External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Thematic (Sector/Industry)

<ul><li>China SOE construction names have outperformed the index YTD on the back of the “Valuation system with China characteristics” (中特估).</li><li>While the sector retreated in May due to weak market, we think the story has yet to come to an end as the sector (H-share) is trading at only 4.5x 2023E P/E (Bloomberg consensus).</li><li>We see multiple drivers ahead: (1) Continuous market share gain of the state-owned construction companies; (2) Belt-and-Road opportunities following the enhanced China-Middle East relations; (3) Better incentives to achieve higher profitability following the revised KPI matrix for SOEs.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

China SOE construction names have outperformed the index YTD on the back of the “Valuation system with China characteristics” (中特估).While the sector retreated in May due to weak market, we think the story has yet to come to an end as the sector (H-share) is trading at only 4.5x 2023E P/E (Bloomberg consensus).We see multiple drivers ahead: (1) Continuous market share gain of the state-owned construction companies; (2) Belt-and-Road opportunities following the enhanced China-Middle East relations; (3) Better incentives to achieve higher profitability following the revised KPI matrix for SOEs.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Construction Sector – Multiple drivers to achieve Valuation with China characteristics

External broker reports(aggregated public sources), Topline Securities

Topline Securities

Topline Securities is one of the fastest growing brokerage houses in Pakistan. It has strong equity brokerage, economic / equity research, mutual fund distribution, commodity trading and corporate finance & advisory functions. Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

<ul><li>Pakistan market is expected to continue its uptrend in 2017 given tangible gains from China Pakistan Economic Corridor (CPEC) projects and rising domestic demand leading to higher economic growth prospects. This coupled with liquidity with local investors will likely set the stage for further gains in 2017, we believe.</li><li>Pakistan market currently trades at 2017F PE of 9.6x, which is at 23% and 29% discount to Morgan Stanley Composite Index (MSCI) Frontier Markets (FM) forward PE of 12.4x and MSCI Emerging Markets (EM) forward PE of 13.6x, respectively. We are of the view that Pakistan Market PE can potentially re-rate to 10x in 2017. This would be in line with the PE witnessed during high growth period of 2005-08 when Pakistan was part of EM index.</li><li>We expect benchmark KSE-100 Index to rise to 56,000 points by Dec 2017 generating 21% returns (inclusive of dividend). Our sample companies’ profit (representing 70% of KSE-100 index) is expected to grow by 23% in 2017, compared to increase of 1% in 2016, due to 1) re-bound in oil prices and higher oil production, 2) bottoming out of interest rates, 3) higher sales of oil, fertilizer and autos and 4) increased investment in energy sector.</li><li>Resultantly, we expect market capitalization of Pakistan to cross US$100bn in 2017 (30% of GDP) vs. US$89bn now.</li><li>Among other events that can potentially impact market movement is transition to MSCI EM in May 2017, which will keep optimism high. Further, local political issues, global sell-off and delays in implementation of CPEC projects can affect local bourse in 2017, we believe.</li><li>During 2016 YTD, the KSE-100 Index is up 41% compared to relatively flat performance in 2015. This is despite foreign selling of US$267mn during the year, thanks to local liquidity where local mutual funds bought US$264mn and Non-Banking Financial Corporations (NBFC) bought US$215mn whereas Companies and Banks sold total of US$221mn. Pakistan market performance in 2016 remained exceptional compared to regional markets where MSCI FM is down 2% while MSCI EM increased 10% in 2016 YTD.</li><li>We maintain ‘overweight’ stance on Cements, Consumers/Autos, Oil &amp; Gas Marketing and Steel sectors. We expect these sectors to be prime beneficiaries of rising domestic demand and expansion activities led by CPEC. We are of the view that Banks/Insurance will continue to benefit from increased economic activity.</li><li>Our top picks for 2017, which are expected to generate above average returns, are: Habib Bank (HBL), Lucky Cement (LUCK), Pakistan State Oil (PSO), DG Khan Cement (DGKC), Sui North Gas Pipelines (SNGP), Pak Suzuki Motors (PSMC), Pak Elektron (PAEL) and Adamjee Insurance (AICL).</li></ul>

Pakistan market is expected to continue its uptrend in 2017 given tangible gains from China Pakistan Economic Corridor (CPEC) projects and rising domestic demand leading to higher economic growth prospects. This coupled with liquidity with local investors will likely set the stage for further gains in 2017, we believe.Pakistan market currently trades at 2017F PE of 9.6x, which is at 23% and 29% discount to Morgan Stanley Composite Index (MSCI) Frontier Markets (FM) forward PE of 12.4x and MSCI Emerging Markets (EM) forward PE of 13.6x, respectively. We are of the view that Pakistan Market PE can potentially re-rate to 10x in 2017. This would be in line with the PE witnessed during high growth period of 2005-08 when Pakistan was part of EM index.We expect benchmark KSE-100 Index to rise to 56,000 points by Dec 2017 generating 21% returns (inclusive of dividend). Our sample companies’ profit (representing 70% of KSE-100 index) is expected to grow by 23% in 2017, compared to increase of 1% in 2016, due to 1) re-bound in oil prices and higher oil production, 2) bottoming out of interest rates, 3) higher sales of oil, fertilizer and autos and 4) increased investment in energy sector.Resultantly, we expect market capitalization of Pakistan to cross US$100bn in 2017 (30% of GDP) vs. US$89bn now.Among other events that can potentially impact market movement is transition to MSCI EM in May 2017, which will keep optimism high. Further, local political issues, global sell-off and delays in implementation of CPEC projects can affect local bourse in 2017, we believe.During 2016 YTD, the KSE-100 Index is up 41% compared to relatively flat performance in 2015. This is despite foreign selling of US$267mn during the year, thanks to local liquidity where local mutual funds bought US$264mn and Non-Banking Financial Corporations (NBFC) bought US$215mn whereas Companies and Banks sold total of US$221mn. Pakistan market performance in 2016 remained exceptional compared to regional markets where MSCI FM is down 2% while MSCI EM increased 10% in 2016 YTD.We maintain ‘overweight’ stance on Cements, Consumers/Autos, Oil &amp; Gas Marketing and Steel sectors. We expect these sectors to be prime beneficiaries of rising domestic demand and expansion activities led by CPEC. We are of the view that Banks/Insurance will continue to benefit from increased economic activity.Our top picks for 2017, which are expected to generate above average returns, are: Habib Bank (HBL), Lucky Cement (LUCK), Pakistan State Oil (PSO), DG Khan Cement (DGKC), Sui North Gas Pipelines (SNGP), Pak Suzuki Motors (PSMC), Pak Elektron (PAEL) and Adamjee Insurance (AICL).

China

China State Construction Engineering Corporation Ltd. is a state-owned enterprise. The Company engages in housing construction, international building contracting, property development and investment, and infrastructure construction.

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China State Construction A (601668 CH)

China Construction Sector – Multiple drivers to achieve Valuation with China characteristics

China SOE construction names have outperformed the index YTD on the back of the “Valuation system with China characteristics” (中特估).

CMB International

Pakistan Market Outlook 2017

Pakistan market is expected to continue its uptrend in 2017 given tangible gains from China Pakistan Economic Corridor (CPEC) projects and rising...

Topline Securities

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