China Equity Strategy

Asia Pacific Equity Research26 April 2020

This report is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan.

China Equity StrategyBuilding confidence in the economic recovery

China Equity Strategy

Haibin Zhu AC

(852) 2800-7039

[email protected]

Bloomberg JPMA HZHU <GO>

J.P. Morgan Securities (Asia Pacific) Limited/JPMorgan Chase Bank, N.A., Hong Kong

Marvin M Chen

(852) 2800-7692

[email protected]

J.P. Morgan Securities (Asia Pacific) Limited/JPMorgan Chase Bank, N.A., Hong Kong

Joanne Cheung

(852) 2800-8596

[email protected]

J.P. Morgan Securities (Asia Pacific) Limited

Tim Huang

(852) 2800-8624

[email protected]

SAC License Number: S1730520040002

J.P. Morgan Securities (China) Company Limited

Head of GEM Equity Strategy

Pedro Martins Junior, CFA

(55-11) 4950-4121

[email protected]

Banco J.P. Morgan S.A.

See page 72 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.jpmorganmarkets.com

Retracing COVID-19 drawdowns. After the sharp sell-off in March, equity markets had a notable rebound over the past month. MSCI China rose 14%, underperforming EM and DM by 3.6% and 9.2%, respectively. While the equity rally has been less spectacular in China equities relative to developed markets, looking at how much of the COVID-19 induced equity losses have been retraced, MSCI China has recovered roughly 56% of the losses, which is in-line with the retracement % for US equities (S&P500 50%, Nasdaq 55%).

1Q GDP contracted 6.8%, but March data better than expected. While still early, 1Q MSCI China earnings growth is also tracking a similar contraction of ~5%. Nonetheless, the quarter ended on a stronger note with the monthly macro data showing that March activity rebounded from the dismal Jan-Feb numbers. On the production side, industrial production (IP) beat expectations notably and the March trade report was also more resilient than expected. Domestic consumption and investment also rebounded in March, and will be the key focus in coming quarters as high frequency indicators show that the consumption recovery (particularly service sectors) has lagged production. Overall, the rebound in March gives us confidence that a V-shaped recovery will continue to take place in the coming quarters, driving a cyclical recovery. We have moderately raised our full year growth forecast to 1.3% from 1.1% previously.

Investment themes. i) Rotation into cyclical sectors over defensive as economic recovery takes hold, with recovery in 2Q led by domestic consumption, real estate and infra-FAI (policy tailwinds in "new and old"); ii) sectors that could benefit from a more permanent change in consumer behavior due to the outbreak include healthcare/grocery retailers/online gaming/e-commerce; iii) expect industry consolidation, benefitting industry winners with low liability ratios and strong balance sheets; iv) within the financial sector: less bearish on banks as expected deposit rate cut in 2Q and lower financial market rates ease funding cost amidst economic recovery; more cautious on insurance.

China Model Portfolio changes: We increase our cyclical exposure by adding Midea under consumer discretionary (upgrade to OW) and SANY under the industrial sector. We move utilities to UW by selling the defensive plays Yangtze Power and GDI. Within the financial sector, we rotate from insurance (downgrade to UW) into banks by trimming Ping An Insurance and add BoCom.

Sector views: OW industrials, consumer staples, healthcare, consumer discretionary and real estate; Neutral diversified financials, materials, communication services and IT; UW energy, utilities, banks and insurance.

Table 1: Top picksTicker Price Price Upside to PT JPM Mkt cap P/E (x) P/B (x) Div Yield (%) ROE (%)

Target % Rating US$bn 20E 21E 20E 20E 20E

Vanke 2202 HK 24.5 38.5 57 OW 5 5.6 4.8 1.1 6.0 22.1Alibaba BABA US 205.2 280.0 36 OW 551 28.8 23.4 46.6 0.0 23.2SANY 600031 CH 19.1 23.0 20 OW 23 12.3 11.3 3.2 2.4 29.1Wuxi Bio 2269 HK 121.5 140.0 15 OW 20 94.1 67.6 10.8 0.0 12.0Sun Art 6808 HK 12.9 14.0 9 OW 16 34.3 26.8 4.3 1.3 12.8Source: Bloomberg, J.P. Morgan estimates. Data as of 23 April 2020.

2

Asia Pacific Emerging Markets Research26 April 2020

Haibin Zhu(852) [email protected]

Table of ContentsInvestment Summary ...............................................................3

Key Thematic Drivers...............................................................7

Market Strategy.......................................................................15

China Model Portfolio ............................................................18

China Model Portfolio Performance Review ........................19

MSCI China Index Target .......................................................20

Earnings Outlook: 3.7%/18.3% EPS Growth in 2020/21E....22

EPS Tracker – Monitoring Consensus Earnings Revisions27

Market Valuations...................................................................28

MSCI China Evolution – From Old to New Economy...........31

The 467 A shares in MSCI China ...........................................32

Accessing China equities ......................................................34

MMA Fund Flows and Positioning ........................................35

Q-score strategy.....................................................................37

Sector views ...........................................................................39

China Model Portfolio Stocks – Investment Case ...............47

Appendix .................................................................................52

3



Investment Summary Retracing COVID-19 drawdowns. After the sharp

sell-off in March, equity markets saw notable rebound over the past month. MSCI China rose 14%, underperforming EM and DM by 3.6% and 9.2%, respectively. While the equity rally has been less spectacular in China equities relative to DM markets, looking at how much of the COVID-19 induced equity losses have been retraced, MSCI China has recovered roughly 56% of the losses, which is in-line with the retracement % of US equities (SP500 50%, Nasdaq 55%). Indeed, while China equities have generally moved along with global markets, volatility has been less extreme, anchored by domestic A-shares which have a lower beta to market moves than offshore China equities.

1Q GDP contracted 6.8%, but March data better than expected. China’s real GDP fell 6.8%oya in 1Q20, however the monthly data showed that March activity rebounded from the dismal Jan-Feb numbers. On the production side, industrial production (IP) beat expectations notably and recorded a sharp sequential rebound in March (+36.8%m/m sa), whilethe March trade report which also was more resilient than expected. Both production and trade in March likely benefitted from some pent up demand following the wide-scale lockdown in February.Meanwhile, retail sales rebounded by 84%m/m sa in March, and the fixed asset investment (FAI) decline narrowed from -24.5%oya in Jan-Feb to -9.3%oya in March. Overall, the rebound in March gives us confidence that a V-shaped recovery will continue to take place in the coming quarters, driving a cyclical recovery. We have moderately raised our full year growth forecast to 1.3% from 1.1% previously.

Better visibility on COVID-19, but risks of second waves and return of US-China tension remain.Global COVID-19 infections remain a key driver in market sentiment. On the positive side, global infection growth curve did flatten over the past month, as the average daily growth of ex. China active confirmed cases came down to 4.8% in April vs. 16% of March, which has led to increasing visibility and discussions on a timeline for relaxation of lockdown policies in the US and other countries that are approaching or have moved beyond the peak. Nonetheless, there have been smaller outbreaks within China, which at this stage look manageable and contained. Meanwhile, potential re-escalation in the US and China confrontation remains an overhang after the virus concerns abate.

Earnings: The 1Q20 corporate earnings results season is underway, with 85 MSCI China constituents reporting their earnings this week, representing ~12% of the index that report quarterly. The results

generally came in-line/ahead of our analysts’ expectation, with reported aggregate blended earnings falling 4.4%oya. Sector-wise, retail companies delivered stable online profitability thanks to the increase in online consumption and better cost control, while offline was largely affected by the store closures. China telcos reported flat growth for 1Q, with weak mobile revenue offsetting a robust fixed-line business. Materials and utilities were hit by the sharp decline in sales volume and power generation. Our bottom-up MSCI China CY20/21E growth forecasts currently stand at 3.7%oya and 18.3%oya respectively.

Valuations: MSCI China has re-rated by 19% from its trough at 10x in late-March to 11.9x currently, which is in-line with its 10y average at 12x. The increase in forward PE is driven by the 15% increase in price and a 4% decline in forward EPS. Energy sector re-rated the most by 58%, largely due to the continuous EPS downgrade amid the falling oil price. Banks and diversified financials, which had underperformed during the recent market rebound, re-rated the least by c.8%. Valuations of some of the cyclical sectors including real estate (5.2x) and industrials (8.6x) remain low, whereas IT and healthcare are trading at 1.5-2 standard deviation above mean.

Investment themes: i) Rotation into cyclical sectors over defensive as economic recovery takes hold, with recovery in 2Q led by domestic consumption, real estate and infra-FAI (policy tailwinds in "new and old"); ii) sectors that could benefit from a more permanent change in consumer behavior due to the outbreak include healthcare/grocery retailers/online gaming/e-commerce; iii) expect industry consolidation, benefitting industry winners with low liability ratios and strong balance sheet.; iv) within financial sector: less bearish on banks as expected deposit rate cut in 2Q and lower financial market rates ease funding cost amidst economic recovery; more cautious on insurance.

China Model Portfolio change: We increase our cyclical exposure by adding Midea under consumer discretionary (upgrade to OW) and SANY under the industrial sector. We move utilities to UW by selling the defensive plays Yangtze Power and GDI. Within the financial sector, we rotate from insurance (downgrade to UW) into banks by trimming Ping An Insurance and add BoCom.

We are OW industrials, consumer staples, healthcare, consumer discretionary and real estate; Neutraldiversified financials, materials, communication services and IT (prefer EV-battery maker; UW tech hardware); UW energy, utilities, banks and insurance.

4



Table 2: China economic heatmap

Source: Bloomberg, CEIC, and J.P. Morgan. Note: Green = acceleration, yellow = deceleration, red= contraction. *WRH = wholesale, retail and hospitality.

%oya 4/18 5/18 6/18 7/18 8/18 9/18 10/18 11/18 12/18 1/19 2/19 3/19 4/19 5/19 6/19 7/19 8/19 9/19 10/19 11/19 12/19 1/20 2/20 3/20

Consumption

Passenger vehicle sales 11.2 7.9 2.3 -5.3 -4.6 -12.0 -13.0 -16.1 -15.8 -17.7 -17.4 -6.9 -17.7 -17.4 -7.8 -3.9 -7.7 -6.3 -5.8 -5.4 -0.9 -20.5 -81.7 -48.4

Retail sales (value) 9.4 8.5 9.0 8.8 9.0 9.2 8.6 8.1 8.2 8.2 8.2 8.7 7.2 8.6 9.8 7.6 7.5 7.8 7.2 8.0 8.0 -20.5 -20.5 -15.8

WRH 7.8 5.6 6.4 5.7 5.9 5.6 3.6 2.0 2.2 3.2 3.2 5.0 1.8 5.0 9.8 2.6 1.6 2.9 0.9 4.2 4.3 -22.2 -22.2 -12.9

Food 8.0 7.3 13.0 9.5 10.1 13.6 7.7 10.6 11.3 10.1 10.1 11.8 9.3 11.4 9.8 9.9 12.5 10.4 9.0 8.9 9.7 1.7 1.7 19.2

Garment/footwear 9.2 6.6 10.0 8.7 7.0 9.0 4.7 5.5 7.4 1.8 1.8 6.6 -1.1 4.1 5.2 2.9 5.2 3.6 -0.8 4.6 1.9 -30.9 -30.9 -34.8

Cosmetics 15.1 10.3 11.5 7.8 7.8 7.7 6.4 4.4 1.9 8.9 8.9 14.4 6.7 16.7 22.5 9.4 12.8 13.4 6.2 16.8 11.9 -14.1 -14.1 -11.6

Jewelry 5.9 6.7 7.9 8.2 14.1 11.6 4.7 5.6 2.3 4.4 4.4 -1.2 0.4 4.7 7.8 -1.6 -7.0 -6.6 -4.5 -1.1 3.7 -41.1 -41.1 -30.1

Daily-use items 12.0 10.3 15.8 11.3 15.8 17.4 10.2 16.0 16.8 15.9 15.9 16.6 12.6 11.4 12.3 13.0 13.0 12.0 12.0 17.5 13.9 -6.6 -6.6 0.3

Household electronics 6.7 7.6 14.3 0.6 4.8 5.7 4.8 12.5 13.9 3.3 3.3 15.2 3.2 5.8 7.7 3.0 4.2 5.4 0.7 9.7 2.7 -30.0 -30.0 -29.7

Online goods sales 25.0 27.3 30.5 27.3 29.2 25.8 25.2 16.4 32.3 19.5 19.5 25.1 25.0 21.8 20.0 17.1 17.7 18.3 19.2 26.7 23.0 3.0 3.0 6.3

Air passenger traffic 15.3 11.5 12.9 10.7 12.1 8.0 10.8 7.8 7.5 14.9 11.1 4.1 4.7 8.7 8.1 10.3 8.3 8.9 5.4 6.0 5.1 -5.3 -84.5 -71.7

Freight volume 7.4 8.5 6.3 6.2 7.2 8.1 9.5 6.5 8.9 6.9 0.9 8.6 6.1 5.6 5.5 6.8 5.4 5.3 2.5 5.6 5.1 -27.9 -27.9 ..

No of delivered package 25.8 25.1 24.2 27.3 25.7 24.1 25.2 24.4 29.0 13.5 38.7 23.3 31.1 25.2 29.1 28.6 29.3 25.0 22.7 21.5 24.3 -16.4 0.2 23.0

Insurance premium 17.4 9.7 14.7 8.2 16.5 14.6 22.7 18.9 18.9 24.1 10.0 6.9 9.4 11.0 12.8 10.8 5.9 8.7 7.1 7.3 16.5 6.8 -14.4 ..

Caixin services PMI 52.9 52.9 53.9 52.8 51.5 53.1 50.8 53.8 53.9 53.6 51.1 54.4 54.5 52.7 52.0 51.6 52.1 51.3 51.1 53.5 52.5 51.8 26.5 43.0

Industrial activities

Fixed asset investment (YTD) 7.0 6.1 6.0 5.5 5.3 5.4 5.7 5.9 5.9 6.1 6.1 6.3 6.1 5.6 5.8 5.7 5.5 5.4 5.2 5.2 5.4 -24.5 -24.5 -16.1

Manufacturing (YTD) 4.8 5.2 6.8 7.3 7.5 8.7 9.1 9.5 9.5 5.9 5.9 4.6 2.5 2.7 3.0 3.3 2.6 2.5 2.6 2.5 3.1 -31.5 -31.5 -25.2

Real estate (YTD) 10.3 10.2 9.7 10.2 10.1 9.9 9.7 9.7 9.5 11.6 11.6 11.8 11.9 11.2 10.9 10.6 10.5 10.5 10.3 10.2 9.9 -16.3 -16.3 -7.7

Infrastructure (YTD) 12.4 9.4 7.3 5.7 4.2 3.3 3.7 3.7 3.8 4.3 4.3 4.4 4.4 4.0 4.1 3.8 4.2 4.5 4.2 4.0 3.8 -30.3 -30.3 -19.7

Industrial production 7.0 6.8 6.0 6.0 6.1 5.8 5.9 5.4 5.7 5.3 5.3 8.5 5.4 5.0 6.3 4.8 4.4 5.8 4.7 6.2 6.9 -13.5 -13.5 -1.1

Steel products production 8.5 10.8 7.2 8.0 6.4 9.8 11.5 11.3 9.1 10.7 10.7 11.4 11.5 11.5 12.6 9.6 9.8 6.9 3.5 10.4 11.3 -3.4 -3.4 -0.1

Cement production 3.2 1.9 0.0 1.6 5.0 5.0 13.1 1.6 4.3 0.5 0.5 22.2 3.4 7.2 6.0 7.5 5.1 4.1 -2.1 8.3 6.9 -29.5 -29.5 -18.3

Apparent oil demand 9.3 5.4 6.8 12.8 5.4 4.9 5.3 6.3 5.8 8.2 8.6 2.6 4.1 5.1 6.4 -0.2 9.1 5.5 7.2 4.2 13.9 -5.1 -6.2 -7.9

Commercial vehicle sales 11.7 15.5 17.5 2.3 0.9 -9.0 -5.1 1.7 5.2 -1.9 8.3 2.6 0.4 -11.8 -17.8 -6.3 -2.8 1.9 7.0 6.9 3.9 -7.5 -67.1 -22.6

Railway freight volume 1.4 11.8 10.1 8.7 6.7 9.7 10.1 14.0 14.0 8.2 -2.2 2.3 10.0 6.8 7.5 9.1 6.9 5.8 9.0 9.2 13.2 4.5 4.5 ..

Excavator sales volume 84.5 71.4 58.8 45.3 33.0 27.7 44.9 14.9 14.4 10.0 68.7 15.7 7.0 -2.2 6.6 11.0 19.5 17.8 11.5 21.7 25.8 -15.4 -50.5 11.6

Residential sales -4.4 8.5 5.6 11.0 2.7 -0.8 -1.3 -3.8 2.5 -3.2 -3.2 1.9 2.8 -4.0 -1.7 3.4 7.3 4.6 4.5 3.0 0.6 -39.2 -39.2 -13.8

Residential new starts 4.1 24.1 20.8 36.0 31.2 17.7 14.5 22.5 23.4 4.3 4.3 19.0 18.5 5.1 7.8 5.4 4.4 8.2 27.6 -1.0 8.1 -44.4 -44.4 -11.0

Residential under construction 2.0 2.5 3.2 3.9 4.6 4.9 5.2 5.7 6.3 8.3 8.3 9.7 10.4 10.4 10.3 10.4 10.1 10.1 10.4 10.1 10.1 4.6 4.6 4.1

Total power generation 6.9 9.8 6.7 5.7 7.3 4.6 4.8 3.6 6.2 8.3 8.3 5.4 3.8 0.2 2.8 0.6 1.7 4.7 4.0 4.0 3.5 -8.2 -8.2 -4.6

Caixin manufacturing PMI 51.1 51.1 51.0 50.8 50.6 50.0 50.1 50.2 49.7 48.3 49.9 50.8 50.2 50.2 49.4 49.9 50.4 51.4 51.7 51.8 51.5 51.1 40.3 50.1

NBS manufacturing PMI 51.4 51.9 51.5 51.2 51.3 50.8 50.2 50.0 49.4 49.5 49.2 50.5 50.1 49.4 49.4 49.7 49.5 49.8 49.3 50.2 50.2 50.0 35.7 52.0

Import by region

EU 27.8 18.3 -6.5 19.7 10.3 9.1 12.3 6.0 -2.7 8.5 2.5 -4.9 4.4 1.8 8.5 -3.3 -5.2 -6.5 -3.0 2.6 9.9 -18.9 -18.9 -6.5

US 20.3 11.4 9.6 11.1 2.2 -1.2 -1.8 -25.0 -35.8 -41.1 -26.2 -25.8 -25.8 -26.8 -31.4 -19.1 -22.3 -15.7 -14.3 2.7 7.8 2.4 2.4 -12.6

Japan 17.1 22.5 0.6 23.5 10.5 3.1 11.4 -1.1 -11.4 -1.1 0.2 -14.1 1.4 -15.9 -5.0 -13.0 -8.8 -6.7 -7.3 -0.1 16.4 -9.4 -9.4 4.8

EM Asia 23.6 27.0 15.7 29.2 13.9 16.5 17.2 -6.4 -16.1 -6.7 -10.8 -6.9 1.5 -6.9 -8.9 -8.0 -2.6 -9.3 -5.9 5.6 20.5 -1.7 -1.7 7.1

Brazil 1.9 26.3 15.9 18.1 28.2 40.8 94.4 58.2 41.8 50.2 22.6 7.6 20.4 -17.8 -22.1 17.6 0.8 -15.2 -7.1 3.6 10.9 -3.4 -3.4 4.2

Australia -3.1 22.4 12.0 33.7 33.8 2.9 6.1 14.5 -3.4 10.6 3.9 2.4 18.0 5.2 8.8 18.7 32.2 25.9 11.5 -9.3 42.5 5.8 5.8 -1.6

Total import 22.2 26.2 13.8 27.0 20.7 14.3 20.3 2.9 -7.6 -0.9 -4.4 -7.2 4.5 -8.2 -6.8 -4.9 -5.5 -8.2 -6.2 0.8 16.5 -4.0 -4.0 -0.9

Credit conditions

Total social financing 12.7 12.2 11.8 11.5 11.5 11.2 10.8 10.3 10.3 10.9 10.6 11.2 10.8 11.0 11.2 10.8 10.7 10.7 10.6 10.7 10.7 10.7 10.7 11.5

Bank loans 12.7 12.6 12.7 13.2 13.2 13.2 e 13.1 13.5 13.4 13.4 13.7 13.5 13.4 13.0 12.6 12.4 12.5 12.4 12.4 12.3 12.1 12.1 12.7

M2 growth 8.3 8.3 8.0 8.5 8.2 8.3 8.0 8.0 8.1 8.4 8.0 8.6 8.5 8.5 8.5 8.1 8.2 8.4 8.4 8.2 8.7 8.4 8.8 10.1

5



Table 3: 2020E MSCI China consensus EPS integer by sector

3/19 4/19 5/19 6/19 7/19 8/19 9/19 10/19 11/19 12/19 1/20 2/20 3/20 4/20MSCI China 7.9 7.9 7.7 7.4 7.4 7.1 7.1 7.2 7.2 7.0 7.1 6.9 6.5 6.0Cons Disc. 12.1 12.1 12.0 11.1 11.1 10.8 10.7 10.9 11.0 11.2 11.2 10.6 9.8 8.5Cons. Stpl. 62.4 62.8 61.4 62.2 62.0 60.3 61.3 62.8 64.2 66.5 66.5 66.4 65.6 48.6Comm. Serv. 7.0 7.0 6.5 6.5 6.4 6.0 6.0 6.0 6.0 6.0 6.0 6.0 5.8 5.3Energy 57.2 57.3 55.8 55.2 54.3 52.3 52.3 52.3 52.4 51.8 52.8 49.9 35.5 50.3Financials 85.4 84.4 81.2 79.8 79.9 77.6 77.1 77.9 78.2 77.5 78.3 77.6 76.2 72.2Banks 53.1 52.3 50.4 49.8 49.7 48.0 47.9 48.3 48.5 48.0 48.5 48.0 47.4 44.5Insurance 62.6 62.5 61.4 61.7 62.8 62.5 62.7 63.9 64.7 64.4 65.1 63.7 62.3 63.8Dv. Fin. 16.0 16.2 14.7 13.7 13.6 13.0 11.9 11.9 11.9 11.9 11.8 11.8 11.2 9.1

Healthcare 11.2 11.0 10.8 10.3 10.3 10.1 9.8 9.8 9.7 8.3 8.2 8.0 7.2 5.5Industrials 15.9 15.7 15.3 15.0 15.0 14.5 14.1 14.0 14.1 13.1 13.2 13.1 12.5 12.0IT 43.2 43.3 41.9 40.5 39.8 37.6 36.4 36.0 35.9 33.5 33.8 33.5 31.9 25.4Materials 109.0 110.3 106.7 101.6 99.0 95.9 90.0 89.0 89.0 85.2 87.7 87.1 85.4 78.1Real Estate 326.9 334.2 331.3 327.2 326.2 314.4 313.1 313.2 311.1 307.3 307.6 300.7 289.4 234.4Utilities 68.4 67.8 67.2 66.9 68.1 66.9 65.6 65.0 64.8 64.1 64.6 62.9 61.5 54.0

Source: MSCI, IBES, Datastream, J.P. Morgan. Red color indicates a decline in EPS integer compared to previous month; Green color indicates an increase in EPS integer compared to previous month.

Table 4: 2021E MSCI China consensus EPS integer by sector

3/19 4/19 5/19 6/19 7/19 8/19 9/19 10/19 11/19 12/19 1/20 2/20 3/20 4/20MSCI China 8.5 8.8 8.7 8.5 8.5 8.1 8.1 8.1 8.1 8.0 8.0 7.9 7.6 6.3Cons Disc. 13.6 13.8 14.8 14.2 14.3 13.7 13.7 13.9 13.9 14.2 14.1 13.8 13.4 9.6Cons. Stpl. 71.4 69.6 68.4 70.3 70.0 68.4 69.4 70.6 71.2 73.5 73.4 73.0 72.2 64.3Comm. Serv. 8.4 8.3 7.7 7.6 7.5 7.0 7.0 7.1 7.1 7.1 7.1 7.1 6.8 5.6Energy 58.1 59.0 58.0 57.5 56.0 53.7 54.2 54.2 54.1 53.5 54.2 53.3 42.1 27.0Financials 92.1 90.3 87.7 86.9 87.3 84.4 84.2 85.1 85.2 84.6 85.1 84.0 82.4 74.1Banks 56.4 55.2 53.8 53.4 53.4 51.5 51.5 52.1 52.0 51.6 52.1 51.4 50.5 46.3Insurance 68.1 69.2 68.9 70.1 71.9 70.4 71.3 72.5 73.2 72.5 72.9 71.1 70.2 60.0Dv. Fin. 15.6 18.3 16.3 15.4 15.2 14.6 13.6 13.4 13.4 13.5 13.2 13.2 12.5 10.8

Healthcare 12.7 12.8 12.8 12.3 12.3 12.0 11.8 11.8 11.7 10.3 10.2 10.1 9.1 6.8Industrials 14.3 17.2 16.8 16.4 16.3 15.9 15.5 15.4 15.4 14.4 14.5 14.5 14.3 11.6IT 47.6 48.2 49.0 47.0 46.7 44.4 43.2 43.0 43.1 40.4 40.7 40.7 39.3 29.9Materials 108.1 114.6 110.2 104.6 102.1 98.8 94.5 93.0 92.8 90.4 92.9 93.3 93.0 82.8Real Estate 380.2 395.6 387.0 384.2 382.4 367.9 364.3 365.7 365.6 360.8 359.5 350.9 336.9 276.9Utilities 80.8 77.3 76.1 74.5 75.4 73.9 72.3 71.8 71.7 71.0 71.6 69.7 68.3 59.1

Source: MSCI, IBES, Datastream, J.P. Morgan. Red color indicates a decline in EPS integer compared to previous month; Green color indicates an increase in EPS integer compared to previous month.

6



Table 5: 2020E MSCI China consensus earnings breadth by sector: number of companies seeing (upgrades – downgrades) / (upgrades + downgrades)

3/19 4/19 5/19 6/19 7/19 8/19 9/19 10/19 11/19 12/19 1/20 2/20 3/20 4/20MSCI China -27 -14 -13 -18 -19 -26 -20 -18 -14 -4 -2 -26 -42 -61Cons Disc. -52 -22 -28 -42 -29 -42 -32 -18 -12 -11 -5 -57 -76 -82Cons. Stpl. 0 0 33 39 0 27 -4 9 38 0 -14 -48 -45 -54Comm. Serv. -20 -14 4 13 -74 -60 -25 -50 -42 -33 -11 -24 -45 -56Energy -13 0 -27 -50 -29 20 -20 -25 0 -7 -25 -50 -33 -47Financials -24 -15 -23 -9 -4 -22 -22 24 3 -12 20 -30 -29 -44Banks -57 -79 -33 -31 -29 -21 -41 23 0 -68 50 -45 -59 -72Insurance -54 8 33 69 69 54 23 33 38 38 8 -14 -14 -14Dv. Fin. 26 44 -40 -38 -27 -65 -24 20 -13 11 -12 5 26 14

Healthcare -47 -29 -13 -52 3 -19 -20 -16 -39 -3 -45 15 -12 -52Industrials -3 -9 -18 -10 -21 -44 -8 -30 -11 -3 3 -17 -38 -69IT -56 -13 -40 -64 -14 -35 -18 -33 -23 36 11 -14 -36 -68Materials -42 -45 -40 -47 -33 -24 -50 -47 -14 10 19 -17 -50 -56Real Estate -33 29 48 9 -19 -10 0 4 -23 -24 -33 -33 -52 -63Utilities 0 -28 0 33 -5 -30 -13 -43 -50 -40 14 -67 -81 -73

Source: MSCI, IBES, Datastream, J.P. Morgan. Red color indicates negative earnings breadth; Green color indicates positive earnings breadth.

Table 6: 2021E MSCI China consensus earnings breadth sector: number of companies seeing (upgrades – downgrades) / (upgrades + downgrades)

3/19 4/19 5/19 6/19 7/19 8/19 9/19 10/19 11/19 12/19 1/20 2/20 3/20 4/20MSCI China 2 8 2 -15 -11 -22 -16 -6 -10 1 -1 -18 -32 -56Cons Disc. 50 40 -26 -22 0 -33 -18 -6 -8 -15 -19 -33 -65 -71Cons. Stpl. 20 6 41 5 14 18 0 16 28 -12 -3 -26 -37 -49Comm. Serv. 18 -47 18 -24 -27 -74 -13 -33 -17 0 -11 -21 -29 -63Energy -71 0 -17 -54 -23 33 -7 -41 0 20 -25 -30 -58 -47Financials -50 -24 -2 14 13 -17 -9 48 2 -32 9 -26 -19 -46Banks -83 -70 17 -29 22 -41 -12 60 -21 -80 20 -52 -56 -86Insurance 50 9 33 85 54 54 38 50 54 23 -8 -23 -29 -71Dv. Fin. - 27 -50 33 -60 -30 -31 26 0 -18 4 4 23 7

Healthcare -14 -16 36 -27 6 -26 -11 -19 -56 47 -24 8 -22 -54Industrials 50 21 13 -9 -12 -23 -25 -21 -5 12 9 -8 -17 -63IT 43 22 -44 -41 -8 -27 -6 -11 -16 33 31 -2 -22 -52Materials - 50 -26 -41 -53 -12 -35 -24 -23 0 25 -23 -21 -39Real Estate - 5 13 14 -26 -17 -21 -15 0 -31 -39 -33 -52 -57Utilities 50 29 37 -33 -30 -43 -18 -5 -26 -26 -24 -50 -90 -82

Source: MSCI, IBES, Datastream, J.P. Morgan. Red color indicates negative earnings breadth; Green color indicates positive earnings breadth.

