprises is commensurate with that of China's industrial enterprises. The
outcome of the business survey can basically reflect the business conditions of China's industry.




                                                                                                                                                                                                                                                                        27
Sunil Garg                                   Asia Pacific Equity Research
(852) 2800-8518                              25 September 2012
sunil.garg@jpmorgan.com




Companies Recommended in This Report (all prices in this report as of market close on 24 September 2012)
Agile Property Holdings Ltd (3383.HK/HK$8.60/Overweight), Beijing Capital International Airport
(0694.HK/HK$5.02/Overweight), China Everbright International (0257.HK/HK$3.86/Overweight), China Longyuan Power
Group Corp. (0916.HK/HK$5.21/Neutral), China National Materials (1893.HK/HK$2.29/Underweight), Geely Automobile
Holdings Ltd. (0175.HK/HK$2.82/Overweight), Sands China Ltd (1928.HK/HK$28.25/Overweight)
Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research
analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed by the research analyst(s) in this report.
Important Disclosures

 Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for China
Everbright International within the past 12 months.
  Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Agile Property Holdings
Ltd, China Everbright International, Geely Automobile Holdings Ltd..
  Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment
banking clients: China Everbright International.
 Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following
company(ies) as clients, and the services provided were non-investment-banking, securities-related: Agile Property Holdings Ltd.
  Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients,
and the services provided were non-securities-related: Agile Property Holdings Ltd.
 Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking China
Everbright International.
  Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking
services in the next three months from Agile Property Holdings Ltd, China Everbright International.
  Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services
other than investment banking from Agile Property Holdings Ltd.
  "J.P. Morgan Securities (Asia Pacific) Limited and or its affiliates (J.P. Morgan) is acting as Sole Bookrunner to China Everbright
International Limited (257.HK) on its top-up placement as announced on 28 Aug 2012. J.P. Morgan will be receiving fees for so acting.
J.P. Morgan may perform, or may seek to perform, other financial or advisory services for China Everbright International Limited or its
associates and may have other interests in or relationships with China Everbright International Limited or its affiliates, and receive fees,
commissions or other compensation in such capacities. This research report and the information herein is not intended to serve as an
endorsement of the proposed transaction or result in procurement, withholding or revocation of a proxy or any other action by a security
holder. This report is based solely on publicly available information. No representation is made that it is accurate or complete.”
   MSCI: The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior
written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or used to
create any financial products, including any indices. This information is provided on an 'as is' basis. The user assumes the entire risk of
any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the
information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular
purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any
third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI,
Morgan Stanley Capital International and the MSCI indexes are services marks of MSCI and its affiliates.
Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan–
covered companies by visiting https://mm.jpmorgan.com/disclosures/company, calling 1-800-477-0406, or emailing
research.disclosure.inquiries@jpmorgan.com with your request.
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of

28
Sunil Garg                                       Asia Pacific Equity Research
(852) 2800-8518                                  25 September 2012
sunil.garg@jpmorgan.com




the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research
website, www.morganmarkets.com.

 J.P. Morgan Equity Research Ratings Distribution, as of July 6, 2012
                                                           Overweight     Neutral       Underweight
                                                           (buy)          (hold)        (sell)
 J.P. Morgan Global Equity Research Coverage               45%            43%           11%
    IB clients*                                            51%            47%           34%
 JPMS Equity Research Coverage                             44%            48%           8%
    IB clients*                                            70%            62%           51%
 *Percentage of investment banking clients in each rating category.
 For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
 rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table
 above.


Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered
companies, please see the most recent company-specific research report at http://www.morganmarkets.com , contact the primary analyst
or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com.
Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based
upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.
Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US
affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS,
and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public
appearances, and trading securities held by a research analyst account.

Other Disclosures
J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing
name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.

Options related research: If the information contained herein regards options related research, such information is available only to persons who have
received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options,
please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf

Legal Entities Disclosures
U.S.: JPMS is a member of NYSE, FINRA, SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC and is authorized and regulated in the
UK by the Financial Services Authority. U.K.: J.P. Morgan Securities plc (JPMS plc) is a member of the London Stock Exchange and is authorized and
regulated by the Financial Services Authority. Registered in England & Wales No. 2711006. Registered Office 25 Bank Street, London, E14 5JP. South
Africa: J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. Hong Kong: J.P. Morgan
Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in
Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan
Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (ABN 61 003 245
234/AFS Licence No: 238066) is a Market Participant with the ASX and regulated by ASIC. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a
participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private
Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock
Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI
Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities
(Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange
Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK.
Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange
Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P.
Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer
by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities
Singapore Private Limited (JPMSS) [MICA (P) 088/04/2012 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities
Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB
Singapore) which is regulated by the MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd
(18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities


                                                                                                                                                               29
Sunil Garg                                         Asia Pacific Equity Research
(852) 2800-8518                                    25 September 2012
sunil.garg@jpmorgan.com




Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities
and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of
Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079
and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai:
JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai
International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.

Country and Region Specific Disclosures
U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMS plc.
Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interest arising as a result of
publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This
report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons
who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be
engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in
their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. JPMSAL does not issue or
distribute this material to "retail clients". The recipient of this material must not distribute it to any third party or outside Australia without the prior written
consent of JPMSAL. For the purposes of this paragraph the terms "wholesale client" and "retail client" have the meanings given to them in section 761G of
the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch and J.P.Morgan Chase
Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of
the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with
the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data
from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear
contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk.
Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the
exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and
consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan
Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau
(kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial
Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time
by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities
discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above.
India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed
by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their
business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section
3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent
of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public
offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory
thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus
with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an
exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information
contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of
the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of
Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities
commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein
or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded
as professional clients as defined under the DFSA rules.