7



Key Thematic Drivers

Retracing COVID-19 drawdowns

After the sharp sell-off in March, equity markets had a notable rebound over the past month. MSCI China rose 14%, underperforming EM and DM by 3.6% and 9.2%, respectively. While the equity rally has been less spectacular in China equities relative to DM markets, looking at how much of the COVID-19 induced equity losses have been retraced, MSCI China has recovered roughly 56% from the trough levels, which is in-line with the retracement % of US equities (S&P500 50%, Nasdaq 55%). Indeed, while China equities have generally moved along with global markets, volatility has been less extreme, anchored by domestic A-shares which have a lower beta to market moves than offshore China equities.

Figure 1: Equity market performance

Source: MSCI, Bloomberg.

Table 7: MSCI China sector performance

Feb 19 - Mar 23 (market correction)

Mar23 - Apr 23 (market rally) Net

% of retracement

Healthcare -20.3 27.1 6.8 106.2Staples -12.9 18.4 5.5 124.3Comm. Services -18.4 16.3 -2.1 72.3Energy -31.2 15.8 -15.4 34.9Discretionary -21.4 15.6 -5.8 57.5Materials -20.1 15.4 -4.7 61.4Real estate -24.6 14.6 -10.0 44.8Industrials -19.9 13.9 -6.0 56.0Utilities -20.8 12.9 -8.0 48.8IT -24.8 10.9 -13.9 33.1Financials -16.5 5.8 -10.7 29.4MXCN INDEX -20.0 14.0 -6.0 56.2

Source: MSCI, J.P. Morgan. Note: color red/green refer to under/outperformance vs. MSCI

China

The broad retracement of global equities has been driven by signs of stabilization of COVID-19 infection rates in some major countries as well as increasing visibility on relaxation of lockdown protocols. In addition,

unprecedented fiscal stimulus packages announced across countries have provided some relief to the building market anxiety. On the technical side, quarter-end fund rebalancing also drove passive equity inflows at the end of March following the sharp sell-off during the month (link). Overall, given the recent moves many major indices are once again approaching bull market status, however it is still debatable if we are just witnessing a bear market rally. For China, given its status as FIFO (first-in first-out) in the GCC, we think there are fundamental reasons such as the March economic data pointing at a rebound in the coming quarters, supporting the more constructive view on China equities. We have recommended to position for economic recovery in early April (link), as cyclicals tend to outperform when PMIs reaccelerate from sub 50 levels.

Figure 2: Cyclicals tended to outperform after PMI reclaimed the 50% threshold

Source: MSCI, NBS, J.P. Morgan

Indeed, the recovery in China equities has been slightly different than global trends in terms of sector allocation. Global market sector leadership continues to stay highly defensive, with Tech, Healthcare, Staples and Utilities outperforming the cyclicals (link). In contrast, China equities seems to be rotating away from defensive plays and into cyclicals since April (Figure 3). Unsurprisingly, defensive plays such as healthcare and staples amidst COVID-19 have been the constant winners, however for April, cyclicals such as durables, materials and semiconductors outperformed, in part driven by targeted policy support including: (i) subsidy/consumption coupons for discretionary (e.g. auto, home appliance and durables), (ii) support for FAI and infrastructure investment that improves the demand outlook of materials, and (iii) acceleration in new infrastructure investment (IT, cloud, 5G).

46

48

50

52

54

80

90

100

110

120

130

Jan-

19

Feb

-19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-1

9

Aug

-19

Sep

-19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb

-20

Mar

-20

Apr

-20

Cyclical vs. Defensive

PMI (RHS)

PMI at 50

8



Figure 3: Cyclicals started to outperform Defensives in April

Source: MSCI, J.P. Morgan

The beginning of a sector rotation can also be seen in northbound Stock Connect flows, which have picked up notably in April. YTD, northbound flows have recovered to see RMB27 bn in inflows, though still remain wellbelow the historical trends. Meanwhile, following the sharp outflows in March, cyclical sectors also see significant inflows in April, which in part resonates with our constructive view on a cyclical recovery.

Figure 4: Northbound net flow

Source: Wind, J.P. Morgan

Table 8: Northbound inflows by sector

Unit: Rmb bn Feb Mar Apr 1-23Staples* 9.8 (14.1) 13.8Industrials 7.4 (11.8) 8.1Health Care 8.4 1.0 7.4IT (1.6) (8.1) 6.3Materials (3.3) (4.9) 3.6Consumer Disc 0.1 (12.3) 3.2Comm. Services (0.7) (1.2) 1.2Financials (1.8) (9.6) 1.1Real Estate (0.3) (1.7) 1.1Energy (0.1) (1.9) 0.6Utilities (0.5) (1.1) (0.8)

Source: Wind, J.P. Morgan. *Note: Moutai & Wuliangye comprised 64% of April staples

inflow

Overall, we believe the shifts in sector allocations can carry on driven by (i) a more progressive policy stance

with higher fiscal deficit, to be confirmed at the annual NPC meeting (likely in late May), more rate cuts and RRR cuts, and further detailed supports for various industries such as consumption, infra and technology, (ii) market attention will shift away from 1Q earnings results to economic recovery in coming months, (iii) improving data points (e.g. PMI) that always induce cyclicals to outperform historically.

Apart from the ongoing cyclical rotation, divergences among different groups of investors are emerging (onshore vs. offshore). Following the liquidity driven rally in February, there are signs that waning onshore retail investor support for A-shares has been partially offset by a return of northbound inflows. Margin financing activity and A-share turnover have eased from the peak as the impact of stay-at-home retail investor trading coupled with increased liquidity faded with work resumption normalization. In addition, institutional investor driven block trades in the A-share market have also declined. Nonetheless, the decline in onshore trading activity, has been partially offset by the acceleration in northbound Stock Connect flows.

Figure 5: CSI300 recovered while trading momentum down


Figure 6: Block trade vs. margin financing


-50

50

150

250

350

450

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2015 20162017 20182019 2020

CNY BN

800

850

900

950

1000

1050

1100

1150

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Block trade (10DMA)

Margin financing balance (RHS)RMB bn, both axis

9



As for our China Model Portfolio revisions, we increase our cyclical exposure by adding Midea under consumer discretionary (upgrade to OW) and SANY under the industrial sector. We believe the home appliance segment will benefit from the release of the pent-up demand on durable goods when the outbreak situation stabilizes, and we like construction machinery on the back of the robust excavator sales amid infra FAI recovery. We reduce our defensive position and move utilities to UW by selling Yangtze Power and GDI. Within the financial sector, we rotate from insurance (downgrade to UW) into banks by trimming Ping An Insurance and adding BoCom. We believe that the declining market rates and potential deposit rate cut in 2Q could aid bank’s NIM, while insurance is facing higher credit and market risks due to the declining bond yield and increasing market volatility.

1Q20 results underway

The 1Q20 corporate earnings results season is underway, with 85 MSCI China constituents reporting their earnings this week, representing ~12% of the index that report quarterly. The results generally came in-line/ahead of our analysts’ expectation. Out of the 17 companies under our coverage, 8 of them were in-line with our forecast and 6were above. By taking into account the consensus estimates of the 46 companies, 22 (35%) beat, 15 (24%) were in-line, and 26 (41%) missed.

Table 9: Earnings scorecard

No. of companies (vs. Consensus)Above (>5%) in-Line Below (<5%)

Banks 3 0 0Consumer Discretionary 0 1 5Consumer Staples 3 3 3Communication Services 1 3 2Diversified Financials 1 0 0Health Care 2 3 3Industrials 2 1 2Information Technology 3 1 8Insurance 4 0 0Materials 3 1 1Energy 0 0 0Real Estate 0 0 1Utilities 0 2 1Aggregate 22 15 26

Source: MSCI, Company, Bloomberg, J.P. Morgan

While still early on, the reported aggregate earnings (blend) growth was down 4.4%oya. Ping An Bank (+15%oya), China Tower (+13%oya) and Angel Yeast (+28%oya) saw limited impact from the outbreak and reported resilient growth despite downturn. Sector-wise,retail companies delivered a stable online profitability, thanks to the increase in online consumption during the outbreak and better cost control, while offline was

largely affected by the store closures. China telcosreported flat growth for 1Q, with weak mobile revenue offsetting a robust fixed-line business. Materials and utilities were hit by the sharp decline in sales volume and power generation.

While the overall negative impact from the COVID-19 outbreak was severe due to the disruption on both the supply and demand side, most of the companieswitnessed some recovery and business normalization in March, which is consistent with the macro activities data reported in April. In particular, some retail companies’ management are anticipating 90% sales recovery in 2Q and complete recovery in June, although the destocking pressure may still pose a drag to the 2Q earnings on corporate level. This reinforces our views that the normalization of domestic consumption demand will be a key driver of the macro recovery in next quarters, on the back of the gradual relaxation on the social control measures and further fiscal supports.

We expect growth to normalize in 2H20 and into 2021. Our analysts forecast a strong recovery on corporate earnings for CY21E at 18.3%oya, following the weak 3.7%oya for this year, which is largely in-line with our top down view at 3-4%oya (link). Based on the bottom-up CY21E EPS integer at 7.46, our base case MSCI China target of 92 implies a 3% re-rating on 12m forward PE to 12.3x from current at 11.9x, which is still within range particularly if the global pandemic begins to ease around mid-year as expected. Nonetheless, risks of a potential re-escalation in the US and China confrontation remains an overhang after the virus concerns abate. Overall, we still see some upside on the corporate earnings outlook for next year when the global economy normalizes and benefitting from a lower base effects.

Figure 7: MSCI China consensus EPS integer

Source: MSCI, IBES, Datastream, J.P. Morgan.

6

6.5

7

7.5

8

8.5

9

9.5

10

Feb 18 Aug 18 Feb 19 Aug 19 Feb 20

2020 2021

10



Table 10: Index target based on EPS and PE scenario (assume CY20E EPS growth at 4%)

EPS growth - CY21E (%)

25% 20% 15% 10%

Tar

get

fw

d P

E (

x) -1 s.d. 10.3 82 78 75 72

-0.5 s.d. 11.1 88 84 81 77

Avg 11.9 94 90 87 83

+0.5 s.d 12.7 100 96 92 88

+1 s.d 13.5 107 102 98 94

Source: MSCI, Bloomberg, J.P. Morgan estimates.

COVID-19: rising visibility of recovery

Global COVID-19 infections remain a key driver ofmarket sentiment, and on this front there have been some positive developments in recent weeks. The global infection growth curve did flatten over the past month, as the average daily growth of ex. China active confirmed cases came down to 4.8% in April vs. 16% of March. Indeed, according to our insurance team’s schematic chart, though China is ahead of the curve, the rest of the world is catching up which has led to increasing visibility and discussions on a timeline for relaxation of lockdown policies in the US and other countries that have moved beyond the peak. In particular, we see most countries have passed the 'checkpoint A’ featured by slowing infection growth rate and some countries have passed the ‘checkpoint B’ when net infections start to decline and could be plausible for economic reopening. Overall, as more countries are passing the peak of the curve, equity markets will likely continue to normalize.

Figure 8: COVID-19: Idea curve exit point in Schematic chart

Source: J.P. Morgan insurance team estimates.

Figure 9: COVID-19: Idea curve exit point in Schematic chart

Source: J.P. Morgan insurance team estimates.

However, the main concern remains a risk of a second wave of infections. While continued waves of infections are a significant risk, and even inevitable as our insurance team argues, the impact of each successive wave of infections will likely be smaller and shorter in duration given the heightened awareness around the issue. China is being closely watched for second wave risks as it is amongst the first to reopen its economy. Indeed, there are some signs of second waves, particularly along the northern border in the Heilongjiang province. In April, Heilongjiang and Shanghai registered 438 and 123 new cases, which have mostly been caused by imported cases. Given the different stages of the outbreak in various countries, imported cases remain a key near-term threat. Overall, while increased monitoring, control checks and border controls have been implemented in areas with increasing cases, lockdown policies have not been as draconian as in February at this stage. The early April surge in cases has improved in recent days, indicating that control measures are limiting the spread. Looking ahead, the challenge for China, and other countries, will be balancing the risk of infections (with smaller impacts) and economic recovery.

Figure 10: Provincial newly confirmed cases in April

Source: NHC, Wind, J.P. Morgan

437

12383 81 64

26 15 13 13 11 11

84

18 4 18 11 234 3 3 0 20

50100150200250300350400450500

April Since Apr-15

11



March data better than expected

China’s real GDP fell 6.8%oya in 1Q20, following growth of 6.0%oya in 4Q19. Based on our seasonal-adjustment process, in sequential terms, the economy contracted 34.7% q/q saar in 1Q20, compared to growth of 6.9% q/q saar in the previous quarter. Meanwhile in nominal terms, 1Q20 GDP fell 5.3%oya, compared to +7.4%oya in 4Q19. Overall, the 1Q GDP report was better than our expectations and the monthly data showed a recovery in March from the sharp deterioration in Jan-Feb due to the COVID-19 shutdown. The rebound in March gives us confidence that a V-shaped recovery will continue to take place in the coming quarters, and we have moderately raised our full year growth forecast to 1.3% from 1.1% previously.

Figure 11: GDP revision

Source: NBS, J.P. Morgan estimates

For the monthly data, on the production side, industrial production (IP) beat expectations notably and recorded a sharp sequential rebound in March (+36.8%m/m sa), following a significant decline in Jan-Feb. The rebound in IP aligns with the March trade report which also was more resilient than expected, with March exports (-6.6%oya) and imports growth (-0.9%oya) declining by only single digits compared to expectations of double digit declines. Both production and trade in March likely benefitted from some pent up demand following the wide-scale lockdown in February.

Figure 12: China industrial production

Source: NBS, J.P. Morgan

Figure 13: China merchandise exports and imports


Meanwhile, on the domestic side, retail sales rebounded by 84%m/m sa in March, and the fixed asset investment (FAI) decline narrowed from -24.5%oya in Jan-Feb to -9.3%oya in March. The overall message from the data release shows economic activity resumed notably in March amid an improved COVID-19 epidemic outlook, in line with our forecast of a V-shaped recovery.

Figure 14: China retail sales


Figure 15: FAI by industry


Nonetheless, the March rebound appears stronger than what high-frequency tracking indicators implied, and

-45

-35

-25

-15

-5

5

15

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

%change

%3m/3m saar%oya

-35

-20

-5

10

25

40

55

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

%oya

Exports

Imports

-35-30-25-20-15-10

-505

101520

2013 2014 2015 2016 2017 2018 2019 2020

%oya 3mma

Auto sales value

Retail sales ex. auto

Total

-40

-20

0

20

40

2013 2014 2015 2016 2017 2018 2019 2020

%oya

ManufacturingInfrastructure

Real estate

12



there seem to be some inconsistencies in the details of March data. One area that is questionable is the retail sales data. The retail sales report showed outperformance in food (+19.2%oya) and health/medicine (+8.0%oya) and underperformance in restaurants (-46.8%oya), shoes and clothes (-34.8%), jewelry (-30.1%), which is in line with our expectations. However, auto sales only declined by 18.1%oya in March, which seems inconsistent with the figures in the IP report, in which auto production declined by 43%oya in March and auto industry value added declined by 22.4%oya. Separately, a study by researchers at the National University of Singapore based on UnionPay transactions suggests that retail consumption declined by roughly 27% in the 12 week period after lockdown (most notably in dining, entertainment and travel-related spending), though the study also confirms the gradual bottoming out in expenditure as the epidemic outlook improves (link).

Despite the caveats in the details of the economic reports, the broad message is that China's domestic activity is recovering, and the economic recovery is a key driver in our positive view on cyclical sectors going forward. The recovery will be led by the production and investment side (infrastructure), with consumption and service sectors normalcy lagging behind. The normalization of domestic consumption will be a key focus in 2Q. On the investment side, infra-FAI will continue to benefit from stepped-up fiscal support. 1.2 trillion yuan special local government bonds have been issued year-to-date, of which more than 70% are related to infra-projects, and another 1 trillion yuan frontloaded-quota has just been approved. Real estate investment recovered the first as shown in March data, and we expect further relaxation at city levels and eased restrictions on funding for real estate developers will continue to support single-digit growth in real estate FAI. By contrast, manufacturing investment will likely stay in negative growth territory, especially related to exports or global production chain,due to major downward pressure coming from the dismal growth picture for the global economy. J.P. Morgan expects the deepest recession since WWII in 2Q, with DM collapsing by 40%q/q saar (of which the US -40%, Euro area -45%, the UK -59%, Japan -17%).

Policy remains supportive but gradual

With China being the FIFO in terms of the COVID-19 curve and response, domestic A-shares have outperformed offshore China equities for much of February and March given the higher sensitivity to domestic policy, however this has changed as many countries have announced fiscal packages much larger than China’s. Indeed, looking at the fiscal thrust as a %

of GDP (which measures the increase in annual fiscal deficit compared to last year), China's thrust of 2.4% of GDP is slightly below the global average of 2.7%, and well behind major DM countries such as the US and UK. The implementation of large fiscal packages have improved market sentiment and have benefitted China offshore equities relatively more given their higher beta to global markets. As such, the A/H premium has eased over the past month after spiking in February, back to around historical averages. Nonetheless, despite the recent outperformance of H-shares, 7 out of the 12 sectors are still trading at a substantially higher A/H premium than their long term averages.

Figure 16: JPMe fiscal thrust of 2020

Source: J.P. Morgan

Figure 17: A/H premium (median) by sector (%)

Source: Bloomberg, J.P. Morgan.

Overall, our view has been that China’s policy response remains important in shaping the recovery, but will likelybe more gradual and moderate relative to some other major countries. In terms of monetary policy, following the 20bps reduction in MLF/LPR rate in April, we expect another 25bp cut along with a 25bp deposit rate cut. We also expect another 50bp RRR cut in mid-2020, and a special RRR cut to finance the issuance of special government bond. On the fiscal side, it is worth watchingthe NPC meeting (likely late May) which will come up with concrete fiscal package, including the increase in

3.2

4.0

2.5

5.0

1.8 2.02.4 2.3

1.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

DM US EU UK JP EM China Korea ASEAN

2020 JPMe Global% of GDP

0102030405060708090

100

Div

. Fin

.

Insu

ranc

e IT

Util

itie

s

Ma

teri

als

En

erg

y

Co

ns.

Dis

c.

He

alth

care

Ind

ustr

ials

Co

ns.

Stp

l.

Ba

nks

Re

al E

stat

e

Current

avg since 2015

13



budgetary fiscal deficit (JPM forecast: 3.2%), the increase in special local government bond quota (JPM forecast: 3.5 trillion) and issuance of special government bond (JPM forecast: 1 trillion or above). Our estimate is that the augmented fiscal deficit will reach 14.3% of GDP, higher than the estimate in the 2009 big stimulus. Nonetheless, the fiscal impulse is higher than 2019 but remains modest at 2.4% of GDP. To be fair, the unprecedented shock and deterioration in labor market conditions could imply that the fiscal package could be modestly higher than our baseline assumption.

Though it is still arguable whether activity levels can be restored to pre-COVID-19 levels, we expect the upward momentum in the near term to persist, given a notable gap between the current operating level and the historical average. More importantly, the stepped-up policy stance along with ongoing policy roll-outs are positive for recovery progress and market sentiment, as evidenced in sectors such as “old+new” infra (i.e. infrastructure plus 5G/big data/ AI/ digital economy), real estate, auto and consumer (Table 2). Looking ahead, policy upsides may stem from the finalized local government special bond quota (J.P. Morgan estimate: Rmb3.5 trillion), as certain projects in real estate (residential community revamp) and infrastructure areas associated with the size of approved special local government bonds.

Table 11: Supportive measures for cyclical sectors

Sector Date Policy highlights

Auto 16-Apr Guangdong province rolled out measures to support rural consumption, which highlighted to provideunsecured loans for car purchase to residents with good credit records.

7-Apr MIIT loosened the entry qualification for new NEV companies by removing the requirement of “R&D capability”.

31-Mar The State Council announced a two-year extension of NEV subsidy as well as exemption from purchase tax.

13-Mar The NDRC outlined 19 measures to foster the domestic consumption sector, which highlightedencouragement to areas that have restricted car purchases to increase the car plate quotas as appropriate.

Real estate 2-Apr The MOF adjusted the investable projects for special bonds. The revamp projects of old residential communities now qualify as projects for local government special bonds. Meanwhile, as guided previously, land reserves and other property related projects remain disqualified.

March Several cities loosened the housing policy by lowering the requirement for home purchase and housing pre-sale approvals, as well as offering tax/purchase subsidy.

Infrastructure 30-Mar Local media reported that the upper limit of local special bonds being used for project capital will rise to 25% from 20% in all provinces.

29-Mar Guangdong province announced that it will accelerate 5G base station construction and targets to build 60k base stations by 2020.

24-Mar The MIIT issued a proposal to accelerate 5G development.

04-Mar President Xi announced the acceleration of construction of 5G network and data center (first mention).

01-Mar The NDRC announced the transformation of enterprise bond issuance to a registration-based system from an approval-based one.

Consumer 7-Apr Local media reported that several regions (e.g. Guangxi province, Hangzhou, Nanjing) have announced distribution of consumption coupons with a total value of ~Rmb5.6bn.

16-Apr Guangdong province rolled out measures to support rural consumption, which highlighted to provide subsidy for homeappliance and consumer electronic purchases

Source: Various newswires, J.P. Morgan.

14



China economic data and forecasts

China economic data and forecasts

Quarterly 2018F 2019F 2020F 1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F

Real GDP, %-ch over a year ago 6.7 6.1 1.3 6.4 6.2 6.0 6.0 -6.8 0.9 5.0 4.8

Real GDP, %-ch over 1 quarter, saar 8.5 5.0 3.5 6.9 -34.7 43.8 21.6 5.6

Nominal GDP, %-ch over a year ago 10.5 7.8 2.0 7.9 8.3 7.6 7.4 -5.3 1.4 5.3 4.9

Consumer prices, %oya, average 2.1 2.9 3.0 1.8 2.2 2.4 2.9 3.3 4.3 3.7 3.0

Producer prices, %oya, average 3.5 -0.3 -0.7 0.2 0.5 -0.8 -1.2 -0.4 -1.4 -1.0 0.1

RRR, EOP 15.0 15.0 15.0 13.5 13.5 13.0 13.0 12.5 12.0 12.0 12.0

Benchmark lending rate, EOP 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35

1-year MLF rate, EOP 3.30 3.25 3.15 3.30 3.30 3.30 3.25 3.15 2.70 2.70 2.70

Exchange rate, EOP 6.88 6.96 6.99 6.71 6.87 7.15 6.96 7.08 7.10 7.00 6.99

Monthly Jan-19 Feb-19 Mar-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

PMI-NBS 49.5 49.2 49.4 49.5 49.8 49.3 50.2 50.2 50 35.7 52

PMI-Markit 48.3 49.9 50.2 50.4 51.4 51.7 51.8 51.5 51.1 40.3 50.1

CPI, %oya 1.7 1.5 2.7 2.8 3.0 3.8 4.5 4.5 5.4 5.2 4.3

PPI, %oya 0.1 0.1 0.6 -0.8 -1.2 -1.6 -1.4 -0.5 0.1 -0.4 -1.5

FX reserves, USD bn 3087.9 3090.2 3101.0 3107.2 3092.4 3105.2 3095.6 3107.9 3115.5 3106.7 3105.0

FX reserves, monthly change, USD bn 15.2 2.3 6.1 3.5 -14.7 12.7 -9.6 12.3 7.6 -8.8 -1.7

Merchandise exports (USD), %oya 9.3 -20.7 1.1 -1.0 -3.2 -0.8 -1.3 8.1 -16.8 -17.9 -6.6

Merchandise imports (USD), %oya -0.9 -4.4 -8.2 -5.5 -8.2 -6.2 0.9 16.6 -14.9 11.0 -0.9

Trade balance, USD bn 38.4 3.0 41.2 34.7 39.1 42.4 37.4 47.3 28.6 -35.6 19.9

Industrial production, %oya, ytd 0.0 5.3 7.3 5.6 5.6 5.6 5.6 5.7 0.0 -13.5 -8.4

Industrial production, %oya 5.3 5.3 5.0 4.4 5.8 4.7 6.2 6.9 0.1 -27.0 -1.1

Fixed investment, %oya, ytd 6.1 6.1 5.6 5.5 5.4 5.2 5.2 5.4 -24.5 -24.5 -16.1

Fixed investment, %oya 6.1 6.1 4.4 4.2 4.7 3.4 5.2 11.8 -24.5 -24.5 -9.3

Retail sales, %oya, ytd 8.2 8.2 8.1 8.2 8.2 8.1 8.0 8.0 6.0 -20.5 -19.0

Retail sales, %oya 8.2 8.2 8.6 7.5 7.8 7.2 8.0 8.0 6.0 -48.4 -15.8

Source: NBS, China customs, PBOC, SAFE, Markit, J.P. Morgan forecasts

15



Market StrategyKey investment themes

Retracing COVID-19 drawdowns. After the sharp sell-off in March, equity markets had a notable rebound over the past month. MSCI China rose 14%, underperforming EM and DM by 3.6% and 9.2%, respectively. While the equity rally has been less spectacular in China equities relative to DM markets, looking at how much of the COVID-19 induced equity losses have been retraced, MSCI China has recovered roughly 56% of the losses, which is inline with the retracement % of US equities (SP500 50%, Nasdaq 55%). Indeed, while China equities have generally moved along with global markets, volatility has been less extreme, anchored by domestic A-shares which have a lower beta to market moves than offshore China equities.

1Q GDP contracted 6.8%, but March data better than expected. China’s real GDP fell 6.8%oya in 1Q20, however the monthly data showed that March activity rebounded from the dismal Jan-Feb numbers. On the production side, industrial production (IP) beat expectations notably and recorded a sharp sequential rebound in March (+36.8%m/m sa), whilethe March trade report which also was more resilient than expected. Both production and trade in March likely benefitted from some pent up demand following the wide-scale lockdown in February.Meanwhile, retail sales rebounded by 84%m/m sa in March, and the fixed asset investment (FAI) decline narrowed from -24.5%oya in Jan-Feb to -9.3%oya in March. Overall, the rebound in March gives us confidence that a V-shape recovery will continue to take place in the coming quarters, driving a cyclical recovery. We have moderately raised our full year growth forecast to 1.3% from 1.1% previously.

Better visibility on COVID-19, but risks of second waves and return of US China tension remain.Global COVID-19 infections remain a key driver in market sentiment. On the positive side, global infection growth curve did flattened over the past month, as the average daily growth of ex. China active confirmed cases came down to 4.8% in April vs. 16% of March, which has led to increasing visibility and discussions on a timeline for relaxation of lockdown policies in the US and other countries that are approaching or have moved beyond the peak.Nonetheless, there have been smaller outbreaks

within China, which at this stage look manageable and contained. Meanwhile, potential re-escalation in the US and China confrontation remains an overhang after the virus concerns abate.

Earnings: The 1Q20 corporate earnings results season is underway, with 85 MSCI China constituent reported their earnings this week, representing ~12% of the index that report quarterly. The results generally came in-line/ahead of our analysts’ expectation, with reported aggregate blend earnings fell 4.4%oya. Sector-wise, retail companies delivered a stable online profitability thanks to the increase in online consumption and better cost control, while offline was largely affected by the store closures. China telcos reported a flat growth for 1Q, with weak mobile revenue offsetting a robust fixed-line business. Materials and utilities were hit by the sharp decline in sales volume and power generation. Our bottom-up MSCI China CY20/21E growth forecasts currently stands at 3.7%oya and 18.3%oya respectively.

Investment themes: i) Rotation into cyclical sectors over defensive as economic recovery takes hold, with recovery in 2Q led by domestic consumption, real estate and infra-FAI (policy tailwinds in "new and old"); ii) sectors that could benefit from a more permanent change in consumer behavior due to the outbreak include healthcare/grocery retailers/online gaming/e-commerce; iii) expect industry consolidation, benefitting industry winners with low liability ratios and strong balance sheet.; iv) within financial sector: less bearish on banks as expected deposit rate cut in 2Q and lower financial market rates ease funding cost amidst economic recovery; more cautious on insurance.

Major events to watch: (i) Development of the COVID-19 outbreak, particularly for DM countries; how smaller scale second waves are contained; (ii) Global policy response, particularly the size of fiscal measures; (iii) earnings seasons and companies’ guidance on the pace of the recovery; (iv) infrastructure investment and overall FAI; (v) employment conditions; (vi) annual NPC meeting (likely end of May), fiscal budget, government economic targets for this year; (vii) US-China relationship.

16



Sector Allocation

Overweight

Consumer discretionary – We upgrade the sector toOW by adding the home appliance company Midea, as we expect demand on durable goods will recover shortly when the COVID-19 situation moderates in China. We remain positive on e-commerce given the change in consumer behavior, resilient online spending, increase inpenetration rate and strong user growth recovery. Our picks are Alibaba and Vipshop due to their solid fundamentals despite the one-off financial impact from the virus outbreak. Meanwhile, our analyst believes the development of new retail (combination of online capabilities with offline resources) could lead to a strong net profit CAGR for major players including Alibaba during the next few years.

Healthcare – We believe the sector will continue to benefit from the increasing demand for drugs and healthcare services amid the COVID-19 outbreak. Moreover, the extent of price cuts in the central procurement program will likely accelerate generic drug industry consolidation and drive innovative drug development, which is positive for the leading players. In the long run, we believe the large affluent population, ample scientific labor pool and a strong centralized regulatory authority will provide a supportive environment and offer new investment opportunities for the industry. We prefer biotech and generic drug segments, in particular companies with strong R&D and large innovative pipeline.

Consumer staples – The sector is expected to deliver robust EPS growth at 27% for this year, thanks to the resilient consumption on necessity goods during the virus outbreak. We prefer grocery retailers that are highlybenefitting from the increased demand in food/beverage and daily use goods, as well as favorable policy support (stricter hygiene policy). Our top pick is Sun Art Retail with its front-running O2O integration and market share gain. We also like the baijiu sector, for which our analyst forecasts a strong sales volume growth and potential ASP hike for this year. Our pick is Moutai for its strong brand with robust top-line growth, high profitability and fundamental stability.

Industrials – We expect FAI activities to regain momentum in 2Q, supported by further fiscal policy stimulus measures. Meanwhile, railway infra capex is likely to see visible pickup during 1H20 in light of the latest guidance from CRC. We recommend to play the recovery theme through the construction equipment and E&C segment. C/E demand will remain intact with the pick-up in domestic and overseas (BnR) infra activities, as well as replacement demand driven by emission standard upgrades. The “highway-to-railway” shift initiative should also encourage more locomotive and freight wagon procurements.

Property – National residential sales have started to normalize in the second half of March, with sales volume down by 14%oya for the month, compared to -39%oya in 2M20. Home price (+2%oya) held up well thanks to good inventory control over the past years. Our analystbelieves that overall sales will be broadly flat y/y in April with the release of pent-up demand, and the decline in 1H2020 should narrow to 5-10%oya. In addition, developers will likely see a favorable operating environment on the back of credit easing, and local government may roll out exceptional measures to mitigate developers' financial risks. The sector is trading at an attractive forward PE at 5.2x, and offering a high dividend yield at 6.3% for CY20E.

Underweight

Insurance –We downgrade the sector to UW due to the rising credit and market risk amid the challenging macro environment. Declining bond yield and financial market volatility will drag investment income and increase the liability reserve provisioning of the insurers for this year. Meanwhile, first year premium growth will remain weak in 1H20 due to a slowdown in face-to-face agent activities and weak footfall in banks. Our analyst has revised down our CY20E EPS forecast for insurers by 14%, and expect a 23% decline in the sector earnings for CY20E. We trim our position in Ping An Insurance to fund our position in the banking sector.

Utilities – We reduce our defensive position in our China Model Portfolio, and downgrade the sector to UW by selling Yangtze Power and Guangdong Investment.

Banks – We are less bearish on the sector outlook, as the high-frequency data supports our base case of V-shaped macro recovery, which ease some credit risk concern on the corporate book in the near-term. Moreover, NIM contraction could be more moderate than we forecast, on the back of falling wholesale funding cost due to the sharp decline in interbank rates. Subsiding inflation risk and falling market rates also open room for a deposit rate cut. We added BoCom to our model portfolio due to its compelling valuations at 0.43x P/B.

Energy – Collapse in the oil price has posed a significant downward pressure on the oil companies’ earnings outlook, and we currently forecast a c.40% decline on the sector EPS for CY20E. Our commodity team expects Brent price will stay low in next quarter due to the significant demand destruction and increase in OPEC+ supply. In addition, refining profitability may worsen in 2020 as well due to oversupply and accelerating competition. Meanwhile, we expect coal price to stay range-bound in the near-term, as the government is likely to maintain a stable coal price and ensure sufficient supply from coal mines during the outbreak.

17



Neutral

Communication services – We expect a mixed performance within the internet space as fundamental outlook diverges. We are constructive on the digital entertainment (e.g. online gaming and music) segment due to the benign regulatory environment and substantial improvement in the gaming industry’s content supply.On the contrary, we are more cautious on the online advertising market due to the intense competition and macro uncertainty which may drag ads demand. We recommend to play the 5G theme through the telecom sector, for which we prefer China Mobile given its improving earnings visibility and well-controlled capex.

IT –We maintain our cautious view on the tech hardware sector given the demand and supply constraints across various applications after the COVID-19 outbreak.Global smartphone demand (JPMe: -3.1%oya in 2020) is likely to stay sluggish due to the decline in consumer discretionary spending amid the outbreak. Our analyst expects China smartphone shipment to decline by 10%oya in 2020, with demand disruption from the major overseas markets including US and Europe. Meanwhile, Chinese smartphone OEMs are likely to accelerate the 5G model launch in 2H20 with a lower retail price in order to boost inventory digestion. This may increase the pricing pressure and competition of the components makers. We stay selective on the segment and prefer Apple supply chain company (Luxshare) amid the resilient iPhone replacement demand. Meanwhile, we are also positive on EV-battery maker Wuxi Lead, which is well-positioned to benefit from the stronger order from Tesla.

Materials – We are positive on the cement segment, and expect demand will pick up substantially from a slow 1Qdriven by the increased government support on infrastructure investment. The sector is likely to maintain a healthy profit margin at close to historicallyhigh levels, thanks to the favorable supply and demand condition. We see on-going destocking pressure in othermaterial space including steel, glass and nonferrous metals due to limited downstream demand amid the COVID-19 outbreak. Our pick is Anhui Conch.

Diversified financials – Our analyst forecasts robust earnings growth at 13% for CY20E. Total underwriting flows are expected to stay resilient driven by the increase in equity refinancing and bond issuance, while regulatory measures on loosening the margin financing andlowering the refinancing cost will continue to drive the recovery on stock-pledged repo businesses. We believe leading brokers are in a better position to benefit from supportive policy measures include the New Securities Law, NEEQ reform, streamlining the QFII/RQFII related-rules, further loosening index futures, increase in corporate share buybacks, and further opening of the A-share market. Our pick is Citic Securities.

Asset allocation change

We increase our cyclical exposure by adding Midea under consumer discretionary (upgrade to OW) and SANY under the industrial sector. We move utilities to UW by selling the defensive plays Yangtze Power and GDI. Withins the financial sector, we rotate from insurance (downgrade to UW) into banks by trimming Ping An Insurance and adding BoCom.

Key risk factors

COVID-19 global outbreak. The prolonged lockdown across countries and possibility of second wave of contagion inside and outside China will cause major disruption to global economic activities and productivity. Deep global recession in 2Q will hurt China’s export sector. Worries about imported contagion may lead to prolonged control measures and slower pace of normalization in China.

Policy outlook. Further policy support will come, but policy stimulus could be overly interpreted by the market. The likelihood of large stimulus is low. On the other hand, the risk is that rescue measures come too little too late.

Deterioration in US-China confrontation and acceleration in de-globalization. Tension between the US and China could escalate again, especially into the US election period. The bar for the Phase Two deal is much higher as it will involve structural issues (e.g. SOE and subsidies) which are moredifficult to resolve. Moreover, the confrontation has expanded to the tech sector (entity list) and possibly into new areas (e.g. financial, geopolitical issues). The high uncertainty in the trade and business environment may lead to weakened incentives for business investment and acceleration in global supply chain outside of China.

Fixed asset investment outlook. Fixed asset investment is the key to business cycle fluctuations and domestic demand. We expect infra FAI should be lifted on the back of further fiscal policy support but downside risk remains. Any downward surprise would be a drag to the growth outlook.

Global oil prices. Declining oil prices exacerbates the credit stresses in DM countries, and increase downward pressure on the global economic growth.

Corporate stress and labor market pressure.Survey-based unemployment stayed modest at 5.9% in March, but labor force participation was down by 6% and 18.3% of urban workers remained employed but did not go work.

18



China Model Portfolio

Table 12: J.P. Morgan China model portfolio

Ticker Price JPM Performance Portfolio MSCI Deviation P/E (x) Div Yield ROERating 1M% 3M% YTD% Weight (%) Wt (%) (%) FY20E FY21E 20E (%) FY20E

Consumer Discretionary 244 15.6 -7.0 -4.8 30.0 27.7 2.3 25.5 17.8 0.3 14.5Alibaba BABA US 205.2 OW 16.4 -6.3 -3.2 20.8 17.6 3.1 28.8 23.4 0.0 23.2Midea 000333 CH 52.0 OW 11.8 -5.6 -10.7 2.5 0.0 2.5 14.2 11.2 3.2 23.4TAL Edu TAL US 49.8 OW 5.9 2.8 3.3 2.7 0.9 1.7 264.6 58.2 0.0 4.7Vipshop VIPS US 16.2 OW 8.1 16.2 14.4 4.0 0.4 3.7 14.6 10.4 0.0 23.2Consumer Staples 1408 18.4 4.2 1.0 6.6 4.0 2.6 22.3 19.9 2.0 20.6Moutai 600519 CH 1252.3 OW 22.9 18.9 5.9 3.3 0.7 2.7 32.6 26.2 1.6 32.5Sun Art Retail 6808 HK 12.9 OW 22.9 38.4 36.5 3.3 0.2 3.1 34.3 26.8 1.3 12.8Communication Services 130 16.3 -0.9 2.2 22.3 22.6 -0.3 22.3 17.8 1.0 11.6China Mobile 941 HK 61.5 OW 15.3 -9.6 -6.1 2.8 2.4 0.4 10.7 10.2 5.2 9.6Tencent 700 HK 411.6 OW 18.3 6.7 9.6 19.5 15.0 4.5 31.5 24.4 0.3 22.7Energy 329 15.8 -25.1 -27.5 0.0 2.7 -2.7 10.7 9.5 5.2 5.5Financials 436 5.8 -12.9 -15.8 11.5 18.3 -6.8 6.0 5.5 5.0 11.6 Banks 231 3.0 -9.2 -13.2 6.4 11.2 -4.8 4.8 4.6 6.1 12.0BoCom 3328 HK 4.7 OW 6.8 -11.2 -15.5 2.5 0.3 2.2 4.0 3.9 7.5 9.7CMB 3968 HK 34.6 OW 9.0 -13.5 -13.7 3.9 0.9 3.1 7.8 7.1 3.8 15.7 Insurance 486 12.4 -18.8 -19.5 3.0 5.2 -2.2 9.8 7.4 3.2 12.2Ping An 2318 HK 78.1 OW 10.1 -17.4 -15.3 3.0 2.8 0.2 11.4 8.0 2.6 15.9 Diversified Financials 98 4.8 -13.1 -17.0 2.0 1.9 0.1 10.0 8.8 3.2 7.7CITIC Securities 6030 HK 14.2 OW 6.1 -15.3 -20.1 2.0 0.2 1.9 12.1 10.9 3.7 8.0Health care 241 27.1 6.7 12.0 7.4 5.1 2.3 33.6 26.3 0.8 11.7CSPC 1093 HK 15.9 OW 13.4 -15.8 -14.2 3.3 0.5 2.8 21.1 16.4 1.6 21.5Wuxi Bio 2269 HK 121.5 OW 30.7 19.0 23.2 4.1 0.6 3.5 94.1 67.6 0.0 12.0Industrials 108 13.9 -7.3 -9.4 9.0 5.5 3.5 9.2 7.7 3.0 9.9CRCC 1186 HK 8.6 OW 14.3 4.4 0.5 3.3 0.1 3.2 4.3 3.7 3.4 11.5SANY Heavy 600031 CH 19.1 OW 19.7 19.2 12.1 2.0 0.1 1.9 12.3 11.3 2.4 29.1Zoomlion 000157 CH 6.2 OW 9.8 -1.9 -7.5 3.7 0.0 3.7 9.1 8.2 0.0 13.2Information Technology 664 10.9 -15.1 -5.8 4.8 4.4 0.4 22.5 18.0 1.2 10.8Luxshare 002475 CH 41.5 OW 20.5 -8.2 13.6 3.1 0.1 3.0 44.8 38.2 0.7 23.1Wuxi Lead 300450 CH 38.1 OW -2.6 -13.4 -15.2 1.7 0.0 1.6 43.4 27.7 0.6 18.6Materials 789 15.4 -5.6 -9.1 2.4 2.3 0.1 9.9 9.2 3.5 11.0Anhui Conch 914 HK 58.8 OW 18.8 7.5 3.4 2.4 0.5 1.9 8.9 9.1 3.5 21.9Real Estate 1538 14.6 -11.0 -19.0 6.1 5.1 1.0 5.5 4.8 6.2 16.4Aoyuan 3883 HK 8.9 OW 16.8 -22.0 -30.1 2.2 0.1 2.1 3.8 3.0 9.8 32.9Vanke 2202 HK 24.5 OW 4.3 -18.2 -26.5 3.8 0.2 3.6 5.6 4.8 6.0 22.1Utilities 574 12.9 -15.6 -13.1 0.0 2.3 -2.3 10.1 9.3 3.8 10.9MSCI China 80 14.0 -7.3 -7.0 100 100 0.0 12.6 10.7 2.2 11.8JPM China Model Portfolio 14.7 -4.3 -4.6

Source: MSCI, Datastream, Bloomberg, J.P. Morgan. Data as of 23 April 2020. Last rebalance on 19 March 2020. Past performance is not indicative of future results. Red denotes the new additions.

Table 13: J.P. Morgan China model portfolio sector allocation

% JPM MSCIWeight Weight OW/UW

Industrials 9.0 5.5 3.5Consumer Staples 6.6 4.0 2.6Health care 7.4 5.1 2.3Consumer Discretionary 30.0 27.7 2.3Real Estate 6.1 5.1 1.0Information Technology 4.8 4.4 0.4Diversified Financials 2.0 1.9 0.1Materials 2.4 2.3 0.1Communication Services 22.3 22.6 -0.3Insurance 3.0 5.2 -2.2Utilities 0.0 2.3 -2.3Energy 0.0 2.7 -2.7Banks 6.4 11.2 -4.8Source: MSCI, Datastream, Bloomberg, J.P. Morgan. 23 April 2020.

Source: MSCI, Datastream, Bloomberg, J.P. Morgan. 23 April 2020.

-5 -4 -3 -2 -1 0 1 2 3 4

Banks

Energy

Utilities

Insurance

Communication Services

Materials

Diversified Financials

Information Technology

Real Estate

Consumer Discretionary

Health care

Consumer Staples

Industrials

19



China Model Portfolio Performance Review

Our China model portfolio rose 14.7% in the past month, outperforming MSCI China by 0.7%. Attribution from the sector allocation and stock selection was +93bps and -27ps. The portfolio was down 4.6%ytd, outperformingMSCI China by 2.3%.

Sector attribution (one month)

Positive: Financials, healthcare, consumer staples, real estate and materials

Negative: Energy, utilities, consumer discretionary, IT, industrials and communication services

Stock selection (one month)

Top 5: Luxshare, CMB, Sun Art Retail, Moutai, Ping An Insurance

Bottom 5: China Vanke, CSPC Pharma, Vipshop, Wuxi Lead, Yangtze Power

Revisions on April 23, 2020

We increase our cyclical exposure by adding Midea under consumer discretionary (upgrade to OW) and SANY under the industrial sector. We move utilities to UW by selling the defensive plays Yangtze Power and GDI. Within the financial sector, we rotate from insurance (downgrade to UW) into banks by trimming Ping An Insurance and adding BoCom.

Previous revisions on March 19, 2020

We upgrade communication services to Neutral by adding China Mobile. We also add TAL Education under the consumer discretionary sector. These are funded by trimming our position in banks and Vipshop.

Figure 18: J.P. Morgan China model portfolio performance

Source: MSCI, Bloomberg, J.P. Morgan. 23 April 2020.

Past performance is not indicative of future returns.

Table 14: Total attribution by sector(%, relative to MSCI China)

1M 3M 6M YTDFinancials 1.01 (0.41) 0.42 (0.02)Consumer Staples 0.39 0.72 0.90 0.85 Communication Services 0.33 1.29 1.78 1.09 Materials 0.08 0.05 (0.11) (0.21)Information Technology 0.04 0.05 0.42 0.30 Health Care (0.01) (0.08) (0.44) (0.13)Energy (0.05) 0.62 1.08 0.74 Utilities (0.12) 0.24 0.59 0.18 Industrials (0.13) 0.31 (0.72) 0.05 Real Estate (0.39) (0.63) (0.97) (1.01)Consumer Discretionary (0.47) 0.80 1.99 0.50 Total 0.68 2.96 4.93 2.33


Table 15: Performance since last rebalance

CodePch (19 Mar –23 Apr 2020)

MSCI China (total return) MXCN 14.4 JPM China model portfolio 15.3 MSCI China Comm. Serv. MXCN0TC 19.4 UpgradeMSCI China Bank MXCN0BK 3.9 TrimTAL Edu TAL US 3.6 AddChina Mobile 941 HK 27.5 AddVipshop VIPS US 12.9 Trim

Source: MSCI, Datastream, J.P. Morgan. Past performance is not indicative of future returns.

95

105

115

125

135

145

155

Jan 19 Mar 19 May 19 Jul 19 Sep 19 Nov 19 Jan 20 Mar 20

JPM China model portfolio MSCI China

20



MSCI China Index Target

Base case (MXCN 92)

End 2020 MSCI China target = 92

Target 2021 EPS number = 7.46

Target forward P/E = 12.3x

Assumptions

EPS outlook

Global demand and supply shock due to the COVID-19 outbreak has posed significant downward pressureto 2020 earnings growth outlook. Our bottom-up growth forecast currently stands at 3.7%/18.3% for CY20/21E, compared to 15.1% for CY19. This is largely in line with our macro growth outlook, for which we expect real GDP growth will slow to1.3%oya for 2020.

Insurance earnings is forecast to decline by 23.3% for CY20E partly due to high base effects. Declining bond yields and equity market volatility may drag down investment income of the insurers. That said, long-term fundamental outlook remains intact, given the better regulatory operating environment. Profitmargin and NBV growth should improve in long-run thanks to product mix shift.

Energy sector earnings are expected to declinesignificantly by 40%oya in CY20E due to the falling oil price. Refinery margins will remain under pressure given the oversupply situation. Materials sector, except for the cement industry, is facing de-stocking pressure due to the delay in demand.

Robust earnings growth is expected for e-commercefor CY21E, thanks to the improving operating efficiency and user growth, as well as consumption demand recovery when the virus outbreak stabilizes. Better earnings visibility for the internet gaming names with improving content supply. Remain cautious on the online ads operators due to macro impact and competitive pressure.

Property developers are expected to achieve robust contract sales amid the increase in sellable resources, continued market share gain and the more balanced demand/supply dynamics.

Lower policy rate may reduce funding costs for the corporate sector, which together with tax cuts in 2019 may provide positive support for company earnings.

Downside risk to IT sector’s bottom up EPS growth forecast due to the slower smartphone shipments and semiconductor demand amid the COVID-19outbreak. Non-tariff conflicts between the US and China in the tech space may negatively impact the

tech supply chain and hit earnings on some of the Chinese tech hardware companies.

Moderate P/E re-rating

Assume the global economy to recover in 2H20 when the COVID-19 situation stabilizes, and corporate earnings to improve in 2H20 and 2021 with normalizing business activities. Nonetheless, potential re-escalation in the US and China confrontation remains an overhang after the virus concerns abate, and may limit valuation upside.

Valuation upside on the cyclical sectors, especially for real estate and industrials which are trading at low P/Es of 5.2x and 8.6x respectively.

Re-rating potential on brokers (9.7x) amid the improving fundamental outlook.

Stable P/E on new consumption/high-growth sectors, including communication services and e-commerce.

Persistent conflict with the US on the technology front will continue to weigh on the tech hardware sector outlook and lead to further de-rating.

CNY outlook will depend on trade developments and domestic economic factors (growth outlook, interest rate, etc.). Our baseline CNY/USD forecasts are 7.1in 2Q20 and 6.99 by end-2020.

Bull case (MXCN 103)



Target forward P/E = 13x

Assumptions

EPS outlook

Stronger-than expected economic recovery, strong corporate earnings growth recovery when theCOVID-19 outbreak ends, driven by the release of the pent-up consumption demand and FAI activities.

Consumption growth accelerates with policy measures to drive domestic demand. Better-than-expected auto sales amid consumption upgrade.

Leading tech companies continue to win market share and monetize traffic. Improving operating environment for internet names due to lower competition and regulatory risks. Strong recovery on the online ad revenue growth, as well as margin improvement on the fintech and business services.

Corporate margins improve with lower input costs and commodity prices.

21



Better-than-feared NIM compression on banks' profitability resulting from the rise in credit costs and lower LPR.

Favorable market conditions drive the investment income on insurance and diversified financial sector.

Visible progress on pro-market reforms, e.g. equal treatment between SOEs and non-SOEs, financial market discipline, fiscal reform, and rural land reform.

P/E re-rating to 13x driven by

COVID-19 outbreak ends sooner than expected.

Positive progress on the US and China Phase Two trade negotiations with tariff rollback. Both sides reach agreement on the more contentious topics, e.g. IP, technology transfer, SOE and industry subsidy.

Policy support feeds through into the economic system resulting in stronger-than-expected domestic growth recovery.

Policy support comes with structural reform (SOE reform, supply-side reform) measures with limited side effects.

Further recovery in TSF growth driven by stable loan growth and strong corporate bond/equity financing, while shadow-banking activity remains subdued.

Ongoing structural reforms drive environmental protection, technology upgrades, automation, and IT infrastructure segments.

Strong fund inflows into both A and H share markets. Continuous capital account liberalization with stabilized CNY and capital flow dynamics, and further capital account openness for institutional investors.

Bear case (MXCN 72)



Target forward P/E = 10.3x

Assumptions

EPS potential downside

MSCI China earnings outlook deteriorates withsignificant slowdown in domestic growth.

Tech hardware earnings significantly hit by further US sanctions on the sector.

Domestic policy reactions are too little and too slow, leading to faster-than-expected slowdown, followed by a big reversal in deleveraging and housing tightening efforts.

PPI remains in deflation territory with slower nominal GDP growth and weakening PMI, leading to further downward earnings revisions.

Significant slowdown in domestic consumption. Tightening regulations on internet/e-commerce space, education, healthcare, etc.

Faster-than-expected deceleration in real estate activity.

Banks’ PPOP growth deteriorates amid weak NIM and lower fee income growth. Credit policy could err on two sides: either too tight (drag on economic activity) or too loose at the cost of credit quality deterioration.

Abandon supply-side discipline and resort to old-style, demand-driven policy stimulus.

P/E de-rating to 10.3x

COVID-19 inflection rates accelerate and with the possibility of second wave of contagion in China, which causes prolonged disruption to global economic activities and productivity (the concern about deep recession evolving into depression).

US-China confrontation intensifies and expanded into new areas; de-globalization trend strengthens.

Policy reactions are too little and not effective, leading to a faster-than-expected macro slowdown and raising concerns about the government’s abilities.

Debt/GDP ratio moves up quickly again, re-igniting debt concerns.

Disappointment in reform measures, expansion of government controls, and low confidence in government policies.

Large-scale corporate bankruptcy and rising labor market pressure

Larger-than-expected CNY depreciation and intensified capital outflow pressure.

Table 16: MSCI China end-2020 index target and assumptions

End 2020E Base Bull BearMSCI China index target 92 103 72Target 2021 EPS 7.46 7.90 7.05Target forward P/E (x) 12.3 13.0 10.3

Source: J.P. Morgan estimates

22



Earnings Outlook: 3.7%/18.3% EPS Growth in 2020/21E

The 1Q20 corporate earnings results season is underway, with 54 MSCI China constituents reporting their earnings this week, representing ~6% of the index that report quarterly. The results generally came in-line with our analysts’ expectation. Out of the 9 companies under our coverage, 6 of them were in-line with our forecast and 2 were above. By taking into account the consensus estimates of the 30 companies, 9 (23%) beat, 12 (31%) were in-line, and 18 (46%) missed.

The reported aggregate earnings growth is 1%oya. PingAn Bank (+15%oya), China Tower (+13%oya) and Angel Yeast (+28%oya) saw limited impact from the outbreak and reported resilient growth despite the downturn. Sector-wise, retail companies delivered stable online profitability, thanks to the increase in online consumption during the outbreak and better cost control, while offline was largely affected by the store closures. Telecom reported flat growth for 1Q, with weak mobile revenue offsetting a robust fixed-line business. Materials and utilities were hit by the sharp decline in sales volume and power generation. While the overall negative impact from the COVID-19 outbreak was severe due to the disruption on both the supply and demand side, most of the companies have witnessed some recovery and business normalization in March.

Our MSCI China CY20E EPS integer was lowered by 1.8% in April, and 8.7% since January. Downward earnings revisions were seen across most of the sectors during the month, led by insurance, materials and industrials. Our downgrades on the insurance sector weremainly incorporating the lower investment income result from the declining bond yield, extra liability reserve provisioning, as well as slower sales volume due to COVID-19 outbreak. Within the material sector, our analyst has revised down our earnings on the steel and aluminum segment substantially on the back of the poor commodity price environment and high inventories level.Our bottom-up MSCI China CY20/21E earnings growth forecast currently stands at 3.7% and 18.3% respectively, which is largely in-line with consensus estimates.

Sector highlights

Internet– mixed earnings outlook across segments

We are constructive on the earnings outlook for the digital entertainment (e.g. mobile gaming, music) segment given the substantial improvement in gaming industry’s content supply and acceleration in subs growth. While earnings impact in the e-commerce space for 1Q could be severe

due to lower discretionary spending and logisticsdisruption, our analyst believes the one-off nature of such virus-caused operational disruption will not affect the earnings power for the key leaders given their competitive positioning, consumer recognition, optimizing cost structure and ecosystem strength. In particular, we believe the development of new retail (combination of online capabilities with offline resources) could lead to a net profit CAGR at 23-76% for Alibaba, Tencent, JD and Meituan during 2020-23E. We remain cautious on the growth outlook of the online ads segment given the persistent macro challenges and competitive pressure.

Tech hardware – uncertainties remain elevated

We maintain our cautious view on the tech hardware sector given the supply and demand constraints across various applications after the COVID-19 outbreak.Global smartphone demand (JPMe: -3.1%oya in 2020) is likely to stay sluggish due to the decline in consumer discretionary spending amid the outbreak. Our analyst expects China smartphone shipment will decline by 10%oya in 2020, with demand disruption from the major overseas markets including US and Europe. Meanwhile, Chinese smartphone OEMs are likely to accelerate the 5G model launch in 2H20 with a lower retail price in order to boost inventory digestion. This may increase the pricing pressure and competition of the components makers. For the PC segment, our analyst expects thatunderlying demand will turn weak from 3Q20 when the WFH momentum starts to taper off, and forecast a low-single-digit yoy NB shipment declines for this year.

Real estate –contracted sales growth remains intact

National residential sales have started to normalize in the second half of March, with sales volume down by 14%oya for the month, compared to -39.2%oya in 2M20. Home prices (+2%oya) continue to hold up well thanks to the good inventory control over the past years. Our analyst believes that overall sales will be broadly flat y/y in April with the release of pent-up demand, and the decline in 1H2020 narrowing to 5-10%oya. Meanwhile, we believe contracted sales for major listed developers will stay resilient into the year due to the increase in sellable resources, continued market share gains and the more balanced demand/supply dynamics. In particular, we expect the ASP for the tier-1 cities will remain strong due to the prevailing price caps, while the incremental hukou easing will continue to drive the volume and ASP growth in the top tier-2 cities. Overall, we expect robust EPS growth forecast at 16% and 14% for CY20/21E.

23



Industrials – solid infra E&C and equipment segment

We stay positive on the earnings outlook for the infra E&C and railway equipment sector. Key drivers include a recovery on infra FAI on the back of fiscal investment support (e.g. higher allocation of funds from LGB issuance to the infra space), improving new order growth from overseas projects related to the BnR initiative, and increasing demand driven by replacement needs and emission standard upgrades. The “highway-to-railway” shift initiative should also encourage more locomotive and freight wagon procurements. In addition, our analysts expect profit margins to improve due to easing raw material costs, positive mix changes, enhanced pricing power, and improving operational efficiency.

Consumer staples – resilient growth outlook

China consumer staples sector is forecast to deliver resilient EPS growth at 27% for CY20, partly driven by the agriculture companies which is benefitting from the surge in pork price. While the COVID-19 outbreak could continue to weigh on the consumption spending in near-term, our analysts believe selected segments such as food retailers and dairy will be more defensive and will benefit from a higher penetration rate, market consolidation andpremiumization. In particular, some key players areexpected to see multi-year margin expansion through streamlining execution and regional M&A, as well as its favorable mix change towards high-margin product. We are more cautious on the beer segment given the significant decline in retail sales and nearly zero wholesales sales.

Banks – diminishing fear of NIM contraction

Our analyst is turning more positive on the Chinese banks outlook as high-frequency data supports our base case of V-shaped macro recovery, which ease some credit risk concern on the corporate book in near-term. Moreover, the NIM contraction could be more moderate than we forecast, on the back of the falling wholesale funding cost due to the sharp decline in the interbank rates. Subsiding inflation risk and falling market rates also open room for a deposit rate cut. Overall, we forecast modest sector EPS growth at 5.8%/4% forCY20/21, respectively.

Insurance – rising credit and market risks

We believe declining bond yield and financial market volatility will drag the investment income and increase the

liability reserve provisioning of the insurers for this year. Meanwhile, first year premium growth will remain weak in 1H20 due to a slowdown in face-to-face agent activities and weak footfall in banks. Overall, our analyst has revised down our EPS forecast for the companies by 7-23%, and expect a 23% decline in the sector earnings for this year. Looking beyond, long-term fundamental outlook remains intact given the product mix shift to higher-margin protection products, productivity improvement in the agency channel and further liability reserve stabilization in the back book. Our analyst also expectscyclical underwriting to turnaround for the non-life insurers due to stricter regulatory control and expansions in the non-auto line.

Diversified financial– benefit from capital market reform

Our analyst forecasts a robust sector EPS growth at 13%for CY20E. Total underwriting flows are expected to stay resilient driven by the increase in equity refinancing and bond issuance, while regulatory measures on loosening the margin financing and lowering the refinancing cost will continue to drive the recovery on stock-pledged repo businesses. We believe leading brokers are in a better position to benefit from supportive policy measures including the New Securities Law for which the registration-based IPO mechanism is implemented across the whole onshore capital market, NEEQ reform, streamlining the QFII/RQFII related-rules, further loosening index futures, increase in corporate share buybacks, and further opening of the A-share market. That said, contributions from the capital market reforms measures will take time to translate into earnings.

Energy/materials – sluggish growth outlook for CY20E

Collapse in the oil price has posed a significant downward pressure on the oil companies’ earnings outlook, and we currently forecasts a c.40% decline on the sector EPS for CY20E. Our commodity team expects Brent price will stay low in the next quarter due to the significant demand destruction and increase in OPEC+ supply. In addition, refining profitability may worsen in 2020 as well due to oversupply and accelerating competition. Within materials, we expect cement will benefit the most fromthe government’s stimulus measure on the infra areas, while we see on-going destocking pressure in other materials space including steel, glass and nonferrous metals due to demand delays and logistic disruption. Overall, we forecast a marginal 0.4% increasein earnings for CY20E.