General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co.
or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to
JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the
securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change
without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any
financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not
intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own
independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S.
affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or
announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P.
Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

"Other Disclosures" last revised August 25, 2012.
Copyright 2012 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of J.P. Morgan. #$J&098$#*P




30
Sunil Garg                                    Asia Pacific Equity Research
(852) 2800-8518                               25 September 2012
sunil.garg@jpmorgan.com




J.P. Morgan Hong Kong and China Equity Research Team
Sunil Garg                Asia Pacific Head of Research        852 2800 8518   sunil.garg@jpmorgan.com
Adrian Mowat              Market Strategy                      852 2800 8599   adrian.mowat@jpmorgan.com
Joseph Leung              HK Strategy/ Banks                   852 2800 8517   joseph.mj.leung@jpmorgan.com
Joanne Cheung             HK Strategy                          852 2800 8596   joanne.cy.cheung@jpmorgan.com.
Lan Deng                  China Strategy
Jin Luo                   Autos
Joshua Klaczek            Banks                                285 2800 8534   Josh.klaczek@jpmorgan.com
Helen Ye                  Banks/Insurance                      852 2800 8513   Helen.zj.ye@jpmorgan.com
Joy Wu                    Banks                                                Joy.wu@jpmorgan.com
Ebru Sener                Consumer                             852 2800 8521   ebru.sener@jpmorgan.com
Jessica Hong              Consumer                             852 2800 8559   jessica.ch.hong@jpmorgan.com
Kenneth Fong              Gaming & Lodging                     852 2800 8597   kenneth.kc.fong@jpmorgan.com
Sean Wu                   Healthcare                           852 2800 8538   sean.wu@jpmorgan.com
Karen Li                  Infrastructure                       852 2800 8589   karen.yy.li@jpmorgan.com
Chapman Deng              Infrastructure                       852 2800 8577   chapman.zw.deng@jpmorgan.com
Bao Ling Chan             Insurance                            852 2800 8592   baoling.chan@jpmorgan.com
Dick Wei                  Internet & New Media                 852 2800 8535   dick.x.wei@jpmorgan.com
Evan Zhou                 Internet & New Media                 852 2800 8505   Evan.z.zhou@jpmorgan.com
Daniel Kang               Metal & Mining                       852 2800 8570   daniel.kang@jpmorgan.com
Lun Zhang                 Metal & Mining                       852 2800 8561   Lun.zhang@jpmorgan.com
Brynjar Bustnes           Oil & Gas                            852 2800 8578   brynjar.e.bustnes@jpmorgan.com
Sophie Tan                Oil & Gas                            852 2800 8531   sophie.lm.tan@jpmorgan.com
Akhil Handa               Oil & Gas                            852 2800 8563   akhil.x.handa@jpmorgan.com
Robert Smith              Quantitative                         852 2800 8569   robert.z.smith@jpmorgan.com
Chris Ma                  Quantitative                         852 2800 8530   Christopher.x.ma@jpmorgan.com
Lucia Kwong               Real Estate                          852 2800 8526   lucia.yk.kwong@jpmorgan.com
Amy Luk                   Real Estate                          852 2800 8524   amy.kp.luk@jpmorgan.com
Ryan Li                   Real Estate                          852 2800 8529   ryan.lh.li@jpmorgan.com
Leon HK Chik              SMID Caps                            852 2800 8590   leon.hk.chik@jpmorgan.com
Andrew Hsu                SMID Caps                            852 2800 8572   andrew.t.hsu@jpmorgan.com
Alvin Kwock               Technology                           852 2800 8533   alvin.yl.kwock@jpmorgan.com
Gokul Hariharan           Technology                           852 2800 8564   gokul.hariharan@jpmorgan.com
Lucy Liu                  Telecoms                             852 2800 8566   lucy.y.liu@jpmorgan.com
Qin Zhang                 Technology                           852 2800 8532   qin.zhang@jpmorgan.com
Michelle Wei              Telecoms                             852 2800 8562   michelle.z.wei@jpmorgan.com
Boris Kan                 Utilities                            852 2800 8573   boris.cw.kan@jpmorgan.com
Elaine Wu                 Utilities                            852 2800 8561   elaine.wu@jpmorgan.com

J.P. Morgan Regional and Hong Kong Sales Team
Christopher Knight        Regional                             852 2800 8828   christopher.knight@jpmorgan.com
Cynthia Lam               Regional                             852 2800 8899   cynthia.wy.lam@jpmorgan.com
Ed Bell                   Regional                             852 2800 8885   ed.h.bell@jpmorgan.com
Maria Hong                Regional                             852 2800 8865   maria.hong@jpmorgan.com
Nick Paolucci             Regional                             852 2800 7808   nicholas.g.paolucci@jpmorgan.com
Allan Murray              Hong Kong & China                    852 2800 8811   ag.murray@jpmorgan.com
Newman Mou                Hong Kong & China                    852 2800 8893   newman.sb.mou@jpmorgan.com
Jennifer Lee              Hong Kong & China                    852 2800 7710   jennifer.a.lee@jpmorgan.com
Kelly Wen                 Hong Kong & China                    852 2800 7871   kelly.l.wen@jpmorgan.com
Stella Chow               Hong Kong & China                    852 2800 7818   stella.chow@jpmorgan.com




                                                                                                                  31

								
To top