24



Table 17: Major earnings and price target revisions in past month

Rating Current Price target EPS revisionsCompany Code Sector Previous New price Previous New EPS20 EPS21BoComm - H 3328 HK Banks N OW 4.7 6.2 6.5 1% 1%China Mobile 941 HK Comm. Serv. OW OW 61.5 70.0 73.0 0% 4%China Tower 788 HK Comm. Serv. N N 1.7 1.9 1.8 -9% -11%Alibaba BABA US Cons. Disc. OW OW 210.0 280.0 280.0 11%Gree Elec - A 000651 CH Cons. Disc. N OW 54.2 60.0 63.0 -13%Guangzhou Auto - H 2238 HK Cons. Disc. OW OW 6.4 10.0 10.0 -5% -4%New Oriental Education EDU US Cons. Disc. OW OW 113.8 150.0 140.0 -5% -6%SAIC Motor - A 600104 CH Cons. Disc. N N 18.6 22.0 20.0 -12% -9%Soufeiya Home Collection - A 002572 CH Cons. Disc. OW OW 19.3 22.0 23.0 -1% 4%TAL Edu TAL US Cons. Disc. OW OW 50.7 64.0 61.0 -14%Trip.com TCOM US Cons. Disc. OW OW 23.0 39.0 36.0 -8%Feihe 6186 HK Cons. Stpl. OW N 14.7 15.8 13.8 -2% -3%Moutai - A 600519 CH Cons. Stpl. OW OW 1244.5 1270.0 1450.0 1% 3%Sun Art 6808 HK Cons. Stpl. OW OW 12.5 11.5 14.0 13%China Cinda 1359 HK Div. Fin. OW OW 1.4 2.3 2.0 5% -2%China Shenhua - H 1088 HK Energy OW OW 13.7 20.0 18.0 -4% -5%CNOOC 883 HK Energy OW OW 8.2 11.6 11.8 13% 5%COSL - H 2883 HK Energy OW OW 5.8 8.9 9.0 3% 5%Offshore Oil Engineering - A 600583 CH Energy OW OW 5.0 8.4 8.4 1% -1%Petrochina - H 857 HK Energy N N 2.7 3.1 3.1 -1% 2%Sinopec - H 386 HK Energy OW OW 3.8 5.2 5.2 1% 1%Yangzhou Coal - H 1171 HK Energy OW N 5.9 9.0 7.0 -10% -10%Yantai Jereh Oilfield - A 002353 CH Energy OW OW 25.3 36.8 38.2 8% 7%3SBio 1530 HK Healthcare OW OW 8.3 11.0 11.0 -2% -1%CR Pharma 3320 HK Healthcare N N 4.9 6.5 5.8 -10% -10%CSPC Pharma 1093 HK Healthcare OW OW 15.8 23.5 21.0 -9% -7%Sino Biopharm 1177 HK Healthcare OW OW 11.1 14.5 13.8 -6% -3%Wuxi Bio 2269 HK Healthcare OW OW 120.0 140.0 140.0 1% 1%CCCC - H 1800 HK Industrials OW OW 5.1 8.2 6.7 -10% -8%China State Construction 3311 HK Industrials OW OW 5.9 10.5 9.2 -6% 3%CRCC - H 1186 HK Industrials OW OW 8.8 14.0 14.9 7% 6%CRG - H 390 HK Industrials OW OW 4.6 8.5 9.1 7% 11%Sany Heavy - A 600031 CH Industrials N OW 19.5 17.0 23.0 -6%Shanghai Elec - H 2727 HK Industrials OW OW 2.4 3.3 3.4 4% 4%Shanghai Int'l Airport - A 600009 CH Industrials N OW 67.3 80.0 81.0 5%Shenzhen Airport - A 000089 CH Industrials OW OW 7.8 14.3 12.2 -25% -10%Xinjiang Goldwind - H 2208 HK Industrials OW OW 7.3 11.1 9.2 -10% -13%China Life Insurance - H 2628 HK Insurance OW OW 15.8 49.0 33.0 -23% -23%CPIC - H 2601 HK Insurance N OW 24.0 34.0 29.0 -12% -11%New China Life Insurance - H 1336 HK Insurance N N 24.6 37.0 23.0 -10% -1%PICC Group - H 1339 HK Insurance OW OW 2.5 4.4 3.0 -7% 8%PICC P&C 2328 HK Insurance OW OW 7.3 12.5 10.5 -12% -7%Ping An Insurance - H 2318 HK Insurance OW OW 77.8 130.0 100.0 -18% 10%Jonhon Optronic - A 002179 CH IT OW OW 34.4 41.0 40.0 -17% -18%SMIC 981 HK IT UW UW 15.0 11.0 10.5 -29% 5%Xiaomi 1810 HK IT UW UW 10.1 9.0 9.0 -9% -2%Angang Steel - A 000898 CH Materials N N 2.7 3.0 3.0 -18% -35%BBMG - H 2009 HK Materials N N 2.0 2.6 2.4 -5% -5%Chalco - H 2600 HK Materials N N 1.5 2.4 2.0 -23% -85%China Moly - H 3993 HK Materials OW OW 2.2 3.2 2.9 -4% -24%CNBM 3323 HK Materials N N 9.5 9.0 9.0 -8% -10%CR Cement 1313 HK Materials OW OW 10.1 12.0 12.0 0% -1%Jiangxi Copper - H 358 HK Materials N N 7.3 11.0 9.0 -13% -28%Maanshan I&S - H 323 HK Materials UW UW 2.2 2.4 2.0 -24% -26%Tianqi Lithium - A 002466 CH Materials UW UW 19.3 26.0 17.0 -45% -35%Wanhua Chemical - A 600309 CH Materials UW OW 42.9 42.0 50.0 -2% -4%Zijing Mining - H 2899 HK Materials OW OW 3.3 3.6 3.6 -13% -16%Seazen 1030 HK Real Estate OW OW 6.7 10.5 9.0 -1% -7%Sino-Ocean Group 3377 HK Real Estate N N 1.9 2.7 2.2 5% 2%SUNAC China 1918 HK Real Estate OW OW 32.7 51.0 46.0 -6% -7%Yuzhou Properties 1628 HK Real Estate OW OW 3.2 6.0 5.1 -13% -11%Zhenro Properties 6158 HK Real Estate N N 4.8 4.7 4.5 -9% -8%Beijing Enterprise 384 HK Utilities N N 23.2 32.5 26.6 -11% -11%China Gas 392 HK Utilities N N 26.2 42.3 32.0 -3% -6%Datang Renewable 1798 HK Utilities N OW 0.6 0.8 0.7 -17% -12%GCL New Energy 451 HK Utilities N UW 0.1 0.2 0.1 -49% -43%Longyuan 916 HK Utilities OW OW 3.7 5.6 5.6 -1% 0%

Source: Bloomberg, J.P. Morgan estimates. Prices as of 22 April 2020.

25



Figure 19: MSCI China 2020E bottom-up EPS growth contribution by sector

Source: MSCI, Datastream, J.P. Morgan estimates.

Figure 20: MSCI China 2021E bottom-up EPS growth contribution by sector

Source: MSCI, Datastream, J.P. Morgan estimates.

Table 18: MSCI China EPS growth forecasts by sector (bottom-up)

Contribution to EPS integer EPS growth (%)2020 EPS growth JPM JPM Consensus

(%) CY19E CY20E CY21E CY19E CY20E CY21E CY19E CY20E CY21E

Consumer Discretionary 45.0 8.4 9.6 13.7 35.9 13.4 43.2 35.1 10.9 38.1Consumer Staples 13.2 49.8 63.1 70.7 24.3 26.7 11.9 24.6 28.8 12.1Communication Services 27.6 5.4 5.8 7.3 4.9 8.5 25.5 5.0 6.7 19.3Energy -58.3 51.0 30.8 34.7 7.6 -39.7 12.7 7.6 -53.0 40.9Financials -4.0 73.2 72.9 80.0 16.5 -0.4 9.6 16.5 2.1 7.6Banks 45.2 45.7 48.4 50.3 5.7 5.8 4.0 5.7 4.1 5.0Insurance -56.7 64.5 49.5 65.8 65.6 -23.3 33.1 65.6 -7.8 15.2Diversified Financials 7.6 8.7 9.8 11.2 32.5 12.9 14.0 32.5 16.5 13.8

Health care 11.0 5.7 7.2 9.2 37.8 26.1 27.7 37.2 25.5 23.8Industrials 4.2 11.6 11.8 14.1 7.4 2.1 19.3 7.4 0.1 20.0Information Technology 8.8 25.8 29.6 36.9 19.4 14.6 24.9 19.6 16.6 26.6Materials 0.4 79.6 80.0 86.2 -7.3 0.4 7.8 -7.2 2.3 12.7Real Estate 44.9 239.3 278.3 317.8 14.2 16.3 14.2 14.2 17.8 16.9Utilities 7.1 51.5 56.5 61.5 20.0 9.7 8.7 20.6 14.1 11.2MSCI China 100.0 6.1 6.3 7.5 15.1 3.7 18.3 15.1 3.7 17.1

Source: MSCI, IBES, Datastream, Bloomberg, J.P. Morgan estimates.

1.7%

1.7%

1.7%

1.0%

0.5%0.4%

0.3%0.3%

0.3%0.2% 0.0%

2.1%

2.2%

3.7%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Cons. Disc. Banks Real estate Comm.Serv.

Cons. Stpl. Health care IT Div. Fin. Utilities Industrials Materials Insurance Energy MSCI China

5.9%

3.3%

2.2%

1.6%

1.5%1.2%

0.6% 0.5%0.4% 0.3% 0.3% 0.2% 0.2% 18.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Cons. Disc. Comm.Serv.

Insurance Real Estate Industrials Banks IT Health care Energy Div. Fin. Cons. Stpl. Utilities Materials MSCI China

26



Figure 21: MSCI China 2020E EPS growth (%)

Source: MSCI, Datastream, Bloomberg, J.P. Morgan estimates.

Figure 22: MSCI China 2021E EPS growth (%)

Source: MSCI, Datastream, Bloomberg, J.P. Morgan estimates.

-45 -40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35

Energy

Insurance

Materials

Industrials

MSCI China

Bank

Comm. Serv.

Utilities

Div Fin

Cons. Disc.

IT

Real Estate

Healthcare

Cons. Stpl.

0 5 10 15 20 25 30 35 40 45

Bank

Materials

Utilities

Cons. Stpl.

Energy

Div Fin

Real Estate

MSCI China

Industrials

IT

Comm. Serv.

Healthcare

Insurance

Cons. Disc.

27



EPS Tracker – Monitoring Consensus Earnings Revisions

The trend of downward revisions in consensus earnings continued over the past month, with MSCI China CY20/21E EPS integer revised down by 7.2% and 5.8%respectively. Energy sector saw the biggest downward revisions of 30% for CY20E, largely due to the plunge in the oil price. Industrials earnings were lowered by 10% mainly dragged by the airlines. Meanwhile, the earnings revision breadth for CY20E (number of companies with EPS upgrades less downgrades/total revisions made) declined to 61% compared to 42% in March. Breadth worsened the most in healthcare, IT and industrials, while utilities had a narrowing negative breadth.

Stocks with the largest 2020E EPS upgrades in the past month are Cosco Shipping, Yum China, China Merchants Energy Shipping, Walvax Biotech and Kaisa.

Stocks with the largest 2020E EPS downgrades in the past month are Petrochina, Trip.com, Air China, China Southern Airlines and Juneyao Airline.

Figure 23: MSCI China consensus EPS integer


Table 19: MSCI China consensus EPS revisions

2020 EPS revision (%) 2021 EPS revision (%)1m 3m 6m 12m 1m 3m 6m 12m

MSCI China -7.2 -11.9 -12.0 -20.4 -5.8 -8.9 -9.1 -16.1Consumer Discretionary -9.7 -15.8 -11.6 -20.2 -6.7 -7.4 -3.9 -3.1Consumer Staples -3.8 -3.4 2.9 2.4 -1.8 -2.3 1.9 3.0Communication Services -3.7 -7.5 -5.9 -19.1 -3.4 -5.4 -3.4 -18.4Energy -29.5 -49.3 -48.5 -53.1 -21.3 -34.9 -34.2 -39.5Financials -3.9 -6.2 -4.4 -12.3 -4.0 -7.0 -5.6 -11.3Banks -3.2 -5.2 -3.9 -11.6 -4.0 -6.6 -5.7 -11.2Insurance -5.5 -8.8 -5.0 -3.7 -3.8 -7.3 -4.4 -1.0Diversified Financials -5.1 -10.8 -8.9 -15.1 -3.5 -10.1 -8.7 -15.2

Healthcare -6.9 -15.9 -29.9 -16.5 -6.9 -14.3 -26.6 -15.2Industrials -10.0 -13.1 -17.9 -18.9 -4.4 -5.1 -10.3 -10.6IT -8.6 -11.7 -17.1 -31.4 -6.6 -8.4 -13.4 -22.9Materials -4.2 -5.8 -7.0 -25.2 0.7 1.2 1.4 -18.0Real Estate -6.7 -10.8 -11.6 -16.9 -6.5 -10.8 -11.7 -18.5Utilities -4.8 -8.6 -9.7 -12.9 -4.4 -8.4 -8.9 -14.5


Figure 24: MSCI China EPS revision breadth: number of companies seeing (upgrades – downgrades) / (upgrades + downgrades)

Source: MSCI, IBES, Datastream

6

6.5

7

7.5

8

8.5

9

9.5

10

Feb 18 Aug 18 Feb 19 Aug 19 Feb 20

2020 2021

-70

-60

-50

-40

-30

-20

-10

0

10

20

Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 Mar 20 Apr 20

2020E EPS 2021E EPS

28



Market Valuations

MSCI China has re-rated by 19% from its trough at 10x in late-March to 11.9x currently, which is in-line with its 10y average at 12x. The increase in forward PE is drivenby the 15% increase in price and a 4% decline on forward EPS. Energy sector re-rated the most by 58%, largely due to the continuous EPS downgrade amid the falling oil price. Banks and diversified financial, which had underperformed during the recent market rebound, re-rated the least by c.8%. Valuations of some of the cyclical sectors including real estate (5.2x) andindustrials (8.6x) remains low, whereas IT and healthcare are trading at 1.5-2 standard deviation above mean.

Sectors with forward P/E above 10y average

Consumer discretionary, communication services, energy, healthcare, IT

Sectors with a low forward P/E below 10x

Banks (4.7), real estate (5.2), industrials (8.6), insurance (8.8), materials (9.6), utilities (8.7), diversified financials (9.7)

Figure 25: MSCI China sector-neutral P/E (x)

Source: MSCI, IBES, Datastream. 23 April 2020. Sector neutral P/E = sector forward PE

weighted by current sector weighting before 2019.

Please see Table 20 for MSCI China sector valuations for details.

Figure 26: MSCI China 12m forward P/E (x)

Source: MSCI, IBES, Datastream. 23 April 2020.

Figure 27: MSCI China IT 12m forward P/E (x)

Source: MSCI, IBES, Datastream. 23 April 2020. Re-calculated based on the new GICS classification prior to November 2018.

Figure 28: MSCI China banks 12m forward P/E (x)


Figure 29: MSCI China consumer discretionary 12m forward P/E (x)


7

9

11

13

15

17

19

10 11 12 13 14 15 16 17 18 19 20

+1 std dev

LT average

-1 std dev

4

8

12

16

20

24

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

8

10

12

14

16

18

20

22

24

26

10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

0

2

4

6

8

10

12

14

16

18

20

22

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

17

18

19

20

21

22

23

24

25

26

27

15 16 17 18 19 20

+1 std dev

-1 std dev

average

29



Figure 30: MSCI China insurance 12m forward P/E (x)


Figure 31: MSCI China communication services 12m forward P/E (x)


Figure 32: MSCI China real estate 12m forward P/E (x)


Figure 33: MSCI China energy 12m forward P/E (x)


Figure 34: MSCI China industrials 12m forward P/E (x)


Figure 35: MSCI China utilities 12m forward P/E (x)


4

8

12

16

20

24

28

32

36

40

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

12

14

16

18

20

22

24

26

28

10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

4

6

8

10

12

14

16

18

20

22

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

4

6

8

10

12

14

16

18

20

22

24

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

5

7

9

11

13

15

17

19

21

23

25

27

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

4

6

8

10

12

14

16

18

20

22

24

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

30



Figure 36: MSCI China diversified financials 12m forward P/E (x)


Figure 37: MSCI China healthcare 12m forward P/E (x)


Figure 38: MSCI China consumer staple 12m forward P/E (x)


Figure 39: MSCI China materials 12m forward P/E (x)


Table 20: MSCI China sector valuations

P/E (x) Prem/disc #SD Div Yield (%) P/BV (x)CY19E CY20E CY21E 12m fwd from 10y average CY20E CY21E CY20E CY21E

Consumer Discretionary 29.5 26.0 18.1 22.7 2.6 0.3 0.3 0.4 3.8 3.2Consumer Staples 28.1 22.1 19.8 21.3 -1.1 -0.1 2.0 2.3 4.6 4.0Communication Services 24.2 22.3 17.8 20.5 7.7 0.4 1.0 1.1 2.6 2.3Energy 6.4 10.5 9.4 10.1 3.1 0.1 5.3 5.2 0.6 0.6Financials 6.0 6.0 5.5 5.8 -19.0 -0.9 5.0 5.5 0.7 0.6Banks 5.1 4.8 4.6 4.7 -17.7 -0.8 6.1 6.4 0.6 0.5Insurance 7.5 9.8 7.4 8.8 -42.0 -1.6 3.2 4.2 1.2 1.1Diversified Financials 11.4 10.1 8.9 9.7 -7.0 -0.3 3.2 3.6 0.8 0.7

Health care 42.1 33.3 26.1 30.5 33.9 1.5 0.8 1.0 3.9 3.6Industrials 9.4 9.2 7.7 8.6 -20.0 -1.2 3.0 3.4 0.9 0.8Information Technology 25.9 22.6 18.1 20.9 41.7 2.3 1.2 1.4 2.4 2.2Materials 9.9 9.9 9.2 9.6 -17.4 -0.8 3.5 3.7 1.1 1.0Real Estate 6.4 5.5 4.8 5.2 -26.8 -1.2 6.3 7.2 0.9 0.8Utilities 11.0 10.0 9.2 9.7 -18.3 -1.7 3.9 4.2 1.1 1.0MSCI China 13.2 12.7 10.7 11.9 0.2 0.0 2.2 2.4 1.5 1.4

Source: MSCI, IBES, Datastream, J.P. Morgan estimates. 23 April 2020.

4

8

12

16

20

24

08 09 10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

14

16

18

20

22

24

26

28

30

10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

4

6

8

10

12

14

16

18

20

22

24

26

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

5

7

9

11

13

15

17

19

21

23

25

27

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

+1 std dev

-1 std dev

average

31



MSCI China Evolution – From Old to New Economy

The MSCI China index composition has changed rapidly since its launch in 1992. A fairer comparison is the performance of the market and economy since 2005 with the listing of the China banks. MSCI China’s 2005-18 CAGR was 7%, vs nominal GDP CAGR of 14%. The current index is 43% internet and e-commerce, which reflects the increasing contribution of the consumption and service sector to the economy. With the growing importance of the China onshore equity markets, MSCI has started to include A-shares from June 2018, which represent 11.8% of MSCI China currently.

Dominated by telecom and energy by 2005

In the 1990s, investors bought the China concept via relatively small industrials and window companies (investment companies that issued shares to pay for asset injections). The main sectors were materials, consumer discretionary, utilities and industrials. The most dramatic change was the listing of CMHK in October 1997, which combined with the late ‘90s TMT bubble resulted in telecoms being 62% of MSCI China in 2000. Industrials was the second-largest sector (22%) led by CITIC Pacific. By 2005, energy (27%) was the largest sector with the listing of PetroChina, Sinopec, and CNOOC in 2000 and 2001. BoCom and CCB were listed in 2005.

Internet and e-commerce are 43% of current index

MSCI China has been biased to the new economy sincethe inclusion of ADRs in Nov 2015 (with 50% of free float market cap) and May 2016 (full inclusion). The 30ADRs (12 in communication services, 11 in consumer discretionary, 3 in industrials, 2 in healthcare and one inIT and diversified financials respectively) are 29% of MSCI China. Tencent and Alibaba are 33% of the index. Banks are 11%, whereas insurance is 5%. Materials is just 2.3% of the index, vs 32% in 1995.

A-share inclusion in global benchmark indices

China A shares were included in MSCI China in five phases: June 1, 2018 (with 2.5% inclusion factor), September 3, 2018 (with 5% inclusion factor), May 28, 2019 (with 10% inclusion factor), August 28, 2019 (with 15% inclusion factor) and November 26, 2019 (with 20% inclusion factor and include mid-caps and ChiNext names). The current 467 A shares are 66% of the stocks (704 in MSCI China) but just 11.8% of the index weight.

Meanwhile, FTSE has also started including the China A shares in its indices, with an inclusion factor of 5%/15%/25% on June19/September19/March20. Our derivative team forecasts total passive inflow of USD26.2bn from MSCI (USD18.1bn) and FTSE (USD8.1bbn), and US$157bn if including active flows (assuming active flows is five times that of passives).

Table 21: Top ten stocks represent 50% of MSCI ChinaCode Weight Sector

Alibaba BABA US 18.0 Cons. Disc.Tencent 700 HK 14.8 Comm. Serv.CCB 939 HK 3.7 BanksPing An Insurance 2318 HK 2.8 InsuranceChina Mobile 941 HK 2.4 Comm. Serv.ICBC 1398 HK 2.1 BanksJD.com JD US 1.6 Cons. Disc.BOC 3988 HK 1.5 BanksBaidu BIDU US 1.4 Comm. Serv.Netease NTES US 1.2 Comm. Serv.

Source: MSCI, Datastream, J.P. Morgan. 22 April 2020.

Table 22: Sector weightings of MSCI China (%)

1995 2000 2005 2010 2015 CurrentNo. of stocks 24 30 75 140 157 704Cons Disc 25 1.9 4.8 5.5 6.3 28.1Comm Serv* - 61.5 22.3 11.3 9.4 22.3Banks - - 8.9 22.8 19.5 11.3Insurance - - 6.7 8.7 9.1 5.3Industrials 14.1 21.7 13.9 8.4 7.5 5.5Real Estate 5.8 0.3 2 5.6 6.0 5.1Health Care - 0.2 0.1 0.8 2.2 5.0Energy 0 4.4 26.5 18.1 6.5 2.7IT 0.9 6.4 3.5 5.4 22.6 4.5Cons Staple 7.7 0.4 2 5.2 3.1 3.9Utilities 14.9 2.1 4.3 1.8 3.8 2.3Materials 31.6 1.1 4.7 6.2 1.3 2.3Div Fin - - 0.2 0.3 2.9 1.9ADR - - - - 11.3 28.7

Source: MSCI, Bloomberg, Datastream, J.P. Morgan. 22 April 2020. *Telecom sector for

1995 - 2015.

Figure 40: Current MSCI China index

Source: MSCI, Datastream, J.P. Morgan. 22 April 2020.

Figure 41: China nominal GDP vs MSCI China market cap (US$bn)

Source: MSCI, Datastream, J.P. Morgan.

Banks, 11.3%

IT, 4.5%

Communication services,

22.3%

Insurance, 5.3%

Industrials, 5.5%

Energy, 2.7%Property, 5.1%

Utilities, 2.3%

Cons. Disc., 28.1%

Cons. Stpl., 3.9%

Div. Fin., 1.9% Healthcare, 5.0%

Materials, 2.3%

0

500

1000

1500

2000

0

2000

4000

6000

8000

10000

12000

14000

1993 1996 1999 2002 2005 2008 2011 2014 2017

Nominal GDP (LHS)

MSCI China mkt cap (RHS)

32



The 467 A shares in MSCI China

The current 467 A shares in MSCI China consist of 255 Shanghai- and 212 Shenzhen-listed companies, with a total free float market cap of US$237bn (based on a 20% inclusion factor and 30% foreign ownership limit) and represent 11.8% of MSCI China. 72 out of the 467 A shares are dual-listed on HKSE. Total average daily turnover (3M) of the A-share constituents was US$47bn, accounting for 39% of the total A-share market.

The universe offers investors broader access to the Chinese traditional sectors and domestic-oriented companies, which are well positioned to benefit from further counter-cyclical macro policy support. Consumer staples, industrials, materials, brokers and healthcare represent 54% of the A-share universe but just 12% of the H-share constituents. IT (internet + hardware) is 13% only versus 46% in H shares and ADRs. Consumer discretionary is dominated by e-commerce and education currently, whereas the A-share universe has higher exposure to home appliance and auto segments.

Consumer staples (15%/A universe) is the largest sector, followed by IT (13%), industrials (12.6%), banks (12.5%), and healthcare (11%). The biggest non-A/H dual-listed companies included the premium liquor Moutai and Wuliangye, video surveillance vendor HikVision, hydroelectric power generator Yangtze Power, medicine manufacturer Hengrui, joint-stock banks Industrial bank and Shanghai Pudong Bank.

Overall, we expect to see gradual fund inflows into the onshore equities amid continuous capital account liberalization, in particular on the mid-cap names which was first included in MSCI in November 2019. Moreover, the increased participation of foreign institutional investors will essentially help optimizing the onshore equity market structure and improve the market efficiency.

Table 23: MSCI China A-share breakdown by sector

# of stocks

% FF Mkt Cap

(US$bn)*

% Weg in MSCI

China (%)*

Cons. Disc. 34 7.3 12.9 5.4 0.6Cons. Stpl. 37 7.9 36.8 15.5 1.8Comm. Serv. 16 3.4 6.0 2.5 0.3Energy 14 3.0 4.7 2.0 0.2Financials 65 13.9 56.6 23.9 2.8 Banks 22 4.7 29.7 12.5 1.5 Insurance 6 1.3 10.1 4.3 0.5 Div. Fin. 37 7.9 16.8 7.1 0.8Health care 58 12.4 26.2 11.0 1.3Industrials 80 17.1 29.9 12.6 1.5IT 69 14.8 30.8 13.0 1.5Materials 61 13.1 17.7 7.5 0.9Real Estate 20 4.3 9.3 3.9 0.5Utilities 13 2.8 6.1 2.6 0.3Total 467 100 237.1 100 11.8

Source: MSCI, Bloomberg, J.P. Morgan. 22 April 2020. *with 20% inclusion factor.

Table 24: Pro-forma MSCI China stock classification

Weighting (%)Current Assume 100% inclusion

A shares 11.8 40.1H shares 22.4 15.2Red chips 8.9 6.1P chips 28.1 19.1B shares 0.1 0.1ADR 28.7 19.5


Table 25: Top 10 non-dual-listed A shares in MSCI China

Sector Price (CNY) Free float mkt cap (US$mn) Weg in MSCI China (%) 3m ADT (US$mn)Kweichow Moutai Co Ltd 600519 CH Staples 1200.0 12753.3 0.6 682.7Wuliangye Yibin Co Ltd 000858 CH Staples 126.5 4153.2 0.2 465.8Jiangsu Hengrui Medicine 600276 CH Health Care 95.3 3565.9 0.2 288.7China Yangtze Power Co 600900 CH Utilities 17.1 3180.9 0.2 57.6Industrial Bank Co Ltd 601166 CH Banks 15.8 2776.9 0.1 189.1Shanghai Pudong Dev Bk 600000 CH Banks 10.0 2490.7 0.1 63.2Contemporary Amperex 300750 CH Industrials 130.5 2438.6 0.1 574.9Foshan Haitian Flavouring 603288 CH Staples 125.0 2379.6 0.1 58.8Hangzhou Hikvision Digital 002415 CH IT 30.0 2371.0 0.1 274.8Shenzhen Mindray 300760 CH Health Care 268.0 2297.2 0.1 188.2

Source: MSCI, Bloomberg, Datastream, J.P. Morgan. 22 April 2020.

.

33



Table 26: MSCI China A-share constituents with H-share counterparts listed on HKSE

Name Ticker Sector Price (CNY)

FF mkt cap

(US$mn)

Weg in MSCI China

(%)

3m ADT H shares counterpart A/H premium/d

iscount US$mn Ticker Price (HK$) %

Ping An Insura 601318 CH Insurance 72.4 6632.5 0.33 832.4 2318 HK 77.8 1.7 China Merch Bk 600036 CH Banks 32.7 5698.3 0.28 326.8 3968 HK 34.7 3.0 Ind & Comm Bk 601398 CH Banks 5.1 2317.5 0.12 160.9 1398 HK 5.1 9.9 Agricultural 601288 CH Banks 3.4 2149.0 0.11 92.6 1288 HK 3.1 21.8 China Vanke Co 000002 CH Real Estate 26.0 2140.6 0.11 357.2 2202 HK 24.6 15.6 Anhui Conch 600585 CH Materials 59.2 2001.5 0.10 290.5 914 HK 58.9 9.8 Citic Securiti 600030 CH Div. Fin. 23.2 1928.6 0.10 675.1 6030 HK 14.3 77.6 China Minsheng 600016 CH Banks 5.7 1710.1 0.09 68.0 1988 HK 5.6 12.2 Bank Of Commun 601328 CH Banks 5.1 1703.5 0.08 60.4 3328 HK 4.7 19.5 China Pacific 601601 CH Insurance 28.7 1524.9 0.08 129.7 2601 HK 24.0 30.8 Zte Corp 000063 CH IT 40.4 1316.5 0.07 894.3 763 HK 23.3 89.4 Wuxi Apptec Co 603259 CH Health Care 103.5 1285.0 0.06 194.7 2359 HK 109.4 3.4 Crrc Corp Ltd 601766 CH Industrials 6.2 1280.2 0.06 73.8 1766 HK 4.0 69.9 China Everbrig 601818 CH Banks 3.6 1199.0 0.06 61.7 6818 HK 3.0 29.2 Huatai Securit 601688 CH Div. Fin. 17.9 1111.1 0.06 251.1 6886 HK 12.6 54.8 Guotai Junan S 601211 CH Div. Fin. 16.7 1061.3 0.05 106.8 2611 HK 10.7 70.1 Bank Of China 601988 CH Banks 3.6 1058.0 0.05 48.0 3988 HK 2.9 32.3 China Railway 601390 CH Industrials 5.9 1014.7 0.05 63.6 390 HK 4.5 43.7 China Petroleu 600028 CH Energy 4.5 978.8 0.05 87.2 386 HK 3.8 30.9 China Railway 601186 CH Industrials 10.1 978.1 0.05 128.3 1186 HK 8.8 25.1 Byd Co Ltd 002594 CH Cons. Disc. 59.4 910.7 0.05 231.7 1211 HK 41.8 55.4 Haitong Securi 600837 CH Div. Fin. 12.9 884.5 0.04 191.6 6837 HK 6.9 104.6 New China Life 601336 CH Insurance 43.3 764.0 0.04 93.6 1336 HK 24.5 93.5 Gf Securities 000776 CH Div. Fin. 13.7 686.1 0.03 101.7 1776 HK 8.1 84.4 Zijin Mining 601899 CH Materials 4.1 679.6 0.03 163.1 2899 HK 3.3 33.8 Weichai Power 000338 CH Industrials 13.3 671.6 0.03 165.1 2338 HK 14.3 1.4 China Life Ins 601628 CH Insurance 27.8 653.5 0.03 72.1 2628 HK 15.7 93.6 Shanghai Fosun 600196 CH Health Care 37.6 639.4 0.03 179.8 2196 HK 28.2 45.9 Petrochina Co 601857 CH Energy 4.5 617.8 0.03 90.5 857 HK 2.7 81.9 China Shenhua 601088 CH Energy 15.4 571.8 0.03 79.9 1088 HK 13.8 21.4 China Molybden 603993 CH Materials 3.5 517.1 0.03 165.5 3993 HK 2.3 68.0 China Const Ba 601939 CH Banks 6.3 507.3 0.03 90.7 939 HK 6.0 13.8 Metallurgical 601618 CH Industrials 2.6 391.2 0.02 33.3 1618 HK 1.3 111.2 China Southern 600029 CH Industrials 5.1 374.0 0.02 61.6 1055 HK 3.5 61.9 Zoomlion Heavy 000157 CH Industrials 6.3 347.6 0.02 42.8 1157 HK 6.3 10.7 Shanghai Elect 601727 CH Industrials 4.9 338.0 0.02 18.5 2727 HK 2.4 126.9 China East Air 600115 CH Industrials 4.2 327.8 0.02 41.1 670 HK 2.9 54.3 Shang Pharm 601607 CH Health Care 20.1 327.0 0.02 89.8 2607 HK 14.0 57.1 Fuyao Glass 600660 CH Cons. Disc. 18.9 320.6 0.02 56.1 3606 HK 16.3 26.8 Aluminum Corp 601600 CH Materials 2.9 318.7 0.02 28.5 2600 HK 1.5 109.8 PICC 601319 CH Insurance 6.3 315.8 0.02 69.5 1339 HK 2.5 176.9 Xinjiang Gold 002202 CH Industrials 9.8 284.7 0.01 45.8 2208 HK 7.4 43.6 Cosco Shipping 600026 CH Energy 9.3 271.6 0.01 39.0 1138 HK 4.9 106.9 Tsingtao Brew 600600 CH Cons. Stpl. 45.7 268.9 0.01 50.9 168 HK 42.1 18.5 Huaneng Power 600011 CH Utilities 4.2 260.5 0.01 20.1 902 HK 2.7 73.2 China Citic Bk 601998 CH Banks 5.1 243.9 0.01 17.0 998 HK 3.6 53.8 Bbmg Corporati 601992 CH Materials 3.3 231.4 0.01 26.8 2009 HK 2.0 81.9 Air China Ltd 601111 CH Industrials 6.7 226.6 0.01 85.2 753 HK 5.2 41.0 Jiangxi Copper 600362 CH Materials 12.9 226.3 0.01 55.2 358 HK 7.4 90.6 Sinopec Shang 600688 CH Materials 4.3 219.6 0.01 21.1 338 HK 2.1 118.0 Cosco Shipping 601919 CH Industrials 3.8 205.3 0.01 19.5 1919 HK 2.1 96.6 Guangzhou Auto 601238 CH Cons. Disc. 9.8 197.5 0.01 31.2 2238 HK 6.5 65.2 Huadian Power 600027 CH Utilities 3.4 197.0 0.01 15.4 1071 HK 2.3 60.9 China Communic 601800 CH Industrials 8.3 192.2 0.01 102.7 1800 HK 5.1 78.7 Yanzhou Coal 600188 CH Energy 8.4 175.1 0.01 29.3 1171 HK 5.9 55.4 Maanshan Iron 600808 CH Materials 2.5 128.2 0.01 12.7 323 HK 2.3 22.3 Sinotrans 601598 CH Industrials 3.4 124.5 0.01 14.3 598 HK 1.8 106.3 Total 53,706 2.7 7,555

Source: MSCI, Bloomberg, Datastream, J.P. Morgan. 22 April 2020. The list only include the MSCI China H share constituents.

34



Accessing China equities

China offers investors a number of ways to gain exposureto its equity markets: 1) HK-listed H shares, Red Chips and P Chips; 2) Shanghai and Shenzhen listed A and B shares; and 3) US-listed ADRs. Performance of these markets diverges with H shares outperforming A shares over 2016-2017, but underperforming since 2018. Different factors such as i) coverage, ii) valuations, iii) accessibility, and iv) currency (FX risk) contributing to the divergence. In addition, the global benchmark indices inclusion and further market openness has driven steady capital flows into the onshore equities in recent years.

Coverage: MSCI China has high exposure to the new-economy growth sectors, with 43% in internet and e-commerce. ADRs represent 29% of the index. SHCOMP is 44% in local banks, industrials, and materials. IT is 22% of SZCOMP but 28% is in industrials and materials.

Valuations: Based on consensus, HSCEI’s 12m forward P/E is 8x, below MSCI China’s 11.9x and SHCOMP's 11.2x, mainly due to its high exposure to China banks (29% of index). ChiNext, a subset of SZCOMP with 32% in IT, is trading at 12m forward P/E of 27.4x. MSCI China’s ADR forward P/E is 23.2x.

Accessibility: Four ways to access China A shares are: 1) QFII (2003); 2) RQFII (2012); 3) Shanghai/Shenzhen Stock connect (2014/16); 4) offshore-listed derivatives (ETFs, Futures, Options, Swaps, etc.).

Currency: Onshore and offshore markets offer investors different FX exposure – China A shares in CNY; B shares in US$/HK$; HK-listed China companies in HK$ and ADRs in US$. Different expectations on exchange rate movements can lead to performance divergence.

Latest QFII/RQFII development: (1) On June 12, 2018, SAFE announced it would lift the monthly 20% cap on fund outflows for QFII/RQFII investors, remove the

lock-up period for investment principal, and allow institutional investors to hedge currency risk onshore. (2) On Jan 14, 2019, QFII quota doubled to USD300bn, (3) On September 10, 2019, SAFE announced the removal of quota restrictions and country/regional restrictions for QFII/RQFII, and streamlining of the registration process (from approval-based to registration-based), (4) On December 13, 2019, SAFE launched a consultation to further simplify the QFII/RQFII related rules (link).

Other key financial market openness measures: (1) Remove the foreign ownership limits for all financial sectors by April 1, which was announced in the Phase One trade deal. (2) Loosening regulatory requirements and lifting business restrictions on foreign banks and insurance companies, such as removing the business track record requirements for insurers that apply to establish foreign-invested insurance companies in China, and lowering the minimum threshold for fixed-term RMB deposits accepted by foreign bank branches from Chinese citizens.

Table 27: Sector composition of major China indices

MSCI China HSCEI SHCOMP SZCOMP ChiNext

Cons. Disc. 28.1 4.5 6.2 11.1 3.7Cons. Stpl. 3.9 2.7 10.2 10.3 3.9Comm. Serv. 22.4 20.8 2.0 3.8 4.7Energy 2.7 6.8 6.1 0.8 0.3Financials 18.3 44.6 30.5 5.4 2.7Banks 11.2 29.2 19.2 2.0 -Insurance 5.2 14.4 5.7 0.1 -Div. Fin. 1.9 0.9 5.7 3.3 2.7

Health Care 5.0 3.6 5.7 13.0 24.4Industrials 5.5 3.2 15.9 16.7 20.9IT 4.5 1.4 7.6 22.0 32.3Materials 2.3 1.4 8.6 11.3 6.8Real Estate 5.0 7.1 3.5 3.8 -Utilities 2.3 3.9 3.8 1.7 0.2


Table 28: Market valuations of major China indices

PE 2020 (x) P/E 2021E (x)MXCN HSCEI SHCOMP SZCOMP ChiNext MXCN HSCEI SHCOMP SZCOMP ChiNext

Consumer Discretionary 26.0 19.5 14.7 17.7 26.2 18.1 15.6 12.6 14.9 20.4Consumer Staples 22.1 22.9 31.7 13.9 6.6 19.8 19.9 26.5 14.2 8.5Communication Services 22.3 18.1 24.2 25.4 25.0 17.8 16.5 20.8 21.0 20.8Energy 10.5 17.7 16.9 12.2 35.1 9.4 11.2 13.3 11.2 25.8Financials 6.0 5.8 7.0 14.3 42.9 5.5 5.4 6.5 12.6 33.6Banks 4.8 4.9 5.5 8.5 - 4.6 4.7 5.1 7.5 -Insurance 9.8 8.4 10.8 15.7 - 7.4 7.3 9.4 15.7 -Diversified Financials 10.1 8.9 19.8 24.4 42.9 8.9 7.8 17.7 21.7 33.6

Health Care 33.3 20.2 27.3 35.0 49.7 26.1 17.0 23.3 29.0 39.2Industrials 9.2 5.2 13.9 21.9 31.0 7.7 4.7 11.7 18.5 24.4Information Technology 22.6 22.3 42.7 32.3 32.9 18.1 17.3 35.4 25.3 25.8Materials 9.9 8.8 13.9 16.5 24.4 9.2 8.6 12.1 14.1 19.9Real Estate 5.5 5.9 6.1 6.5 - 4.8 5.0 5.4 5.6 -Utilities 10.0 15.2 13.6 11.6 16.3 9.2 13.3 12.5 10.9 14.8Aggregate 12.7 8.3 11.6 19.2 29.0 10.7 7.5 10.3 16.6 24.7


35



MMA Fund Flows and Positioning

Shanghai/Shenzhen-HK Southbound Connect registered a net inflow of CNY17bn in April following the strong inflow at CNY132 in March, and is the 14th consecutive month of net inflows since March 2019. Overall, cumulative net inflows are CNY236bn ytd and CNY1206bn since the Connect debuted November 2014. Southbound trading volume (1mma) currently accounts for 8.7% of HKSE total turnover.

Southbound position (in value terms) increased the most in communication services, banks, consumer discretionary and healthcare.

Figure 42: Shanghai/Shenzhen-HK Connect cumulative net flow

Source: Wind. 22 April 2020.

Table 29: Top 20 stock position (by value)

Name Code Value (HK$bn) % of FF

China Construction Bank Corp 939 145 26%Industrial & Commercial Bank o 1398 118 30%Tencent Holdings Ltd 700 105 5%HSBC Holdings PLC 5 68 9%Sunac China Holdings Ltd 1918 30 36%Meituan Dianping 3690 25 11%Agricultural Bank of China Ltd 1288 24 28%Bank of China Ltd 3988 24 10%China Pacific Insurance Group 2601 18 27%Semiconductor Manufacturing In 981 18 30%Xiaomi Corp 1810 13 18%China Shenhua Energy Co Ltd 1088 12 26%Wuxi Biologics Cayman Inc 2269 12 13%Sino Biopharmaceutical Ltd 1177 11 16%Ping An Insurance Group Co of 2318 10 2%Sunny Optical Technology Group 2382 10 14%ANTA Sports Products Ltd 2020 10 15%WH Group Ltd 288 9 13%China National Building Materi 3323 9 24%New China Life Insurance Co Lt 1336 9 36%

Source: HKEX, Bloomberg.

Table 30: Top 20 stock position (by % of free float)

Name Code Value (HK$bn) % of FF

China Merchants Securities Co 6099 1 75%Digital China Holdings Ltd 861 3 73%Ganfeng Lithium Co Ltd 1772 3 68%Koolearn Technology Holding Lt 1797 5 58%Shanghai La Chapelle Fashion C 6116 0 58%Dalian Port PDA Co Ltd 2880 1 54%Chiho Environmental Group Ltd 976 0 50%Fullshare Holdings Ltd 607 1 50%XD Inc 2400 1 49%China High Speed Transmission 658 1 48%Flat Glass Group Co Ltd 6865 1 47%Orient Securities Co Ltd/China 3958 2 47%Man Wah Holdings Ltd 1999 3 46%Huaneng Power International In 902 5 45%Greentown China Holdings Ltd 3900 3 44%YiChang HEC ChangJiang Pharmac 1558 2 44%Guangzhou Baiyunshan Pharmaceu 874 1 44%KuangChi Science Ltd 439 0 44%Zhou Hei Ya International Hold 1458 2 43%Shandong Xinhua Pharmaceutical 719 0 41%

Source: HKEX, Bloomberg.

Table 31: Southbound OW/UW sectors

Southbound position Neutral market cap Diff

Banks 34% 20% 14%IT 7% 3% 3%Health Care 7% 4% 2%Cons. Disc. 9% 8% 2%Materials 3% 2% 1%Div. Fin. 4% 4% 0%Energy 2% 3% 0%Cons. Stpl. 3% 3% 0%Industrials 5% 6% -1%Real Estate 8% 10% -2%Utilities 2% 5% -3%Insurance 5% 11% -6%Comm. Serv. 10% 20% -10%

Source: HKEX, Bloomberg. Neutral market cap is free float adjusted market cap for connect universe with southbound position.

Figure 43: Southbound position and investable universe

Source: HKEX, Bloomberg. Neutral market cap is free float adjusted market cap for connect

universe with southbound position. Data rank by Southbound investors’ position.

0

200

400

600

800

1,000

1,200

1,400

Nov 14 Nov 15 Nov 16 Nov 17 Nov 18 Nov 19

Southbound NorthboundCNY BN

0% 5% 10% 15% 20% 25% 30% 35%

UtilitiesEnergy

MaterialsCons. Stpl.

Div. Fin.InsuranceIndustrials

Health CareIT

Real EstateCons. Disc.

Comm. Serv.Banks

Southbound investors' position

Connect neutral market cap

36



Shanghai/Shenzhen-HK Northbound Connect had net inflow of CNY44bn in April, after an outflow of CNY68bn in the previous month. Overall, net inflow is CNY26bn ytd and CNY1020bn since the Connect debuted in November 2014. Northbound trading volume (1mma) currently accounts for 5.2% of A-share total turnover.

Shanghai Northbound position (in value terms) increased the most in consumer staples, healthcare, industrials and IT. Position decreased in consumer discretionary and utilities.

Shenzhen Northbound position (in value terms) increased the most in healthcare, consumer staples and IT. Position decreased in energy.

Figure 44: Shanghai/Shenzhen-HK Connect monthly net flow

Source: Wind. 22 April 2020.

Table 32: Shanghai Northbound OW/UW sectors

Southbound position Neutral market cap DiffCons. Stpl. 25% 10% 15%Health Care 11% 7% 4%Cons. Disc. 7% 5% 2%Utilities 4% 3% 1%Insurance 7% 7% 0%Comm. Serv. 1% 2% -1%Energy 1% 2% -1%Real Estate 2% 4% -2%Materials 7% 9% -2%Industrials 13% 15% -2%Div. Fin. 4% 8% -3%IT 5% 9% -4%Banks 11% 17% -7%

Source: HKEX, Bloomberg. Neutral market cap is free float adjusted market cap for connect universe with northbound position.

Figure 45: Shanghai Northbound position and investable universe


universe with northbound position. Data rank by northbound investors’ position.

Table 33: Shenzhen Northbound OW/UW sectors

Southbound position Neutral market cap Diff

Cons. Disc. 22% 11% 11%Cons. Stpl. 16% 8% 8%Health Care 16% 13% 3%Banks 4% 2% 2%Insurance 0% 0% 0%Energy 0% 1% 0%Utilities 0% 1% -1%Real Estate 3% 4% -1%Comm. Serv. 3% 4% -2%Div. Fin. 2% 3% -2%Industrials 11% 14% -4%Materials 5% 11% -6%IT 18% 26% -8%

Source: HKEX, Bloomberg. Neutral market cap is free float adjusted market cap for connect universe with northbound position.

Figure 46: Shenzhen Northbound position and investable universe


universe with northbound position. Data rank by northbound investors’ position.

-80

-30

20

70

120

170

Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20

Southbound (net) Northbound (net)CNY bn

0% 5% 10% 15% 20% 25%

Comm. Serv.Energy

Real EstateUtilities

Div. Fin.IT

InsuranceMaterials

Cons. Disc.Banks

Health CareIndustrials

Cons. Stpl.

SH Northbound investors' position


0% 5% 10% 15% 20% 25% 30% 35%

InsuranceUtilitiesEnergy

Div. Fin.Comm. Serv.

Real EstateBanks

MaterialsIndustrials

Health CareCons. Stpl.

ITCons. Disc.

SZ Northbound investors' position


37



Q-score strategy

Robert Smith, PhDAC

Global Quantitative StrategyJ.P. Morgan Securities (Asia Pacific) [email protected](852) 2800 8569

In this section, we use the quantitative screening tool to guide stock selection in China. We present two screens:(1) stocks with highest Q-scores, (2) stocks with highest earnings score.

Table 34: Stocks with highest Q-scores

Ticker Rec Price Mkt cap Value Momentum Qlty Earn. Overall(USD mn) Score Score Score Score Q-score

China Aoyuan 3883 HK OW 8.8 3069 99.3% 76.2% 97.4% 75.3% 99.4%Ever Sunshine Lifestyle Services 1995 HK NC 10.0 1986 60.6% 96.9% 94.2% 98.7% 99.4%Country Garden Services Holdings 6098 HK OW 33.7 11822 37.4% 98.8% 98.3% 98.0% 99.4%KWG Group 1813 HK OW 11.0 4525 89.0% 91.6% 91.5% 95.7% 99.2%China MeiDong Auto 1268 HK NC 12.3 1838 42.8% 98.0% 98.1% 91.6% 98.7%AK Medical 1789 HK NC 22.3 3176 29.9% 97.6% 93.0% 98.1% 98.6%China Overseas Property 2669 HK N 8.5 3613 29.0% 96.9% 98.0% 96.3% 98.5%Chaowei Power 951 HK NC 2.4 335 98.5% 28.9% 74.7% 94.0% 98.4%Genertec Universal Medical Group 2666 HK NC 4.6 1019 96.0% 51.5% 73.2% 95.4% 98.3%Tianneng Power International 819 HK NC 7.8 1127 89.5% 35.4% 93.3% 97.9% 98.2%YiChang HEC ChangJiang 1558 HK NC 34.6 974 79.7% 79.3% 97.5% 92.7% 98.0%Central China Real Estate 832 HK NC 4.0 1405 98.0% 87.3% 76.1% 67.7% 97.8%China Overseas Grand Oceans 81 HK NC 4.6 2023 94.2% 79.9% 85.4% 84.6% 97.6%Kaisa Group 1638 HK NC 2.9 2314 97.6% 54.7% 71.1% 86.2% 97.3%A-Living Services Co. Ltd. Class H 3319 HK OW 38.0 2125 44.2% 97.3% 92.6% 92.2% 97.2%Logan Property Holdings 3380 HK N 12.1 8590 90.7% 71.5% 96.9% 78.5% 97.0%BOC Aviation 2588 HK NC 51.3 4589 86.3% 31.6% 76.5% 98.3% 96.7%Tiangong International 826 HK NC 2.6 862 66.3% 96.5% 61.6% 91.6% 96.6%Q Technology (Group) 1478 HK NC 8.8 1329 54.1% 85.8% 87.9% 97.6% 96.3%Concord New Energy 182 HK NC 0.3 332 98.5% 56.2% 68.2% 71.3% 96.0%

Source: J.P. Morgan, Factset. 22 April 2020. NC=not covered.

Table 35: Stocks with highest earnings Q-scores

Ticker Rec Price Mkt cap Value Momentum Qlty Earn. Overall(USD mn) Score Score Score Score Q-score

Ever Sunshine Lifestyle Services 1995 HK NC 10.0 1986 60.6% 96.9% 94.2% 98.7% 99.4%China Literature 772 HK UW 29.9 3912 16.4% 47.2% 33.2% 98.7% 77.8%Vinda International 3331 HK NC 22.7 3507 25.7% 93.0% 67.4% 98.6% 95.4%BOC Aviation 2588 HK NC 51.3 4589 86.3% 31.6% 76.5% 98.3% 96.7%AK Medical 1789 HK NC 22.3 3176 29.9% 97.6% 93.0% 98.1% 98.6%Country Garden Services Holdings 6098 HK OW 33.7 11822 37.4% 98.8% 98.3% 98.0% 99.4%Tianneng Power International 819 HK NC 7.8 1127 89.5% 35.4% 93.3% 97.9% 98.2%Q Technology (Group) 1478 HK NC 8.8 1329 54.1% 85.8% 87.9% 97.6% 96.3%Hengan International Group 1044 HK N 65.3 10016 17.1% 69.0% 91.3% 97.3% 87.6%BYD Company Limited Class H 1211 HK UW 41.8 4929 43.0% 29.4% 14.9% 97.2% 68.2%China Railway Group Limited 390 HK OW 4.5 2432 90.3% 25.7% 58.8% 96.6% 95.1%China Overseas Property 2669 HK N 8.5 3613 29.0% 96.9% 98.0% 96.3% 98.5%COFCO Meat 1610 HK NC 2.4 1228 75.5% 8.1% 88.6% 96.2% 89.1%Shougang Fushan Resources 639 HK NC 1.5 1033 47.3% 48.2% 49.5% 96.0% 81.8%KWG Group 1813 HK OW 11.0 4525 89.0% 91.6% 91.5% 95.7% 99.2%Genertec Universal Medical Group 2666 HK NC 4.6 1019 96.0% 51.5% 73.2% 95.4% 98.3%Tingyi (Cayman Islands) Holding 322 HK OW 12.9 9390 15.5% 86.8% 78.0% 95.4% 85.5%NetDragon Websoft 777 HK NC 20.1 1458 67.7% 42.3% 65.1% 95.2% 87.5%China Resources Cement 1313 HK OW 9.9 8875 36.5% 88.9% 84.9% 94.5% 92.2%Chaowei Power 951 HK NC 2.4 335 98.5% 28.9% 74.7% 94.0% 98.4%

Source: J.P. Morgan, Factset. 22 April 2020. NC=not covered.

38



Combining J.P. Morgan Q-scores and Thematic top-down strategy

With the help of J.P. Morgan’s quant team, the strategy team has developed a screening tool to monitor current trades and identify new ideas.

The output of the screen is a list of liquid and investible stocks in MSCI China and filtered using the J.P. Morgan Q-scores developed by the Quant team.

The J.P. Morgan Q-score

The J.P. Morgan Q-Score provides an indication of a company’s expected return versus both its country peers and its regional industry peers using a balanced multi-factor quantitative approach. The goal is a simple one. To bias stock selection towards cheap, successful, quality companies with solid earnings and away from expensive, poor quality, unsuccessful companies with poor earnings.

The higher the company scores, the higher-the-expected return (or Alpha) relative to the considered universe. A score of 50% indicates that this company is expected to perform in line with the benchmark universe. A score greater than 50% indicates an expected outperformer, and a score less than 50% indicates an expected under-performer. All scores are expressed as a percentile rank from 0% to 100%.

How is the Q-Score calculated?

Share prices are affected by many different factors. Quant practitioners attempt to isolate factors that can be shown to constantly explain some of this return. The aim is to outperform the benchmark by targeting our portfolios toward those stocks with positive factor exposures and away from those with negative factor exposures.

The Q-Score is generated by evaluating the companies’ prospects based on combining 10 such factors categorized into four factor families. These families are current valuation, recent success or momentum, qualityattributes and a consideration of recent changes in earnings and sentiment. The detail for each factor family is shown in the table below.

Liquidity / investibility criteria

Market cap greater than US$2billion;

Daily turnover greater than US$5 million

Exception: Minimum of 5 stocks per market

Value Q-score Earnings Q-score

Many quant researchers have explored the ‘Value Anomaly’ and it is widely recognized that low P/E stocks outperform high P/E stocks over

the long term. Similar analysis has shown consistent results using P/Sales, P/Dividend and P/Book ratios. Our studies have also shown that Earnings Growth can complement straight Value factors in many

markets.

The market is not efficient at incorporating new information and a window of opportunity exists to exploit recent analyst revisions in earnings and

recommendations. Similarly analyst behavioral biases lead to subsequent changes suggesting an exploitable serial correlation in earnings

upgrades/downgrades.

Component Factors Component Factors

12M Forward P/E vs Market (34%) Earnings Momentum 3M avg FY1&FY2, Risk Adjusted (34%)

12M Forward P/E vs Country Sector (33%) 1M change in consensus recommendations (33%)

EPS Growth; forecast FY1 mean to FY2 mean (33%) Net Revisions (upgrades-downgrades) to mean FY2 EPS (33%)

Momentum Q-score Quality Q-score

Momentum theory for stock prices suggests that companies that do well in one (long term) investment period will continue to do well in the subsequent investment horizon. Over short time frames (<1month) studies have also highlighted the tendency of stocks to overreact leading to short term reversion. We have widely observed these

phenomenon in our own testing

Whilst arguably less readily observable than some other factors, it is generally accepted that it is desirable to tilt portfolios towards highly profitable and good

quality businesses. Similarly over the long term the market also appears to reward 'earnings certainty' and penalize those stocks that carry a large degree

of earnings risk.

Component Factors Component Factors

12M Price Momentum (75%) ROE: average of FY1 and FY2 mean forecast (50%)

1fM Price Reversion (25%) Earnings Risk: Variation in FY1 and FY2 forecast EPS (50%)

39



Sector views

Autos (Rebecca WenAC)

(852) 2800 [email protected]. Morgan Securities (Asia Pacific) Limited

Key message: We believe July or 3Q20 will see annual growth return to positive territory. On a quarterly basis, after the 42% yoy slippage in 1Q (wholesales), we expect 2Q to narrow to -15% to -20%, followed by ~3-5% in 3Q and 4Q, bringing the full year to -12%. In other words, the magnitude of recovery in both production and demand should be mild. While consensus estimates imply a rosier outlook in 2H, we think this might not materialize. Our 2H20-2021 forecasts for our entire auto coverage across OEMs, parts, dealers and battery supply chain are nearly 20% below the Street. Following the recent 15% rebound, a pullback is likely post 1Q results in late April as the Street marks down forecasts. Our 2020 view remains for the sector to end flat to down by year-end while exhibiting a repeated W-shaped performance during the year. Our investment strategies focus on: 1) dealers who derive two-thirds of earnings from a resilient aftermarket business vs. the new car sales market with high cyclical uncertainty; 2) components who can deliver content growth through electrification or autonomous solution, and 3) OEMs with a company-specific story.

Drivers/catalysts/events: China’s State Council announced 20 proposals and measures aiming to boost the domestic economy and consumption including gradual removal or cancellation of car purchase restriction. Among all, relevant to the auto space, directly and indirectly, include: Gradual removal or complete cancelation of car purchase ban in cities (at discretion of local govt) currently with such restrictions; support purchase of new energy vehicle in cities or provinces with sufficient fiscal /financial flexibility; encourage transaction of second hand car and title registration across the nation; enhanced support of consumer finance including auto loan.

Key issues/risks: China’s NDRC announced a specific timeline on the removal of the 50-50% JV requirement in the automotive industry. Briefly, the relaxation or removal is scheduled to come in three stages over the next five years. For passenger OEMs in which most investors are interested the timeline is set for 2022 and from then the 50-50% JV restriction will be removed. Contrary to the negative knee-jerk reactions and sentiment, we argue and believe that current JV setups for most OEMs will keep the status quo for the foreseeable future. We believe the market has priced in

an unlikely worst-case scenario and see this is an opportunity to buy rather than trim.

Key OW stocks: Brilliance, Geely, Guangzhou Auto-H & Zhongsheng. Key stocks to avoid: BYD, NIO.

Banks (Katherine LeiAC)

(852) [email protected]. Morgan Securities (Asia Pacific) Limited

Key message: We are turning positive on China banks, as high frequency data supports a V-shaped recovery and easing concern on corporate loan book. Although Loan Prime Rate (LPR) reform could compress NIM, in exchange of supports to real economy and macro recovery, declining market rates could aid banks’ NIM. With subsiding inflation risk, there could be potential deposit rate cut, which is not in our base case.

Drivers/catalysts/events: 1) High frequency data support a V-shaped recovery, easing corporate asset quality concerns near/medium term; (2) asset quality outlook in the long run is uncertain, as JPM expects TSF/GDP to rise by 16ppt y/y to 269% by 2020, while major concern in the near term is on consumer loans, due to rise in unemployment rate; (3) LPR reform leads to compression on NIM, jeopardizing profitability, which could be partly offset by declining interbank rates; 4) Due to epidemic outbreak, concerns on national services weighs on the share price, i.e. low lending rates of inclusive finance, fee reduction, and involvement in bad debt resolution of failed small banks.

Key issues/risks: Upside: a) stronger-than-expected macro growth led by demand recovery and government policies (e.g. tax cuts); b) faster and smoother-than-expected shadow banking contraction. Downside: a) lackluster macro growth due to weaker-than-expected demand recovery and potential re-escalation of US-China trade tensions; b) liquidity squeeze due to uncoordinated de-leveraging.; c) worse epidemic impacts than expected, work resumption below expectation.

Key OW stocks: a) CMB: best-in-class profitability, leading retail franchise & private banking, prudent risk mgmt. practice and high provision level, and strong capital positions; b) BoCom: beneficiary of declining interbank rates, low credit risks due to moderate unsecured credit growth, attractive valuation and yield.

Key stocks to avoid: a) MSB: pressures on capital raising, deterioration in asset quality, and weak business fundamentals; b) HXB: concerns on asset quality and capital strength, NIM contraction and lackluster profit growth.

40



Consumer (Kevin YinAC)


Our sector ranking by COVID-19 impact: travel(CNY travel traffic down 50% yoy; flight prices 50-70% off) > catering (most restaurants closed in Feb) > beer(nearly zero wholesale sales; significant decline in retail sales) > holiday gift packs (CNY usually contributes c30% of full-year sales; less than 50% of sales target achieved in 2020 CNY) > mass-market liquor (more associated with dining out) > soft drinks > luxury liquor(collection value) > milk > meat > tissues > infant formula > condiment > instant noodles.

Recovery started in March: Most of our companies have seen recovery signals and expect full recovery in 2H20. For example, (1) CRB anticipates off-trade channels (supermarket and street stores) to fully recover by end-April, on-trade channels (restaurants and night clubs) to fully recover by end-May, and complete recovery in Jun before peak season starts in Jul; (2) After a >30~40% sales disruption in Feb/Mar, Mengniuexpects a 70% recovery in Mar, 90% recovery in 2Q20 and 100% in Jun; and (3) Li Ning’s offline retail sell-through declines narrowed from c40% in first two weeksof March, to c20% in the rest of March. It expects demand to recover to normal level in Jun/Jul.

Inventory destocking a massive pain: We estimate the destocking of channel inventory (produced in Nov-Jan) would lead to 25~50% decline in 1H20 earnings for most companies. Mengniu and peers are offering buy-1-get-1-free, targeting to clear up all excess inventory by end-April. Bud APAC has no price cut plan for its premium beers, but will consider offering product take back/swap when expiry dates are approaching. Li Ning/Anta/Xtepare taking back inventory, cutting orders and giving additional rebates to distributors. On the flip side, most companies budget lower marketing expense for 2020.

2020 outlook and valuation: Consensus is looking for 10.4%/7.5% yoy growth in 2020 sales/earnings for the 41 companies on market cap weighted average basis (3.7%/0.1% on simple average basis). China consumer staples are currently trading at 26.2x 12-month forward P/E (around 1x standard deviation above 5-year average); and discretionary at 14.0x 12-month forward P/E (around 1x standard deviation below 5-year average.

Our concerns and stock picks: From a short-term perspective, the names on our defensive list include Sun Art, Yonghui, Haitian, Angel. Assuming the COVID-19 outbreak is under control with no material economic slowdown in 2H20 in China, from a long-term perspective, we would suggest adding positions in those high-quality discretionary names. They are Li Ning, Moutai, CRB, Mengniu.

Healthcare (Ling WangAC)

(852) 2800-8599ling.wang @jpmorgan.comJ.P. Morgan Securities (Asia Pacific) Limited

Key message: We believe the COVID-19 outbreak situation is improving in China with most cities resumingwork in early March. After checking with leading pharma and biotech companies, in general companies may expect roughly 2-3 months’ delay in patient enrollment in certain clinical trials and they are working diligently to mitigate disruptions in compliance of trial protocols (as patients were facing difficulties in getting medication in hospitals and doctors may not be able to handle any adverse events in time during the outbreak). Regulatory process for certain NDAs is likely to see 2-3 months’ delay associated with inspection of clinicalcenters depending on the stages of the NDA process.

We continue to be optimistic about China’s R&D sourcing market. Our bull thesis for the long-term outsourcing market outlook in China is supported by 1) increasing global R&D outsourcing trend; 2) China market becoming increasingly important growth driver for multinational companies (MNCs); 3) ongoing centralized medical reforms in China should accelerate the transformation of the domestic pharma industry from predominantly generics to innovation driven. As a result, we are optimistic that the increasing levels of R&D spending will create a favorable environment for the CRO/CDMO industry in China.

Increasing globalization for drug manufacturers. With the China market becoming an increasingly important growth driver for multinational corporations (MNCs), we expect to see more cross-border collaborations and expect domestic players with strong clinical and commercial capabilities to increasingly bridge the gap between China and the western countries. There is also a trend for domestic pharma/biotech companies to in-license novel drug candidates and conduct global trials to drive future growth from overseasmarket.

Drivers/catalysts/events: China has a large affluent population, ample scientific labor pool and a strong centralized regulatory authority that provides a supportive environment to develop a strong domestic industry. Key issues/risks: 1) development failures of innovative new drugs; 2) medical cost control that may lead to further price cuts; 3) tougher regulatory requirements that may lead to higher development costs; 4) highly regulated industry.

Key OW stocks: Wuxi Biologics (2269 HK), Sino Biopharma (1177 HK), Alihealth (241 HK), and Mindray (300760 CH).

41



Infra E&C and Machinery (Karen LiAC)


Key message: We are positive on all the sub-sectors exposed to China infra capex. In the E&C space, we maintain our positive view on China’s infra E&C, given: (1) Major Chinese infra E&C contractors are speeding up efforts to deleverage and shrink their balance sheets through various asset monetization initiatives; (2) From a top-down basis, we expect China’s slowing macros to provide impetus for a pick-up in infra investment in 2020; (3) We expect China infra activity to further improve on stimulating fiscal/monetary policy and higher infra spending post COVID-19 outbreak. In Railway equipment space, we highlight the following key drivers: (1) Aftersales business to remain as a growth driver for CRRC; (2) We see drivers for rebound in demand for new-build MUs from FY20E; (3) Both CRRC and ZZCRRC have been striving to reduce reliance on CRC’s rail budget, helped by expanding sales of RTV/intercity trains as China accelerates the build-out of intercity connections and subway networks. (4) New-build locomotive demand is well supported by China’s Highway-to-Railway shift which remains intact despite slower-than expected progress made during 2019. Our view on overall construction equipment demand remains positive with key demand drivers including rising demand in light of pick-up of infra activities post COVID-19 situation as well as pre-buying activity ahead of the upcoming emission standard upgrade and further pick-up in infra activity.

Drivers/catalysts/events: (1) Industry sales growth for C/E supported by rising PPP contribution, pickup in infra activity and emission standard upgrades; (3) COVID-19 outbreak’s impact on E&C space is limited and temporary. We expect increasing infra spending in FY20post COVID-19 situation. (3) Release of pent-up railway equipment demand; (4) For infra contractors, revenue increased driven by positive growth of domestic orders.

Key issues/risks: (1) Delays in railway equipment procurement/delivery; (2) unexpected slowdown in government investment; (3) margin pressure for E&C contractors and machinery players if raw material prices start to rise again; (4) potential capacity constraints for E&C companies to fulfill the orders.

Key OW stocks: CRG – CRG’s 1Q20 orders came in stronger-than-expected (+8% Y/Y), driven by overseas contracts (+163% Y/Y) while its domestic orders momentum (+4% Y/Y) stayed strong and its highway

segment saw high growth (+75% Y/Y). CRG’s trend mirrors that reported by CRCC. CRCC - CRCC’s 1Q20 new orders (Rmb3.5B, +14% Y/Y) came in stronger than expected and are tracking well to achieve the 2020 target. Specifically, construction orders were the driver (Rmb307B, 22% Y/Y), propelled by the railway sub-segment (+53% Y/Y. Zoomlion - We stay positive on Zoomlion, driven by 1) its favorable product portfolio skewed towards later-cycle machinery, in particular tower cranes which continue to see supply shortages; 2) notable market-share gains for concrete machinery and construction cranes, which mgmt expects to continue to see robust demand outlook for the coming two to three years; and 3) Zoomlion retained FY20 guidance despite COVID-19 impact; 4) 1Q20 results likely to hold up better than peers.

Infrastructure operators

Key message: Near term share price of infra operators has been suppressed due to concerns over impact from COVID-19. For airports, traffic disruption and tariff adjustment impacted near term sentiment, we however remain confident on Chinese airports’ fundamentalsbeyond near-term disruption for (1) Growth runway for DFS supported by consumers purchase power and better product offerings; (2) continuing adding to Int’l flight network, and (3) milder-than-expected diversion impact from Beijing Daxing airport to BCIA . We upgrade SHIA to OW given its better position after traffic recovery with additional landing quota, good asset quality as well as stringent cost and budget control. For toll roads, despite the near-term suspension of national toll fees, we have positive outlook for JSE on mid-to-long term due to impressive margin expansion and excellent capital mgmt. while stay neutral on ZJE for the lack of focus and negative operational trend.

Drivers/catalysts/events: (1) milder-than-expected impact from COVID-19 (2) steady volume/throughput/traffic growth especially for higher-yielding segments (int’l PAX for airports and CVs for toll roads); (3) rerating potential on the back of upside to tariffs, in our view, for railways/airports/toll roads; (4) for airports, growth of non-aero, especially DFS business to continue driving margin expansion; (5) for railway operators, potential passage of new railway land monetization guidelines which could allow operators to unlock the value of their land assets.

Key issues/risks: (1) larger-than-expected impact from COVID-19 (2) larger-than-expected deceleration in volume growth on the back of macro slowdown or disruptive global events impacting trade and travel; (2)

42



continuing deterioration of operation data (AM and PAX for airports and CVs for toll roads); (3) potential risk of additional government intervention as part of its plans to reduce total social logistics costs.

Key OW stocks: Shenzhen Airport Co Ltd - A (SZA)– beyond near term pressure, SZA sees strong growth prospects on back of its consistent expansion of int’l flight network in addition to enhancing policy support from the central government (in contrast to prior perceptions that the support was only from the Shenzhen government). We see upside to SZA’s DFS business, given the upcoming renewal of the DFS mgmt. contract (negotiations are underway likely to be finalized by early 2020 and favor SZA through better revenue-sharing ratio). We stay positive on SZA’s growth outlook as we continue to see upside potential from the DFS business for the top line.

Defense (Patrick XuAC)


Key message: The Chinese Ministry of Defense announced that the defense budget would grow 7.5% in 2019 in Rmb terms, which would make it 1.8% of GDP, based on J.P. Morgan's forecast of China's GDP. We expect China’s military expenditure to grow 7.5-8.5% in 2019-21 with increasing focus on the air force and the navy, assuming it to remain 1.8% of the GDP. The key contributors for the rising defense expense are army mechanization, navy expansion and the deployment of more advanced weapons systems.

Drivers/catalysts/events: (1) Rising geopolitical tensions. (2) acceleration of weapon upgrades, such as tanks, transport aircrafts and aircraft carriers. (3) CSSC Group merges with CSIC Group.

Key issues/risks: (1) Diplomatic conciliation between US and China; (2) extension of the current reform climate as China restructured military command chains; (3) the government is considering revoking the VAT-free status of some defense contractors.

Key OW stocks: Our top pick is Jonhon Optronic (002179 CH), which has the highest ROE with the highest profitability and above-average asset turnover.

Key stocks to avoid: We are cautious on CSSC Offshore and Marine Engineering Group - A (600685 CH, UW), as the company has been struggling with low operating margins and we expect recurring ROE to improve in FY20-22, driven by increased defense orders, but still be below breakeven.

43



Insurance (MW KimAC)


Key message: Increased macro risk and business slowdown; tactical upgrade of CPIC-H/A. We cut PT by -27% and FY20/21 EPS by -14%/-25% and downgraded China Life-A to N, upgraded CPIC-H/A to OW/N from N/UW on inexpensive valuations. First, we expect volume slowdown, and forecast -32% to -8% oya FY20E NBV growth. Second, falling bond yield could lead to potential reserve provisioning and dent the earnings. Third, we re-introduce non-standard asset (credit risk) and equity (market risk) into our valuation framework. Near term, we forecast China insurers’ 1Q20 net profit to decline 8% to 56% oya. Ping An Group-H, PICC P&C-H, and China Life-H are our top OWs due to strong risk management, adequate capital position, and strong retail franchise.

Drivers/catalysts/events: (1) recovery in life insurers’ new business sales volume; and (2) improvement in agency channel productivity/ headcount.

Key issues/risks: (1) declining bond yield and (2) deteriorating macro environment.

Key OW stocks: Ping An Group-H: The company is relatively more defensive during macro downturn due to core earnings more sourced from morbidity/ mortality margins. PICC P&C: Potential improvement in 1Q20 underwriting profit due to lower car accident rate as traffic was reduced from city lockdowns during COVID-19 period. China Life-H: Strong fundamental turnaround in product mix and conservative B/S. Reforms under new management prioritizing value creation with a clear strategy of improving sales agents should drive strong NBV growth.

Key stocks to avoid: New China Life - A: We are concerned about the company’s front-book growth outlook as the company sold more short-term product with less margin. We are also cautious about the company’s larger exposure to non-standard asset.

Internet (Alex YaoAC)


Key message: We expect China’s consumer Internet operators (i.e. Alibaba, JD, Vipshop, PDD, Meituan, Ctrip and Tongcheng eLong) to be significantly affected by the coronavirus breakout in 1Q20 with most of the names posting significant revenue declines on a YoY basis. While the current operating environment caps the near-term share price upside, we expect reasonably limited downside from the current share prices for most of these names. We expect the order of the impact from the least affected to the most affected is: Alibaba, JD, Vipshop, PDD, Meituan, Trip.com and Tongcheng-eLong. Vipshop and PDD might see the most negative share price reaction into the print due largely to relatively lower visibility of their 2021 financial outlook.

Drivers/catalysts/events: (1) Progress in penetrating traditional industries such as financial services, cloud and offline retail. (2) Expanded addressable market through penetration into lower-tier cities and overseas market. (3) Increasing cost control efforts may bring margin upside.

Key issues/risks: (1) Competition on multiple fronts, e.g. on subsidies, price cut, new opportunities etc. (2) Potentially intensified geo-political tension may bring both operational and regulatory risks. (3) Slowdown inmacro economy.

Key OW stocks: We suggest investors accumulate Vipshop and JD on weakness for faster-than-average recovery in 2H20.

Key UW stocks: Sogou and Focus Media on weak ad demand.

44



Materials (Po WeiAC)


Key message: Cement: We believe cement will benefit most directly from the Chinese government’s stimulus measures post the COVID-19 outbreak and industry profitability will remain at close to historical highs. Packaging paper: We believe the rebound/stabilization in domestic wastepaper prices will lead to packaging paper price hikes. Steel/glass/aluminum: High inventories (currently sitting at historically high levels) will in general be an overhang for steel/glass/aluminum margins. Coal: We expect coal price will remain weak till summer 2020. EV materials: Cobalt: Expect 2020E supply to remain tight, and epidemic containment in Africa to bring price rebound by 3Q. Lithium: Given the high dependence on overseas demand in the lithium hydroxide market, we expect lithium hydroxide prices will remain weak in the near term. Precursor/cathode: 1Q20 EV cathode demand slumped 50% YoY. In 2Q, domestic clients restarted but end EV sales have not picked up yet; overseas demand also faces uncertainty amid the pandemic outbreak. With expectations for continued policy support, we remain hopeful to see a demand rebound in 2H.

Drivers/catalysts/events: (1) Policy support to counter economic challenges due to the COVID-19 outbreak; (2) Resumption of downstream demand; (3) Inventory destocking trajectory; (4) EV sales data and policy stimulus.

Key issues/risks: (1) Inventory overhang; (2) Export demand impacted by global spread of COVID-19.

Key OW stocks: CR Cement, Guangdong Tapai Cement, Conch, China Jushi, and Nine Dragons Paper.

Key stocks to avoid: Ganfeng Lithium-A, Tianqi Lithium-A and Xinyi Glass

.

Oil & Gas (Scott DarlingAC)


Key message: 1) Good workload for oil services, 2) worsening refining oversupply, 3) mixed views on chemicals, 4) risk of limited progress on NPC, and 5) gas demand growth moderation.

Drivers/catalysts/events: (1) China oils capex, economic growth, oil prices, refined product demand and petrochemical spreads, and (2) natural gas demand growth.

Key issues/risks: (1) Downside risks of longer-than-expected COVID-19 impacts, (2) economic growth moderation, weak oil price trend, (3) higher domestic gas production, lower LNG import; and (4) delays to reform measures.

Key OW stocks: (1) SPC – Middle East Arab heavy crude to Asia OSP discounted to US$-7.4/bl after May. This is nearly the biggest OSP discount in history (US$-7.45/bl in July 2008). The market share fight of crude oil between Saudi and Russia may continue for a large part of FY20. We expect the OSP big discounts in 2Q20 would significantly benefit the China refineries which have high feedstock exposure to Middle East crude oil, namely SPC (+83%) and Sinopec (c60%) refining business. (2) COSL, Jereh – good workload driven by China oils upstream capex double-digit growth; profitability may continue to improve driven by better operating leverage and higher utilization rates.

45



Property (Ryan LiAC)


Key message: Contracted sales have started to normalize in the second half of March, and this trend has extended into April. We therefore expect April sales to be broadly flat Y/Y. While we think 2Q20 residential sales data will remain strong, we think the whole sector is unlikely to breach the peak it achieved in January as no matter how strong the data, expectations in 2020 are unlikely to beat those back in January. Also, as LPR and RRR cuts are within expectations, and with a seemingly quicker resolution of COVID-19 situation, the need to stimulate the property market via policy easing is not as strong. We suggest shifting to laggards. This is because we believe that if the well-being of the sector persists, investors will be willing to go down the value curve and buy cheaper names that have underperformed.

Drivers/catalysts/events: 1) better-than-expected contracted sales momentum; (2) deleveraging; (3) credit and policy easing.

Key issues/risks (1) worse-than-expected sales momentum; (2) consensus downgrades; (3) share placement.

Key OW stocks: Vanke-H (2202 HK), COLI (688 HK), CIFI (884 HK), Midea Real Estate (3990 HK), China SCE (1966 HK).

Key stocks to avoid: Evergrande (3333 HK).

Tech hardware (Gokul HariharanAC)


Key message: Our recent research suggests: 1) smartphone sell-through has been recovering moderately on a yoy basis, but Chinese OEMs remain cautious and see more downside risks in overseas markets; 2) a 10-15% cash discount is now available to boost inventory digestion, and we expect more affordable 5G models in 2H20, but likely at the cost of de-spec and price pressure on components; 3) key de-spec areas are display, fingerprint, memory, 3rd/4th cameras and casings; 4) the supply chain in China has been normalizing, but demand could be a bigger concern and we expect order revision in more components starting from 2Q20. Therefore, we stay cautious on the overall smartphone supply chain in China.

Drivers/catalysts/events: 5G smartphone unit shipment and semi/ component inventory level are the key trends to watch, especially the impact from COVID-19.

Key issues/risks: (1) Phase II U.S.-China trade discussion and supplier relocation, (2) Negative impact from COVID-19 on both demand and supply.

Key OW stocks: (1) Innolight – leading supplier of advanced 400Gbps optic module, with new business opportunities.

Key stocks to avoid: (1) SMIC – margins likely remain depressed for next two years due to heavy R&D/capex to support renewed push towards leading edge process, (2) Everwin – high exposure to OPPO/Vivo and potential earnings turnaround in 2019 already priced in.

46



Telecom (Michelle WeiAC)


China Tower’s 1Q20 results in line with our forecast:We think the market will likely consider the top-line as disappointing and EBITDA/earnings fine. 1Q20 top-line growth decelerated to 4% yoy, which we think is partly due to: 1) COVID-19 caused a delay of new revenue, and 2) Operators’ cost control efforts. The company will likely miss revenue target of its incentive scheme, which implies 8% yoy growth for 2020E and appears demanding given the weak revenue number in 1Q20 and operators’ determination to control tower usage costs. We note that the street has revised down 2020 earnings forecast by nearly 16% over the past year, but we still see some downside to the current estimate of Rmb7.3bn.

China Mobile - 1Q20 mobile business affected by COVID-19, stable earnings: Mobile revenue declined 5% yoy in 1Q20. We estimate mid-single digit impact to mobile service from COVID-19, partly due to fewer voice calls, termination of second SIMs, and reduced roaming revenue to a lesser extent. Fixed-line remained strong, up 37% yoy, as demand for broadband and cloud etc. should have been intact during the outbreak. Total service revenue increased by 2% yoy, vs 1% for 2019 and 6% for 4Q19. EBITDA decline accelerated to 6% yoy. We think the EBITDA drop is due to 1) COVID-19 revenue impact, and 2) rising cost lines such as network cost which more than offset S&M cost decrease. Earnings only edged down by 1% yoy, thanks to a depreciation decrease resulting from a change of depreciable life of certain 4G assets.

China Unicom - 1Q20 mobile business affected by COVID-19, fixed-line very strong, profitability under pressure: Company reported 2% yoy service revenue growth in 1Q20, which is not too bad given the negative impact from COVID-19 to mobile revenue. Mobile subscribers resumed growth in March, following a big loss in February. EBITDA and earnings dropped by 6% yoy and 14% yoy respectively, mainly due to more personnel and G&A expenses. We see the results as mixed and not indicative of future trends, given COVID-19’s impact on mobile revenue and S&M expenses, and the seemingly more aggressive G&A expense recognition.

Key stocks: We are OW on China Telecom, China Unicom and China Mobile, and Neutral on China Tower.

Utilities (Elaine WuAC)


Key message: China Utilities have underperformed HSCEI and Shanghai Composite by 1.2% and 3.8%, respectively, since the start of April. China gas utilities and solar names continued to be the worst-performing sub-sectors. For China solar, concern on potential module shipment delay due to COVID-19 is acting as a near-term overhang. Looking beyond, we like Xinyi Solar and Daqo. We recently turned positive on wind farm, on 1) relative defensiveness against COVID-19; 2) privatization potential and; 3) rising mix of project with no subsidy delay issue in 2021. Our preferred name is Longyuan. Pullback in the gas names was led by a 14% retreat in China Gas MTD, after the block sale of its shares by SK Group. We expect the pick-up in April andMay gas consumption numbers to be a positive catalyst in alleviating investor concerns on gas demand growth, and we continue to prefer CR Gas and ENN within the sector. We stay cautious on coal-fired IPPs in the medium term on tariff headwinds and market share loss to renewables. Yet, we see trading opportunities in 2Q on lower coal prices and rebound in power generation. Within China Environmental stocks, our top pick is Guangdong Investment on robust dividend growth and attractive valuation.

Drivers/catalysts/events: (1) More supportive government policies for clean energy use, (2) improving subsidy collection for renewable power operators, (3) recovery in solar equipment demand, (4) more clarity on the National Pipeline Company, and (5) liberalization ofcoal-fired benchmark tariff.

Key issues/risks: (1) RMB depreciation, (2) potential slowdown in industrial output/GDP growth, (3) decreasing power plants utilization hours, (4) gas volume growth slowdown, and (5) negative changes in government regulations.

Key OW stocks: (1) CR Gas, with its defensive profile and volume growth potential from M&A, (2) ENN, on robust growth outlook and improving margins, (3) Daqo, on improving polysilicon demand-supply dynamics, (4) Longyuan, on generation rebound in 4Q19 and solid balance sheet and free cash flow generation vs peers, (5) GDI, the best dividend play among China utilities.

47



China Model Portfolio Stocks – Investment Case

Consumer discretionary

Alibaba (BABA US) – Alex Yao

We forecast total revenue to grow 18% YoY this quarter to RMB 110b (2% higher than consensus), and the revenue mix should be more favorable than our earlier estimate in February. We now project its core-core CMR + commission revenue to decline 7% YoY, which we believe is more positive than the consensus expectation, as NBS released resilient 2M20 China online physical goods retail sales (+3% YoY) thanks to accelerated online penetration. We also expect its adjusted EBITDA/EPS to drop 12%/15% YoY, or 2%/7% above consensus, due to the more resilient than feared high-margin core-core revenue and the reduced need for sales and marketing expenses for the core commerce new initiatives amid the COVID-19 outbreak.

Cloud and new retail: near-term upside capped but long-term outlook turns more promising. Some sub-segments’ growth may be slower than our earlier expectation: we forecast non CMR + commission revenue for China retail segment will grow 79% YoY this quarter (vs. 100+% in the previous quarter), as the accelerated growth of grocery retail revenue will be offset by the decline of other offline retail (such as Intime Department Stores). We estimate cloud revenue to grow just over 60% YoY in March Q (in-line with previous quarters), as many projects are for hybrid cloud, which still requires physical on-premises installation and the pandemic has delayed the work. However, we believe the COVID-19 outbreak has accelerated the online penetration pace of both China new retail and public cloud market. We recently published in-depth reports on China new retail and China public cloud (“A sizable market in the making”, April 7, 2020) which suggest 25%/34% upside potential respectively to Alibaba’s current market cap on a three-year valuation framework.

Vipshop (VIPS US) – Andre Chang

We believe Vipshop’s 4Q19 result has demonstrated an optimized cost structure with 10%+ OPM versus the historical peak level of 6-7%. However, we expect the company to reinvest a meaningful portion of the extra margin into product merchandising, leading to a stronger revenue growth outlook. In addition, we believe management has found efficient ways to: 1) lower the free shipping threshold to RMB88 from RMB288 in order to attract new buyers

and encourage more transactions; and 2) subsidize suppliers with lower take rates to enhance merchandise offerings. We think both approaches offer real value to consumers and should improve user acquisition efficiency. We see upside to consensus forecasts of a 7% revenue CAGR in 2019-21E and 6.3% non-GAAP NPM by 2021 (vs. 5.4% in 2019). Our revised 2021E EPS is 26% above consensus.

TAL Education (TAL US) – DS Kim

We believe TAL offers the most definable long-term outlook, fueled by super-normal revenue growth in online, which we estimate to print ~80% CAGR and account for ~36% of revenue by FY22E.

We acknowledge that growing the online business will weigh on TAL’s profitability in the near term, and we model TAL to record an all-time-low OPM this/next year. However, our deep-dive on unit economics shows a clear path to profit, suggesting online can be as much (if not more) profitable as offline in a few years, with TAL just needing to toggle the ‘profitability switch’ by slowing customer acquisitions. This should drive a highly visible yet substantial profit upcycle for many years to come, in our view.

We thus see TAL as an attractive long-term investment, with its well thought-out strategy, best-in-class execution and (repeatedly) proven track record giving us comfort. Valuation isn’t cheap at 37x P/E on CY21E (or 52x on FY21E), but it doesn’t look prohibitive to us either given high visibility in its high growth. After all, time is on our side for the compounder like TAL, which can quickly shave off multiples year after year.

Midea (000333 CH) – George Hsu

Midea is one of the top-quality consumer companies that we would recommend investors hold for the long term. The company has historically been steady and has become even stronger after market downturns by consolidating market share from smaller or weaker competitors. We do not think the current crisis will be an exception. In our view, Midea will further increase its market share across most home appliance categories during the coming year.

48



We believe home appliance demand is just delayed due to disrupted logistics and will pick up in either 2H20 or 2021. Therefore, any sell-off in Midea on its likely subdued performance in 1H20 should give investors, particularly those with a long-term investment horizon, an opportunity to accumulate on dips, in our view. We are constructive on Midea’s capability to quickly respond to the changing consumer demand, strength in new product launches to support sustainable growth, and channel reform, which we believe will lead to efficiency improvement and margin expansion. We do not expect the near-term non-structural revenue decline to cast a shadow on Midea’s long-term structural growth trajectory.

Consumer staples

Kweichow Moutai (600519 CH) – Kevin Yin

Moutai's 2019 sales/earnings increased 16%/17% yoy, 1%/2% above its preliminary release on 2 Jan. Direct sales contribution increased from 5%/3%/7% in 1Q/2Q/3Q19 to 17% in 4Q19, an encouraging result from on-going internal anti-corruption campaign. Despite the COVID-19 impact, we revise up our 2020/21 EPS forecast by 1-3%, assuming 20%/25% direct sales volume in 2020/21. Benchmarking to 30x 2021E P/E, we derive our new Jun-21 PT of Rmb1,450 (from Rmb1,270). Moutai remains one of our China consumer top-picks. OW

We think the worst is likely behind us and expect the recovery to be driven by: (1) increasing traffic in catering channels (60-70% recovered, by our estimation); (2) pent-up consumption (after nearly 100 days of rigid traffic control); (3) accelerating FAI and more stimulus policy; and (4) private consumption. We maintain our 37k tons sales volume assumption for Feitian Moutai in 2020. Given the capacity constraint, we estimate flattish sales volume growth for its series liquor (lower grade than Feitian). Stronger demand might accelerate the rollout of mid-/high-end series liquor and drive a healthy product mix upgrade.

Sun Art (6808 HK) – George Hsu

We believe that Sun Art is one of the most defensive plays amid the COVID-19 outbreak, and such a market consensus should further drive up its share price in the near term, aided by hedge funds’ market-neutral strategy that must have some long positions. In the long run, we highlight three likely fundamental catalysts which we believe the market has not yet

fully priced in: i) more aggressive store additions potentially by the franchised model; ii) further improvement in online profitability driven by either scaling up or SG&A optimization (including delivery charge); and iii) expansion in B2B. It is possible that after COVID-19 the Chinese government will launch a policy to drive market consolidation among the leading modern grocery retailers.

Banks

CMB (3968 HK) – Katherine Lei

CMB has the best retail franchise in China in terms of providing high-quality services. Therefore, its retail deposits per branch were significantly higher than its peers’ average.

CMB has the lowest deposit costs among joint-stock banks and city commercial banks. This should be an advantage amid deposit-rate liberalization.

Rising profit contribution from retail business: Retail business contributed ~50% of PBT, the highest among our coverage banks.

High NPL provision and credit costs provide a buffer for future earnings. CMB’s NPL coverage ratio is relatively high among national banks. Its PPoP/average assets is the highest among peers. Also, its PPoP/average assets is the highest among peers, which should provide a buffer to earnings in coming earnings periods.

NIM contraction of 16bps q/q in 4Q19 was a key disappointment. This was mainly driven by material loan-deposit spread compression. The key upside surprise is on asset quality – gross NPL formation ratio declined (h/h) in 2H19, while provision level continued to rise. Improvement trend on asset quality is unlikely to sustain due to impact of COVID-19, but this demonstrates CMB’s strong risk management capacity.

BoComm (3328 HK) - Katherine Lei

Beneficiary of declining market rates: 3-M interbank rates have declined meaningfully YTD; among large banks, BoCom has the highest % of interbank funding in liabilities mix. The easing wholesale funding costs are positive to NIM outlook.

Relatively low exposure to unsecured consumption loans: Credit card loans accounted for high single digit % of BoCom's loan book, lower than the sector average. And 5-year CAGR of credit card loans was moderate. As we consider consumption loans more vulnerable in the current asset cycle, BoCom's NPL

49



formation rate is likely lower than that of peers in our view.

Insurance

Ping An Insurance Group (2318 HK) – MW Kim

Following a strong start to the high-marginprotection-type insurance market in China (mostly healthcare insurance), we think Ping An’s agency-based business model will drive a sector-leading fundamental re-rating of the stock. The company’s non-core/non-insurance business streamlining outlook, starting from its P2P lending platform (LUFAX) and Ping An Securities, suggests a favorable risk/reward outlook at current share price levels, in our view. We also expect the company to be the largest P&C insurer in Mainland China by 2020. For major share price drivers, we highlight: (1) non-insurance-related business streamlining potential, as the only G-SII in Asia; (2) a gradual decrease in group earnings contribution from the bank (i.e., <20%); and (3) a strong earnings re-rating from insurance operations from structural insurance market developments in China. Ping An Group’s strong agency force and strong balance sheet make it an outlier in China’s sales recovery period.

Brokers

CITIC Securities (6030 HK) – Jemmy S Huang

Leading position in underwriting to benefit from positive developments. Citic maintains its top-tierpositions in both equity and bond underwriting, where we expect positive momentum in the coming quarters driven by the launch of the STAR Market and declining funding costs.

Leading position in OTC derivatives products to enjoy rising demand from PE funds. Growing PE fund AUM will likely result in more demand for OTC products, such as return swaps and options, in which Citic has been one of the leading players.

Declining funding costs: Costs of newly issued short term financing vehicles have declined by 50-60bps at Citic in 1H19 vs. 2H18 due to declining funding costs and policy support on CP issuance, which would help to enhance profitability of investments and capital intermediary businesses.

Communication services

Tencent (700 HK) – Alex Yao

Non-GAAP EPS was RMB2.64 in 4Q19, 8%/4% below JPMe and Bloomberg consensus. The earnings

miss was primarily due to operating expenses and losses below the line.

We expect Tencent’s digital entertainment operations, particularly gaming, to be the short term catalyst in 1H20 (i.e. positive benefits from the COVID-19 breakout) and mobile gaming international expansion to further drive the sentiment and share price in 2H20.

Trading at 25x/20x 2020/2021 P/E based on our estimates against EPS growth acceleration (JPMe 20-21E EPS CAGR of 25%), Tencent is our favorite stock within our China Internet coverage universe. Own for multiple expansion.

China Mobile (941 HK) – Michelle Wei

China Mobile reported 2% yoy service revenue growth in 1Q20, which is not too bad given the negative impact from COVID-19 to mobile revenue. Mobile subscribers resumed growth in March, following a big loss in February. Earnings only edged down 1% yoy, as depreciation decrease resulting from depreciable life adjustment largely offset the 6% yoy EBITDA decline. CM management has made it clear that they aim at stable earnings and expect EBITDA to decline this year. We are increasingly confident that earnings and DPS will be at least stable, in light of the limited earnings decline during the COVID-19 hit 1Q20

Healthcare

CSPC (1093 HK) – Sherry Yin CSPC is a high-quality innovative pharma player in

China with a diversified product portfolio focusing on cardiovascular diseases and oncology. We believe its strong R&D pipeline is well positioned for sustained long-term growth and we expect a strong top/bottom line CAGR driven by new drug additions. CSPC won the CP for three drugs, albumin-bounded paclitaxel, azithromycin and amoxicillin.

Albumin-bounded paclitaxel won with the lowest price offering: CSPC bid at Rmb747/vial vs. Rmb780 by Hengrui, and Rmb1,150 by Celgene/Beigene) and should enjoy priority in provincial market selection (Hebei, Shanxi, Liaoning, Jilin, Jiangsu, Hunan, Guangdong, Guizhou, Shaanxi, Qinghai). The actual price cut of ~70% is in the middle range of previous market expectations (50-80%).

We expect a single digit CP impact on CSPC’s top line/bottom line, since the CP price cut also improved drug affordability significantly to support robust volume ramp-up.

50



CSPC reported FY2019 topline growth of 25% and bottom-line growth of 21% yesterday, both inline with JPM estimates. We expect the company to maintain ~20% revenue growth in FY20, but lower our profit growth estimate to 15%.

Wuxi Biologics (2269 HK) – David Li

An integrated end-to-end R&D service provider, Wuxi is a play on the increasing trend of R&D outsourcing in biologics drug development. The net profit attributable to shareholders increased more than 58% y/y for FY2019, which is fairly in-line with our forecast and slightly beat the consensus estimate based on Bloomberg.

Wuxi ranks in the top percentile for growth exposure. We forecast EPS growth sustaining at 42-47% p.a annually till FY22E. Our confidence on growth stems from 1) R&D outsourcing has become an increasingly popular option in biologics development; 2) Wuxi has built a good reputation in the industry through its advanced technology platforms and efficient services; and 3) strong growth in number of new projects and service backlogs.

Wuxi Biologics (Wuxi) sustained its strong growth in FY19 with top/bottom line growth of 57% y/y and 60% y/y, respectively. The results were fairly in-line with JPMe and slightly beat consensus. Total backlog also increased by 55.4% y/y from US5.1bn in Dec-19 to US$7.9bn in Mar-20. The strong growth was driven by a solid increase in the number of new projects in each development process and contributions from existing customers as they move from pre-clinical to the clinical stage. We believe Wuxi’s recent advancement in the vaccine business as well as upcoming potential catalysts related to its proprietary technology platforms will allow the company to continue to attract more projects to sustain its strong growth.

Technology

Luxshare (002475 CH) – Gokul Hariharan We believe Luxshare is a beneficiary of AirPods

Pro’s debut, as we estimate 60-70% of AirPods assembly goes to Luxshare. We saw orders related to AirPods Pro revised upward in 3Q19, while the higher ASP of AirPods Pro, coupled with favorable forex, could further propel sales growth for both companies. Meanwhile, GM for AirPods is likely not dilutive (if not accretive) to Luxshare blended GM.

Furthermore, the company guided for 45-55% yoy 2019 earnings growth, which is above our and market expectation. We attribute this stronger-than-expected

earnings to: (1) solid execution capability to improved efficiency; (2) gaining Apple share, coupled with robust AirPods shipment growth; (3) favorable forex. We believe the better-than-expected demand for iPhone 11 and stronger iPhone upcycle in 2020 could lead to further earnings upside. Remain OW.

Wuxi Lead (300450 CH) – Rebecca Wen

Company’s positive drivers include: (1) robust revenue growth (~30% CAGR toward 2021E) is expected, driven by industry capacity expansion and solid backlog orders; (2) order wins – we believe Wuxi Lead is well positioned to win orders from tier-1 Korean/Japanese battery makers as they expand capacity in China before the subsidy phases out in 2021; Wuxi Lead’s recent order wins with LG, Tesla and Northvolt prove its ability to capture overseas customers’ expansions.

Industrials

Zoomlion (1157 HK) – Karen Li

Zoomlion is now our top pick in the C/E space;raising estimates and PT; maintain OW on A and H: China’s crane sales growth moderated in June driven by high base, hence not a concern to us, while we see upside to our full-year sales growth of 65% Y/Y for Zoomlion. We raise EPS by 23%/40% for FY19/20E, which now stand at 12~22% ahead of consensus, while we expect upward revision momentum to continue.

CRCC (1186 HK) – Karen Li

The outlook for infra capex in China has improved,given the pro-growth policy and easing funding constraints as counter-cyclical measures in light of the COVID-19 impact. CRCC’s operational trends since mid-2019 have stood out as the best among all Chinese isnfra E&C contractors during the same reporting period.

SANY Heavy Industry (600031 CH) – Karen Li

Our positive view on SANY Heavy is based on the improving risk-reward, given the better-than-expected project restarts and work resumption in China post-COVID-19, driving better excavator sales in the peak season. SANY is a leading construction equipment producer in China and has been expanding its market share within China in different product categories. We expect domestic excavator demand to remain supported for the remainder of the year, given an improving infra spend outlook and solid replacement demand despite potential delays in emissions standard upgrades. Moreover, late-cycle

51



machines continue to see stronger demand growth. We also see scope for margin expansion, given potential price hikes and easing raw material cost pressure

SANY Heavy reported its FY19 results. The bottom-line coming in at Rmb11.2B (+83% Y/Y), in line with the mid-point of the pre-announced profit range, meeting JPMe (Rmb11.1B). We highlight a few key positives from the results: (1) Better-than-expected Op-CF; (2) Payout maintained at c30% in line with its existing policy, standing out as a positive given the payout cuts by peers; (3) Blended GPM also beat expectations. Note that a briefing call will be hosted post its 1Q20 results (scheduled on April 29th). Maintain OW on SANY, viewing current risk-reward as attractive, in light of the stronger-than-expected industry demand and SANY’s solid fundamentals.

Materials

Conch Cement (914 HK) – Po Wei

Conch Cement is the second-largest cement producer in China (after CNBM), with total cement capacity of 300Mt (vs CNBM: 407Mt). With nearly 80% of the company’s capacity located in the Eastern and Southern regions, we believe Conch is well-positioned to leverage tighter markets and higher utilization levels in the region. Looking ahead, policy measures to support urbanization and reduce capacity set the stage for improved utilization rates.

We think the cement demand is delayed, not diminished: while most local governments’ official day for work resumption is 10 February, construction workers may need to go through 14 days’ quarantine, so demand may only begin to pick up gradually at the end of Feb or early March, and normalize in mid-March, assuming the virus outbreak subsides. In this case, demand should pick up fairly strongly in mid-March across China. In a worst-case scenario in which the outbreak lasts until April/May, demand should pick-up strongly in 2H20, too. Overall, we believe 2020 demand should be little impacted with losses in 1Q being offset by a recovery in 2Q and onwards.

Overall, management remains optimistic on the 2020 outlook and kept its sales target unchanged at roughly flat YoY. It’s expected that negative impacts from COVID-19 in 1Q20 could largely be offset by sales in 2Q-4Q20 after demand returns to normal levels in Apr-May (currently construction lines at 60-80% while property at 40-60% resumption rate). For FY20, the firm foresees an overall stable demand

prospect mainly supported by the infra sector (>40% of cement demand), while demand from the property market (slightly <40%) will likely be more moderate. Supply discipline is largely expected especially in East China for 2020, given the low level of net increase in capacity (~14.9mn tons) and exit of capacity in East China (Anhui Chaohu, Jiangsu Huaihai and Zhejiang). See details below:

Real Estate

China Vanke (2202 HK) – Ryan Li

Vanke’s 2019 result was up 15% Y/Y yet it was a miss to consensus and our estimates, mainly due to less than expected delivery and higher tax burden. However as margin is inline, the earnings trend into 2020 and 2021 should remain broadly in shape at high-teen CAGR. We expect Vanke’s ROE to remain stable at around 20%, with a stable DP business and the new IP business to start contributing more in 2020. While Vanke has always been perceived as a pure developer, with incrementally more investment into the IP rental business, we believe the market may start giving them credit on such. We continue to like Vanke as we think Vanke will consistently be able to deliver a higher-than-industry ROE via its effective use of working capital.

China Aoyuan (3883 HK) – Karl Chan

Aoyuan’s FY19 core net profit jumped 65% Y/Y to Rmb3.9 bn, 5% below our estimate due to more SG&A and taxes. Payout ratio (on reported net profit basis) came down from 40% to 35%, which is slightly disappointing. Adjusted net gearing (on attributable equity; adding back returned consideration for Aeon Life) went down slightly from 170% in 1H19 to 163% by end-2019. With contracted liabilities of Rmb86 bn on the balance sheet, we believe 2020E earnings growth should stay strong. We think the key focus at the results briefing will be on (1) sales guidance (we expect >10% growth in 2020E); (2) plans for non-property businesses (“other businesses” saw a loss of Rmb10 mn in segment profit, which we believe is due to the retail business); (3) redevelopment conversion; (4) payout guidance; (5) deleverage plans.

52



Appendix

Table 36: Regional and country valuations

Source: MSCI, IBES, Datastream, Bloomberg, J.P. Morgan. Data as of 22 April 2020.

53



Table 37: J.P. Morgan China daily valuations

Price as of Apr 23, 2020 Price Target Price Mkt Avg. Daily EPS EPS Y/Y Growth P/E P/BV ROE Div. Yield

Company Name Analyst Reporting Rec RIC Ticker CP D/D TP Upside Cap Turnover First Year FY1E FY2E FY1E FY2E FY1E FY2E FY1E FY2E FY1E FY2E FY1E FY2E

Curr (%) (%) (US$MM) (US$MM) Estimate (%) (%) (x) (x) (x) (x) (%) (%) (%) (%)

Advertising

Focus Media - A Yao, Alex CNY UW 002027.SS 4.38 -0.90 4.60 5.0 9,075 138.1 2019 0.19 0.31 -52.5 62.5 23.2 14.3 4.1 3.3 18.6 25.9 2.3 1.3Mkt Cap Weighted Aggregates 9,075 138.1 23.2 14.3 4.1 3.3 18.6 25.9 2.3 1.3

Aerospace & Defense

AECC Aviation Power - A Xu, Patrick CNY UW 600893.SS 23.96 0.29 14.00 -41.6 7,609 66.3 2020 0.46 0.49 -4.7 7.3 52.4 48.8 1.8 1.8 3.5 3.7 0.6 0.6

AVIC Electromechanical - A Xu, Patrick CNY OW 002013.SZ 8.13 1.50 10.00 23.0 4,141 48.7 2020 0.29 0.33 7.4 13.6 28.0 24.7 2.8 2.5 10.3 10.8 0.8 0.9Mkt Cap Weighted Aggregates 11,751 115.0 43.8 40.3 2.2 2.1 5.9 6.2 0.7 0.7

Air Freight & Logistics

BEST Inc. Wong, Calvin C CNY OW BEST 5.65 4.82 7.50 32.7 2,195 7.8 2020 -0.14 1.35 -73.4 NM na 29.7 4.0 3.5 1.5 15.1 na na

SF Holding Co Ltd - A Wong, Calvin C CNY N 002352.SZ 49.03 0.04 49.00 -0.1 30,582 139.9 2019 1.28 1.33 24.0 4.4 38.3 36.7 5.2 4.7 10.8 12.7 0.5 0.5

STO Express Co Ltd - A Wong, Calvin C CNY UW 002468.SZ 16.66 0.97 14.10 -15.4 3,600 24.3 2019 0.94 0.80 -29.8 -15.3 17.7 20.9 2.8 2.6 16.3 12.8 2.1 1.8

YTO Express Group - A Wong, Calvin C CNY UW 600233.SH 12.11 4.40 9.30 -23.2 4,835 38.5 2019 0.70 0.71 4.3 1.8 17.2 16.9 2.9 2.6 16.2 14.6 1.3 1.3

Yunda Holding Co Ltd - A Wong, Calvin C CNY N 002120.SZ 30.39 1.13 29.50 -2.9 9,552 43.3 2019 1.19 1.22 -1.8 2.2 25.5 25.0 5.1 4.4 21.4 19.0 1.2 1.2

ZTO Express (Cayman) Inc. Wong, Calvin C CNY OW ZTO 28.97 3.84 28.50 -1.6 22,666 65.7 2020 6.92 8.81 -4.3 27.4 29.7 23.3 3.6 3.1 14.0 15.4 0.0 0.0Mkt Cap Weighted Aggregates 73,430 319.6 30.5 28.8 4.4 3.9 13.5 14.5 0.6 0.6

Airport Services

Beijing Capital International Airport (0694) Li, Karen CNY OW 0694.HK 5.15 -4.45 13.00 152.4 2,878 10.0 2019 0.56 0.30 -15.4 -46.6 8.4 15.7 0.9 0.8 10.4 5.5 5.2 3.2Guangzhou Baiyun International Airport Co., Ltd - A Li, Karen CNY OW 600004.SS 14.99 2.46 24.00 60.1 4,379 32.1 2019 0.36 0.28 -34.8 -23.1 41.8 54.3 1.9 1.9 4.7 3.5 0.7 0.6

Shanghai International Airport - A Li, Karen CNY OW 600009.SS 70.98 5.50 81.00 14.1 19,307 148.2 2019 2.61 1.44 18.9 -44.9 27.2 49.4 4.3 4.1 16.7 8.5 1.1 0.6

Shenzhen Airport Co Ltd - A Li, Karen CNY OW 000089.SZ 7.86 1.03 12.20 55.2 2,275 22.8 2020 0.21 0.37 -26.2 72.3 36.8 21.3 1.3 1.2 3.6 6.0 0.7 1.2Mkt Cap Weighted Aggregates 28,839 213.1 28.3 44.5 3.3 3.2 13.2 7.2 1.4 0.9

Aluminum

Aluminum Corp of China - A Wei, Po CNY N 601600.SS 2.88 -0.35 3.20 11.1 6,059 24.3 2020 0.01 0.05 -79.4 603.3 na 53.6 0.9 0.9 0.2 1.7 0.0 0.0

Aluminum Corp of China - H Wei, Po CNY N 2600.HK 1.49 0.00 2.00 34.2 2,865 5.7 2020 0.01 0.05 -79.4 603.3 na 25.3 0.4 0.4 0.2 1.7 0.0 0.0Mkt Cap Weighted Aggregates 8,924 30.0 na 44.5 0.7 0.7 0.2 1.7 0.0 0.0

Apparel Retail

HLA Corp Ltd - A Yao, Qian CNY OW 600398.SS 6.23 -0.32 11.30 81.4 3,951 9.3 2019 0.78 0.88 1.2 13.5 8.0 7.1 1.9 1.8 25.6 26.2 7.5 8.5Mkt Cap Weighted Aggregates 3,951 9.3 8.0 7.1 1.9 1.8 25.6 26.2 7.5 8.5

Apparel, Accessories & Luxury Goods

54






Lao Feng Xiang - A Hsu, George CNY OW 600612.SS 39.35 0.85 49.00 24.5 2,906 12.5 2019 2.69 3.05 16.9 13.1 14.6 12.9 3.0 2.7 21.5 21.7 3.3 3.7

Li Ning (2331) Yao, Qian CNY OW 2331.HK 23.25 -2.31 28.80 23.9 7,241 62.6 2020 0.65 0.83 4.6 27.5 32.8 25.7 6.4 5.5 20.4 22.4 0.9 1.1

Peacebird Fashion - A Yao, Qian CNY OW 603877.SS 15.69 -0.06 17.40 10.9 1,055 3.2 2020 1.06 1.23 -9.5 16.1 14.8 12.8 2.0 1.8 13.7 14.8 3.4 3.9

Semir Garment - A Yao, Qian CNY N 002563.SZ 7.10 -0.14 9.00 26.8 2,706 13.5 2019 0.57 0.53 -8.7 -7.3 12.4 13.4 1.6 1.5 13.5 11.8 4.5 4.2

Shenzhou International (2313) Yao, Qian CNY N 2313.HK 88.05 -1.73 83.00 -5.7 17,078 63.7 2020 3.71 4.43 9.4 19.5 21.7 18.2 4.4 3.9 21.0 22.7 2.5 3.0

Xtep International Yao, Qian CNY OW 1368.HK 2.85 1.79 4.80 68.4 871 3.1 2020 0.28 0.33 -7.9 15.2 9.2 8.0 0.9 0.8 9.5 10.6 6.4 7.4Mkt Cap Weighted Aggregates 31,857 158.6 22.2 18.5 4.3 3.8 19.7 21.0 2.5 2.9

Application Software

Cheetah Mobile Inc Sullivan, James CNY NR CMCM 1.95 -0.51 na na 262 1.1 2016 na na na na na na na na na na na na

Glodon - A Zhang, Kevin CNY N 002410.SZ 46.57 0.98 37.00 -20.5 7,432 57.5 2020 0.35 0.42 64.8 20.8 na na 15.2 14.1 11.6 13.1 0.4 0.4

OneConnect Financial Technology Yao, Alex CNY OW OCFT 9.68 -3.87 20.00 106.6 3,568 4.4 2020 -3.92 -3.07 -14.9 -21.7 na na 5.0 5.7 NM NM na naMkt Cap Weighted Aggregates 15,478 122.9 na na 8.4 8.1 5.6 6.3 0.2 0.2

Asset Management & Custody Banks

China Cinda Asset Management Co Ltd (1359) Lei, Katherine CNY OW 1359.HK 1.41 -1.40 2.00 41.8 6,596 6.8 2020 0.41 0.45 20.7 8.2 3.1 2.9 0.3 0.3 8.7 8.9 9.6 10.4

Noah Holdings Ltd Lei, Katherine CNY OW NOAH 24.40 4.77 35.00 43.4 1,467 11.5 2020 13.44 17.09 -19.7 27.1 12.9 10.1 1.3 1.2 10.3 12.3 0.0 0.0Mkt Cap Weighted Aggregates 8,063 18.3 4.9 4.2 0.5 0.5 9.0 9.5 7.9 8.5

Auto Parts & Equipment

Fuyao Glass - A (600660 CH) Wen, Rebecca Y CNY UW 600660.SS 18.93 0.64 15.50 -18.1 6,703 52.0 2020 0.78 1.29 -32.9 66.9 24.4 14.6 2.3 2.1 9.6 15.1 3.7 2.5

Fuyao Glass - H (3606) Wen, Rebecca Y CNY N 3606.HK 16.32 -0.24 17.00 4.2 5,283 6.4 2020 0.78 1.29 -32.9 66.9 19.2 11.5 1.8 1.7 9.6 15.1 4.6 3.1

Huayu - A (600741 CH) Wen, Rebecca Y CNY N 600741.SS 20.19 0.30 18.00 -10.8 8,985 68.9 2020 1.54 1.97 -24.9 27.8 13.1 10.3 1.2 1.1 9.6 11.6 4.2 3.2

Minth (0425) Wen, Rebecca Y CNY OW 0425.HK 17.60 1.73 24.00 36.4 2,613 13.4 2020 1.03 1.64 -29.9 58.7 15.6 9.8 1.2 1.1 8.1 12.1 3.6 2.6

Nexteer (1316) Wen, Rebecca Y USD N 1316.HK 3.91 -6.68 4.10 4.9 1,265 4.7 2020 0.04 0.09 -56.7 118.4 12.6 5.8 0.7 0.6 5.5 11.4 6.4 2.4

Ningbo Joyson - A Wen, Rebecca Y CNY UW 600699.SS 19.42 -2.80 15.00 -22.8 3,392 180.6 2020 0.41 0.69 -46.9 70.2 47.8 28.1 1.7 1.9 3.8 6.9 0.4 0.2

Ningbo Tuopu Group Co Ltd - A Wen, Rebecca Y CNY UW 601689.SS 21.23 2.07 9.00 -57.6 3,162 69.4 2019 0.44 0.47 -38.8 8.4 48.6 44.8 3.0 2.8 6.3 6.5 1.3 0.0

Xinyi Glass (0868) Fu, Han HKD UW 0868.HK 8.95 -0.44 8.10 -9.5 4,611 12.8 2020 0.85 0.87 -23.9 2.3 10.5 10.3 1.5 1.3 15.1 13.4 0.0 0.0Mkt Cap Weighted Aggregates 36,014 408.2 22.3 15.8 1.7 1.6 9.2 12.1 3.1 2.0

Automobile Manufacturers

BAIC Motor Corp LTD (1958) Lai, Nick YC CNY OW 1958.HK 3.14 1.29 4.50 43.3 3,247 3.9 2019 0.51 0.52 -9.4 1.4 5.6 5.6 0.5 0.4 8.3 8.0 6.6 5.9

Brilliance China Automotive (1114) Lai, Nick YC CNY OW 1114.HK 6.86 0.59 9.00 31.2 4,466 17.0 2020 1.40 1.57 4.2 12.1 4.5 4.0 0.8 0.7 18.8 17.8 0.0 3.3

BYD Company Limited - A Lai, Nick YC CNY UW 002594.SZ 58.25 -1.99 45.00 -22.7 22,432 216.1 2019 0.61 0.43 -40.2 -29.2 95.5 na 2.8 2.8 3.0 2.1 0.2 0.1

BYD Company Limited - H Lai, Nick YC CNY UW 1211.HK 43.25 2.00 30.00 -30.6 15,225 56.8 2019 0.61 0.43 -40.2 -29.2 64.8 91.5 1.9 1.9 3.0 2.1 0.2 0.2

Chongqing Changan Automobile - A Lai, Nick YC CNY UW 000625.SZ 9.02 -1.85 9.00 -0.2 4,967 60.4 2019 -0.60 0.12 NM NM na 74.7 1.0 1.0 NM 1.3 0.2 0.0

Chongqing Changan Automobile - B Lai, Nick YC CNY N 200625.SZ 3.61 0.00 4.50 24.7 420 1.2 2019 -0.60 0.12 NM NM na 27.3 0.4 0.4 NM 1.3 0.5 0.0

55






DongFeng Motor Co., Ltd. (0489) Lai, Nick YC CNY N 0489.HK 4.97 0.61 5.50 10.7 1,831 12.3 2020 1.43 1.51 -4.5 6.0 3.2 3.0 0.3 0.2 8.9 8.2 5.5 7.4

Geely Automobile Holdings Ltd. (0175) Lai, Nick YC CNY OW 0175.HK 11.48 0.70 18.00 56.8 13,562 95.7 2020 0.76 0.84 -15.6 10.7 13.8 12.5 1.6 1.5 12.2 12.3 2.1 1.8

Great Wall Motor - A Lai, Nick YC CNY N 601633.SS 7.99 -0.62 9.00 12.6 10,294 28.6 2020 0.46 0.50 -6.8 7.9 17.4 16.1 1.3 1.2 7.5 7.8 2.5 2.3

Great Wall Motor - H Lai, Nick YC CNY N 2333.HK 4.90 -1.21 5.00 2.0 5,771 19.9 2020 0.46 0.50 -6.8 7.9 9.8 9.0 0.7 0.7 7.5 7.8 4.4 4.1

Guangzhou Automobile Group - A Lai, Nick YC CNY N 601238.SS 9.76 -0.31 11.00 12.7 9,283 29.0 2020 0.76 0.89 18.3 15.8 12.8 11.0 1.2 1.1 9.4 10.1 1.5 1.8

Guangzhou Automobile Group - H Lai, Nick YC CNY OW 2238.HK 6.34 -0.94 10.00 57.7 5,512 29.6 2020 0.76 0.89 18.3 15.8 7.6 6.5 0.7 0.6 9.4 10.1 2.6 3.1

NIO Lai, Nick YC CNY UW NIO 3.09 2.32 2.00 -35.3 3,182 228.6 2019 -11.05 -4.15 -50.5 -62.5 na na na na na 62.7 na na

SAIC Motor Corp - A Lai, Nick YC CNY N 600104.SS 18.37 -0.97 20.00 8.9 30,296 83.0 2020 1.80 2.03 -18.0 13.1 10.2 9.0 0.8 0.8 8.2 8.9 4.8 3.9Mkt Cap Weighted Aggregates 130,488 882.0 31.2 20.1 1.4 1.3 7.0 8.5 2.2 2.1

Automotive Retail

Baoxin Auto Group Limited (1293) Lai, Nick YC CNY N 1293.HK 0.94 0.00 1.10 17.0 344 0.2 2020 0.16 0.18 -29.5 14.4 5.5 4.8 0.3 0.3 5.6 6.1 0.0 0.0China ZhengTong Auto Service Holding Limited (1728) Lai, Nick YC CNY N 1728.HK 1.12 0.00 1.40 25.0 320 2.3 2020 0.22 0.27 -17.2 21.2 4.6 3.8 0.2 0.2 4.3 5.0 0.0 6.6

Zhongsheng Group Holdings (0881) Lai, Nick YC CNY OW 0881.HK 29.95 0.34 32.00 6.8 8,899 17.4 2020 1.53 1.77 -22.9 15.8 17.9 15.5 2.6 2.3 15.1 15.5 1.5 1.1Mkt Cap Weighted Aggregates 9,563 19.9 17.0 14.7 2.4 2.1 14.4 14.8 1.4 1.3

Biotechnology

3SBio (1530) Li, David CNY OW 1530.HK 8.30 0.36 11.00 32.5 2,720 15.6 2020 0.62 0.71 61.0 14.5 12.3 10.7 1.7 1.5 15.0 14.8 0.0 0.0

Athenex, Inc. Wang, Ling USD OW ATNX 8.54 -0.23 30.00 251.3 697 7.3 2020 -1.87 -1.13 23.2 -39.5 na na 3.8 3.0 NM NM na na

BeiGene – ADR Wang, Ling USD OW BGNE 160.68 1.36 215.00 33.8 12,409 50.9 2020 -1.44 -1.57 18.7 9.0 na na 5.5 18.3 NM na 0.0 0.0

Beigene (6160) Wang, Ling USD OW 6160.HK 95.70 -0.52 129.00 34.8 12,397 1.2 2020 -1.44 -1.57 18.7 9.0 na na 5.5 18.3 NM na 0.0 0.0

CStone Pharmaceuticals Wang, Ling CNY OW 2616.HK 9.00 4.17 18.00 100.0 1,175 0.6 2020 -1.86 -2.07 -17.2 11.4 na na 14.8 16.5 na na na na

Innovent Biologics (1801) Wang, Ling CNY OW 1801.HK 34.85 1.90 38.00 9.0 6,037 20.7 2020 -0.81 -0.97 -40.5 19.1 na na 7.1 9.1 NM NM na na

Shanghai Junshi Biosciences Wang, Ling CNY OW 1877.HK 33.95 0.59 37.00 9.0 3,435 1.6 2020 -0.95 -1.24 -0.1 30.5 na na 4.6 5.7 NM NM na naMkt Cap Weighted Aggregates 38,869 97.9 0.9 0.8 5.7 14.2 1.0 1.0 0.0 0.0

Brewers

Beijing Yanjing Brewery - A Yin, Kevin CNY UW 000729.SS 5.96 0.51 5.50 -7.7 2,359 9.2 2017 na na na na na na na na na na na na

Budweiser Asia Pacific Yin, Kevin USD OW 1876.HK 21.00 -2.10 29.00 38.1 35,885 34.9 2020 0.06 0.09 -5.5 47.8 42.3 28.6 3.5 3.2 8.4 11.6 0.8 1.2

China Resources Beer (0291) Yin, Kevin CNY OW 0291.HK 36.10 0.56 45.00 24.7 15,111 41.7 2020 0.50 1.06 23.5 112.5 66.1 31.1 5.2 4.7 11.0 17.1 0.6 1.3

Tsingtao Brewery - A Yin, Kevin CNY OW 600600.SS 47.28 1.05 51.00 7.9 9,016 50.9 2019 1.34 1.12 27.5 -16.4 35.2 42.1 3.4 3.2 8.0 6.1 1.3 1.1

Tsingtao Brewery - H Yin, Kevin CNY OW 0168.HK 43.35 -1.03 56.00 29.2 7,557 11.5 2019 1.34 1.12 27.5 -16.4 29.5 35.3 2.8 2.7 8.0 6.1 1.5 1.3Mkt Cap Weighted Aggregates 69,928 148.3 43.7 30.7 3.6 3.4 8.6 11.1 0.9 1.2

Coal & Consumable Fuels

China Coal Energy - A Wei, Po CNY N 601898.SS 3.86 -0.77 3.70 -4.1 7,224 10.2 2020 0.42 0.44 -10.4 5.9 9.2 8.7 0.5 0.5 5.6 5.7 3.3 3.4

56






China Coal Energy - H Wei, Po CNY N 1898.HK 2.03 -2.87 2.70 33.0 3,473 2.2 2020 0.42 0.44 -10.4 5.9 4.4 4.2 0.2 0.2 5.6 5.7 6.8 7.2

China Shenhua Energy - A Wei, Po CNY OW 601088.SS 15.30 -0.52 19.00 24.2 42,956 68.1 2020 2.00 1.95 -4.8 -2.2 7.7 7.8 0.8 0.8 10.9 10.3 7.8 7.7

China Shenhua Energy - H Wei, Po CNY OW 1088.HK 13.70 0.29 18.00 31.4 35,159 50.7 2020 2.00 1.95 -4.8 -2.2 6.3 6.4 0.7 0.6 10.9 10.3 9.6 9.4

Shaanxi Coal Industry Co Ltd - A Wei, Po CNY N 601225.SS 7.08 -0.28 8.20 15.8 9,994 27.9 2019 1.15 1.19 4.3 3.4 6.2 6.0 1.2 1.0 21.4 19.1 4.7 4.9

Shanxi Xishan Coal & Electricity - A Wei, Po CNY UW 000983.SZ 4.82 -1.43 4.50 -6.6 2,144 13.3 2019 0.63 0.63 10.5 -0.7 7.6 7.7 0.7 0.7 9.7 9.1 6.9 6.8

Yanzhou Coal Mining - A Wei, Po CNY N 600188.SS 8.37 -0.83 10.00 19.5 3,497 23.6 2020 1.58 1.62 -17.3 2.6 5.3 5.2 0.7 0.7 14.0 13.3 5.7 5.8

Yanzhou Coal Mining - H Wei, Po CNY N 1171.HK 5.87 -0.84 7.00 19.3 1,478 11.9 2020 1.58 1.62 -17.3 2.6 3.4 3.3 0.5 0.4 14.0 13.3 8.8 9.1Mkt Cap Weighted Aggregates 105,927 208.1 6.9 7.0 0.8 0.7 11.5 10.8 7.7 7.6

Commodity Chemicals

Guangzhou Tinci Materials - A Wei, Po CNY UW 002709.SZ 25.86 0.19 9.20 -64.4 1,983 53.4 2019 0.18 0.24 -78.3 34.0 na na 4.9 4.7 3.5 4.5 0.1 0.1

Hengli Petrochemical - A Ong, Parsley Rui Hua CNY OW 600346.SS 13.99 1.23 20.00 43.0 13,901 60.9 2020 2.08 1.89 34.3 -8.9 6.7 7.4 1.9 1.5 34.4 22.4 5.9 6.8

Rongsheng Petro Chemical - A Ong, Parsley Rui Hua CNY UW 002493.SZ 11.93 -0.33 9.50 -20.4 10,594 13.9 2020 0.78 0.83 119.4 7.5 15.4 14.3 2.5 2.0 9.4 15.6 1.3 1.4

Sinopec Shanghai Petchem - A Darling, Scott L CNY OW 600688.SS 4.52 7.11 5.63 24.6 6,900 23.5 2020 0.30 0.33 47.2 9.6 15.0 13.7 2.0 1.8 11.9 13.9 3.9 3.8

Sinopec Shanghai Petchem - H Darling, Scott L CNY OW 0338.HK 2.21 1.84 3.05 38.0 3,084 6.1 2020 0.30 0.33 47.2 9.6 6.7 6.1 0.9 0.8 11.9 13.9 8.7 8.5

Tongkun Group - A Ong, Parsley Rui Hua CNY OW 601233.SS 12.10 -1.79 17.00 40.5 2,118 53.4 2019 1.55 2.48 33.2 60.6 7.8 4.9 1.3 1.0 17.1 23.0 1.9 4.1Mkt Cap Weighted Aggregates 38,580 211.2 10.3 9.8 2.1 1.8 19.2 17.5 4.0 4.4

Computer & Electronics Retail

Gome Retail (0493) Hsu, George CNY UW 0493.HK 0.94 -1.05 0.50 -46.8 2,499 14.6 2020 -0.07 -0.06 -49.6 -14.8 na na 1.7 1.9 NM NM 0.0 0.0

Suning.com Co - A Hsu, George CNY N 002024.SZ 8.63 -0.92 9.50 10.1 11,275 75.4 2019 1.20 0.39 -16.7 -67.5 7.2 22.2 0.9 0.9 3.4 3.1 4.2 1.4Mkt Cap Weighted Aggregates 13,774 90.0 5.9 18.1 1.0 1.1 2.8 2.6 3.4 1.1

Construction & Engineering

China Communications Construction - A Li, Karen CNY N 601800.SS 8.12 -1.22 7.30 -10.1 18,540 104.3 2020 1.22 1.35 5.2 9.9 6.6 6.0 0.5 0.5 8.3 8.5 3.0 3.3

China Communications Construction - H Li, Karen CNY OW 1800.HK 5.08 0.59 6.70 31.9 10,602 16.7 2020 1.22 1.35 5.2 9.9 3.8 3.5 0.3 0.3 8.3 8.5 5.3 5.8

China Railway Construction - A Li, Karen CNY OW 601186.SS 9.82 -1.50 15.60 58.9 18,824 137.3 2020 1.87 2.20 26.0 17.2 5.2 4.5 0.6 0.5 11.5 12.1 2.8 3.3

China Railway Construction - H Li, Karen CNY OW 1186.HK 8.57 -2.61 14.90 73.9 15,016 15.5 2020 1.87 2.20 26.0 17.2 4.2 3.6 0.5 0.4 11.5 12.1 3.5 4.1

China Railway Group Limited - A Li, Karen CNY OW 601390.SS 5.80 -1.19 9.10 56.9 18,703 67.5 2020 1.06 1.22 10.3 14.5 5.5 4.8 0.6 0.5 11.2 11.7 3.2 3.7

China Railway Group Limited - H Li, Karen CNY OW 0390.HK 4.55 -0.44 9.10 100.0 13,412 10.9 2020 1.06 1.22 10.3 14.5 3.9 3.4 0.4 0.4 11.2 11.7 4.5 5.1

China State Construction (3311) Li, Karen HKD OW 3311.HK 5.99 1.87 9.20 53.6 3,902 4.6 2020 1.19 1.36 11.4 14.0 5.0 4.4 0.7 0.6 13.6 14.1 6.0 6.8

Sinoma International Engineering - A Wei, Po CNY OW 600970.SS 5.96 -1.49 8.00 34.2 1,476 20.1 2020 0.85 0.89 -7.1 4.9 7.0 6.7 0.9 0.8 13.4 12.6 2.6 2.8

Sinopec Engineering Group (2386) Li, Karen CNY OW 2386.HK 3.49 2.05 5.40 54.7 1,994 3.5 2019 0.60 0.67 57.8 12.5 5.3 4.7 0.5 0.5 9.9 10.4 6.4 8.4Mkt Cap Weighted Aggregates 102,469 380.4 5.1 4.5 0.5 0.5 10.6 11.0 3.7 4.2

Construction Machinery & Heavy Trucks

Changsha Zoomlion Heavy Industry - A Li, Karen CNY OW 000157.SZ 6.18 -2.22 8.10 31.1 6,812 44.8 2020 0.70 0.77 25.4 10.3 8.9 8.1 1.1 1.1 13.2 12.8 0.0 2.5

57






Changsha Zoomlion Heavy Industry - H Li, Karen CNY OW 1157.HK 6.13 -0.65 7.40 20.7 6,176 11.1 2020 0.70 0.77 25.4 10.3 8.1 7.3 1.0 1.0 13.2 12.8 0.0 2.7

China Shipbuilding Industry Co Ltd - A Xu, Patrick CNY UW 601989.SS 4.29 1.18 3.40 -20.7 13,808 52.7 2019 0.05 0.04 76.4 -33.9 81.0 na 1.1 1.1 1.4 0.9 0.4 0.3

CRRC Corp - A Li, Karen CNY OW 601766.SS 6.19 -0.64 11.10 79.3 25,076 67.0 2019 0.46 0.60 18.0 29.2 13.3 10.3 1.3 1.2 10.0 12.0 2.9 3.7

CRRC Corp - H Li, Karen CNY OW 1766.HK 4.05 0.25 8.30 104.9 14,997 15.5 2019 0.46 0.60 18.0 29.2 8.0 6.2 0.8 0.7 10.0 12.0 4.8 6.2CSSC Offshore and Marine Engineering Group - A Xu, Patrick CNY UW 600685.SS 15.22 2.49 4.20 -72.4 1,765 20.6 2020 1.45 0.23 274.4 -83.9 10.5 65.0 1.8 1.7 18.3 2.6 0.0 0.0CSSC Offshore and Marine Engineering Group - H Xu, Patrick CNY N 0317.HK 5.08 2.63 4.60 -9.4 388 0.6 2020 1.45 0.23 274.4 -83.9 3.2 19.8 0.5 0.5 18.3 2.6 0.0 0.0

Lonking Holdings Ltd (3339) Li, Karen CNY N 3339.HK 2.63 -2.59 1.90 -27.8 1,452 2.5 2019 0.34 0.23 25.8 -31.7 7.1 10.5 1.4 1.3 16.8 10.7 8.9 6.1

Sany Heavy Industry - A Li, Karen CNY OW 600031.SS 19.11 -2.00 23.00 20.4 20,546 239.6 2019 1.33 1.59 69.6 19.4 14.4 12.0 3.9 3.2 30.8 29.1 2.1 2.5

Sinotruk (3808) Lai, Nick YC CNY UW 3808.HK 15.66 1.03 10.00 -36.1 5,579 10.0 2020 1.18 1.13 -2.4 -3.9 12.1 12.6 1.3 1.2 11.5 10.2 2.5 2.4

Weichai Power - A Li, Karen CNY N 000338.SZ 13.16 -1.94 14.00 6.4 14,856 141.1 2019 1.22 1.04 12.9 -14.8 10.8 12.6 2.3 2.1 23.1 17.5 3.9 3.3

Weichai Power - H Li, Karen CNY N 2338.HK 13.84 -0.72 14.30 3.3 14,281 26.5 2019 1.22 1.04 12.9 -14.8 10.4 12.1 2.2 2.0 23.1 17.5 4.1 3.5

Zhengzhou Yutong Bus - A Lai, Nick YC CNY N 600066.SS 12.50 -1.11 12.50 0.0 3,906 39.6 2020 0.83 0.91 -4.8 8.8 15.0 13.8 1.6 1.6 10.6 11.7 8.0 7.6Mkt Cap Weighted Aggregates 129,644 671.5 18.8 10.2 1.8 1.7 15.9 14.6 2.8 3.3

Construction Materials

BBMG - A Wei, Po CNY N 601992.SS 3.26 -0.61 3.90 19.6 4,914 25.8 2020 0.37 0.38 7.9 3.0 8.7 8.5 0.5 0.5 6.4 6.3 4.0 4.1

BBMG - H Wei, Po CNY N 2009.HK 1.96 0.00 2.40 22.4 2,700 3.2 2020 0.37 0.38 7.9 3.0 4.8 4.7 0.3 0.3 6.4 6.3 7.2 7.4

China Jushi - A Fu, Han CNY OW 600176.SS 8.30 -0.72 10.30 24.1 4,103 52.2 2020 0.57 0.63 -7.0 11.7 14.7 13.1 1.7 1.6 12.1 12.5 2.2 2.4China National Building Material Company (3323) Wei, Po CNY N 3323.HK 9.45 -0.63 9.00 -4.8 6,583 48.7 2020 1.23 1.39 -5.8 13.4 7.1 6.2 0.8 0.8 12.2 12.7 3.8 4.3

China Resources Cement (1313) Wei, Po HKD OW 1313.HK 10.26 1.58 12.00 17.0 8,649 18.8 2020 1.19 1.18 -3.5 -0.5 8.6 8.7 1.5 1.4 18.8 17.1 5.6 5.6

Conch Cement Co Ltd - A Wei, Po CNY OW 600585.SS 57.92 -2.70 56.20 -3.0 43,327 296.6 2020 6.52 6.30 0.8 -3.4 9.4 9.7 1.9 1.7 24.7 20.4 3.2 3.2

Conch Cement Co Ltd - H Wei, Po CNY OW 0914.HK 58.75 -1.09 60.00 2.1 40,172 69.3 2020 6.13 5.98 -3.4 -2.5 8.8 9.0 1.8 1.6 21.9 18.6 3.5 3.4

Guangdong Tapai Group Co - A Wei, Po CNY OW 002233.SZ 13.75 -1.22 13.70 -0.4 2,314 61.5 2020 1.52 1.59 4.0 4.9 9.1 8.6 1.6 1.4 17.8 17.4 6.4 6.7

Huaxin Cement Co Ltd - A Wei, Po CNY OW 600801.SS 25.76 -2.16 28.00 8.7 7,624 109.3 2019 3.16 3.30 27.8 4.6 8.2 7.8 2.5 2.1 34.6 28.9 4.1 4.3

Wannianqing - A Wei, Po CNY OW 000789.SZ 13.20 -1.64 14.00 6.1 1,486 50.3 2020 1.71 1.69 -0.4 -1.2 7.7 7.8 1.8 1.6 24.9 21.5 5.3 5.2Mkt Cap Weighted Aggregates 121,871 735.8 9.0 9.0 1.7 1.5 21.6 18.5 3.7 3.7

Consumer Finance

Jianpu Technology Yao, Alex CNY OW JT 0.75 4.17 9.50 1,166.7 125 0.1 2019 0.42 1.19 NM 181.4 12.6 4.5 0.5 0.4 5.8 17.4 na na

VCredit Holdings Ltd (2003) Cai, George CNY N 2003.HK 5.92 0.85 7.00 18.2 381 0.3 2020 0.43 0.76 225.3 79.5 12.7 7.1 0.7 0.6 10.3 10.5 0.0 0.0Mkt Cap Weighted Aggregates 506 0.4 12.7 6.4 0.7 0.6 9.2 12.2 0.0 0.0

Copper

Jiangxi Copper Co Ltd - A Wei, Po CNY UW 600362.SS 12.80 -0.54 12.50 -2.3 6,257 48.5 2020 0.60 0.71 -14.7 18.2 21.3 18.0 0.8 0.8 3.9 4.4 1.6 1.6

Jiangxi Copper Co Ltd - H Wei, Po CNY N 0358.HK 7.26 -1.09 9.00 24.0 3,244 6.0 2020 0.60 0.71 -14.7 18.2 11.0 9.3 0.4 0.4 3.9 4.4 3.0 3.0

58






Mkt Cap Weighted Aggregates 9,500 54.5 17.8 15.1 0.7 0.7 3.9 4.4 2.1 2.1

Data Processing & Outsourced Services

Huifu Payment (1806) Yao, Alex CNY OW 1806.HK 2.11 0.96 8.00 279.1 341 0.9 2019 0.20 0.28 45.3 43.4 9.9 6.9 1.0 0.9 11.8 14.9 na naMkt Cap Weighted Aggregates 341 0.9 9.9 6.9 1.0 0.9 11.8 14.9 na na

Department Stores

Rainbow Department Store - A Hsu, George CNY OW 002419.SZ 9.18 2.91 11.00 19.8 1,555 12.8 2020 0.66 0.80 -8.2 22.1 14.0 11.4 1.5 1.4 10.1 12.0 4.2 5.1Mkt Cap Weighted Aggregates 1,555 12.8 14.0 11.4 1.5 1.4 10.1 12.0 4.2 5.1

Distillers & Vintners

Kweichow Moutai Co - A Yin, Kevin CNY OW 600519.SS 1252.26 0.62 1450.00 15.8 222,056 662.7 2020 38.20 47.57 16.5 24.5 32.8 26.3 9.9 8.3 32.5 34.3 1.6 1.9

Hongfa Technology - A Xu, Patrick CNY UW 600885.SS 29.37 -1.81 21.00 -28.5 3,088 45.3 2019 0.91 1.07 -3.2 17.7 32.3 27.4 4.5 4.0 14.5 15.4 1.0 1.1

TBEA - A Xu, Patrick CNY OW 600089.SS 7.80 -3.23 8.70 11.5 4,090 102.6 2020 0.62 0.60 32.2 -3.8 12.6 13.1 0.8 0.8 6.4 5.9 2.8 2.7

Zhongshan Broad Ocean Motor - A Wen, Rebecca Y CNY UW 002249.SZ 3.82 -1.04 2.40 -37.2 1,276 20.5 2019 0.12 0.09 NM -21.6 31.7 40.4 1.4 1.3 4.4 3.3 0.0 0.0

Zhuzhou CRRC Times Electric Co Ltd (3898) Li, Karen CNY OW 3898.HK 23.80 0.00 43.00 80.7 3,610 8.7 2019 2.29 2.74 2.9 19.7 9.5 7.9 1.2 1.0 12.9 13.8 2.1 2.5Mkt Cap Weighted Aggregates 61,508 1176.7 50.3 47.9 5.8 3.9 11.7 9.6 0.5 0.6

Electronic Components

Accelink - A Hariharan, Gokul CNY N 002281.SZ 29.49 -4.87 28.00 -5.1 2,696 100.8 2018 na na na na na na na na na na na na

BOE Technology - A Kwon, Jay CNY N 000725.SZ 3.77 -1.05 2.40 -36.3 18,519 662.1 2018 na na na na na na na na na na na na

Dongshan Precision - A Hariharan, Gokul CNY OW 002384.SZ 22.57 -2.97 23.65 4.8 5,118 235.2 2019 0.90 1.18 78.9 30.9 25.0 19.1 3.7 3.2 15.9 18.0 0.7 1.6

Everwin Precision - A Zhang, Kevin CNY UW 300115.SZ 17.99 -3.75 9.00 -50.0 2,311 134.8 2020 0.25 0.45 171.1 80.3 72.0 40.0 3.7 3.4 5.2 8.8 0.1 0.3

JONHON Optronic - A Xu, Patrick CNY OW 002179.SZ 34.83 1.31 40.00 14.8 5,413 49.9 2020 1.16 1.44 11.6 23.6 29.9 24.2 4.0 3.5 14.3 15.4 0.5 0.6

Lens Technology Co Ltd - A Hariharan, Gokul CNY N 300433.SZ 16.18 -4.03 10.00 -38.2 8,968 256.6 2018 na na na na na na na na na na na na

Luxshare - A Hariharan, Gokul CNY OW 002475.SZ 41.45 -0.96 27.50 -33.7 31,297 552.2 2019 0.72 0.93 9.2 29.2 57.4 44.4 11.2 9.5 21.9 23.1 0.3 0.7

OFILM Group Co Ltd - A Yang, William CNY UW 002456.SZ 14.26 -3.91 6.60 -53.7 5,465 424.5 2019 0.16 0.31 NM 98.0 90.4 45.7 4.3 3.9 4.8 8.9 0.0 0.2

Sunny Optical Technology Group Co. (2382) Yang, William CNY N 2382.HK 105.90 -0.94 120.00 13.3 14,979 168.2 2020 4.45 5.55 22.2 24.7 21.7 17.4 6.5 5.0 33.7 32.3 0.9 1.1Mkt Cap Weighted Aggregates 94,766 2584.5 32.4 23.4 5.5 4.6 14.6 15.3 0.3 0.5

Electronic Equipment & Instruments

China Railway Signal & Communication Corp Ltd (3969) Li, Karen CNY OW 3969.HK 3.75 -0.79 7.30 94.7 4,253 2.5 2019 0.39 0.46 1.4 16.7 8.7 7.5 0.9 0.8 11.8 11.2 4.6 5.4Hangzhou HikVision Digital Technology Co., Ltd - A Hariharan, Gokul CNY OW 002415.SZ 29.90 -0.27 40.00 33.8 39,442 275.4 2019 1.41 1.72 14.8 21.8 21.2 17.4 6.1 5.1 31.7 32.0 2.1 2.4

Hollysys Automation Technologies Ltd. Li, Karen USD OW HOLI 13.96 3.95 28.00 100.6 844 3.0 2020 2.25 2.60 7.6 15.6 6.2 5.4 0.8 0.7 13.5 13.8 1.4 1.6

Universal Scientific Industrial (Shanghai) - A Hariharan, Gokul CNY N 601231.SS 17.06 -2.07 9.10 -46.7 5,240 94.0 2018 na na na na na na na na na na na na

Zhejiang Dahua Technology Co., Ltd - A Hariharan, Gokul CNY N 002236.SZ 16.33 -1.09 19.50 19.4 6,910 160.5 2019 1.05 1.22 23.9 16.7 15.6 13.4 3.2 2.6 22.4 21.5 0.8 1.0

59







Electronic Manufacturing Services

AAC Technologies Holdings (2018) Yang, William CNY N 2018.HK 36.40 -1.49 48.00 31.9 5,735 82.8 2020 2.06 2.57 12.2 24.5 16.1 13.0 1.9 1.8 12.4 14.5 2.7 3.0

Goertek - A Hariharan, Gokul CNY UW 002241.SZ 17.98 -3.02 6.60 -63.3 8,236 276.9 2019 0.41 0.55 52.7 34.5 44.0 32.7 3.6 3.3 8.4 10.4 0.4 0.6

Wuxi Lead - A Wen, Rebecca Y CNY OW 300450.SZ 38.09 -2.78 43.00 12.9 4,739 147.3 2019 0.85 0.90 0.8 6.3 44.9 42.2 8.4 7.3 20.1 18.6 0.6 0.6Mkt Cap Weighted Aggregates 18,710 506.9 35.7 29.1 4.3 3.9 12.6 13.7 1.2 1.3

Environmental & Facilities Services

A-Living Services Chan, Karl Man Ho CNY OW 3319.HK 38.90 -0.51 44.00 13.1 6,692 30.0 2020 1.27 1.62 37.5 27.5 28.0 22.0 6.3 5.2 24.6 25.9 1.4 1.8

China Everbright International Ltd (0257) Tsui, Stephen T HKD OW 0257.HK 4.42 0.68 8.00 81.0 3,503 11.2 2019 0.82 1.00 -7.1 22.3 5.4 4.4 0.7 0.6 14.1 15.5 5.5 6.7

Country Garden Services Chan, Karl Man Ho CNY OW 6098.HK 35.40 1.14 39.00 10.2 12,383 36.3 2020 0.74 1.01 28.7 37.1 43.8 31.9 12.6 9.5 32.5 34.0 0.6 0.8Mkt Cap Weighted Aggregates 22,578 77.6 33.1 24.7 8.9 6.9 27.3 28.7 1.6 2.0

Fertilizers & Agricultural Chemicals

China BlueChemical Ltd (3983) Darling, Scott L CNY OW 3983.HK 1.13 -0.88 2.47 118.6 672 0.9 2019 0.23 0.09 -24.7 -60.4 4.6 11.6 0.3 0.3 7.0 2.7 10.9 4.3Mkt Cap Weighted Aggregates 672 0.9 4.6 11.6 0.3 0.3 7.0 2.7 10.9 4.3

Footwear

Anta Sports (2020) Yao, Qian CNY OW 2020.HK 63.60 0.00 74.00 16.4 22,031 94.6 2020 1.96 2.77 -1.4 41.3 29.7 21.0 6.7 5.5 24.2 28.6 1.0 1.4Mkt Cap Weighted Aggregates 22,031 94.6 29.7 21.0 6.7 5.5 24.2 28.6 1.0 1.4

Gas Utilities

Beijing Enterprises Holdings Limited (0392) Wu, Elaine HKD N 0392.HK 26.10 -0.19 32.00 22.6 4,250 8.1 2020 6.33 6.64 -0.7 4.9 4.1 3.9 0.4 0.4 10.2 9.8 4.3 4.5

China Gas Holdings Limited (0384) Wu, Elaine HKD N 0384.HK 23.80 2.59 26.60 11.8 16,026 62.5 2020 1.75 1.95 7.5 11.5 13.6 12.2 2.9 2.5 23.3 21.9 2.2 2.6

China Resources Gas Group Limited (1193) Wu, Elaine HKD OW 1193.HK 43.05 2.50 48.00 11.5 12,354 20.6 2020 2.46 2.72 6.3 10.4 17.5 15.8 3.1 2.7 18.8 18.4 2.1 2.4

ENN Energy Holdings Limited (2688) Wu, Elaine CNY OW 2688.HK 82.55 3.90 93.30 13.0 11,988 33.4 2020 5.22 5.81 3.4 11.3 14.5 13.0 2.9 2.5 21.1 20.5 2.4 2.8

Kunlun Energy Company Limited (0135) Wu, Elaine CNY OW 0135.HK 4.48 3.46 8.00 78.6 4,810 15.2 2020 0.72 0.78 7.4 8.4 5.7 5.3 0.7 0.6 11.9 12.0 7.0 7.6Mkt Cap Weighted Aggregates 49,428 139.8 13.2 11.9 2.5 2.2 19.4 18.7 2.9 3.3

Gold

Zijin Mining Group - A Wei, Po CNY OW 601899.SS 4.15 2.22 4.10 -1.2 13,492 152.0 2020 0.17 0.19 -6.7 11.4 24.2 21.7 2.0 1.9 8.4 9.0 2.5 2.7

Zijin Mining Group - H Wei, Po CNY OW 2899.HK 3.42 3.01 3.60 5.3 10,163 18.3 2020 0.17 0.19 -6.7 11.4 18.2 16.3 1.5 1.4 8.4 9.0 3.3 3.6Mkt Cap Weighted Aggregates 23,655 170.3 21.6 19.4 1.8 1.7 8.4 9.0 2.8 3.1

Health Care Distributors

Shanghai Pharmaceuticals Holding - A Yin, Sherry CNY OW 601607.SS 19.60 -0.96 23.00 17.3 5,320 104.6 2019 1.49 1.67 8.9 12.3 13.2 11.7 1.3 1.2 10.4 10.9 1.9 2.0

Shanghai Pharmaceuticals Holding - H Yin, Sherry CNY OW 2607.HK 14.12 0.43 19.00 34.6 1,674 8.7 2020 1.49 1.78 3.5 19.7 8.7 7.3 0.8 0.8 9.8 10.9 3.1 3.2

60






Sinopharm Group (1099) Yin, Sherry CNY OW 1099.HK 19.82 -0.90 24.00 21.1 7,981 31.1 2019 2.04 2.12 9.0 3.7 8.9 8.6 1.2 1.1 14.1 13.4 3.3 3.6Mkt Cap Weighted Aggregates 14,975 144.4 10.4 9.5 1.2 1.1 12.3 12.2 2.8 3.0

Health Care Equipment

MicroPort (0853) Yin, Sherry USD NR 0853.HK 18.60 -0.96 na na 3,846 34.5 2019 na na na na na na na na na na na na

Shenzhen Mindray - A Yin, Sherry CNY OW 300760.SZ 270.52 -0.77 291.00 7.6 46,423 248.1 2019 3.85 4.83 25.9 25.4 70.3 56.0 17.8 14.6 27.9 28.6 0.4 0.5Mkt Cap Weighted Aggregates 50,269 282.6 64.9 51.7 16.5 13.5 25.7 26.5 0.4 0.5

Health Care Technology

Alibaba Health (0241) Yin, Sherry CNY OW 0241.HK 19.60 3.48 10.70 -45.4 29,617 78.8 2020 0.01 0.09 NM 568.4 na na 71.3 53.2 10.4 31.2 0.0 0.0

Ping An Healthcare and Technology (1833) Yin, Sherry CNY OW 1833.HK 111.80 -2.53 90.00 -19.5 15,396 81.8 2020 -0.61 0.07 -12.5 NM na na 12.1 12.0 NM 0.8 0.0 0.0Mkt Cap Weighted Aggregates 45,013 160.6 na na 51.0 39.1 6.9 20.8 0.0 0.0

Heavy Electrical Equipment

Dongfang Electric Corporation Limited - A Xu, Patrick CNY UW 600875.SS 8.90 -0.78 5.50 -38.2 3,883 27.2 2020 0.38 0.40 -7.4 4.3 23.4 22.5 0.9 0.9 3.9 4.0 2.6 3.1

Dongfang Electric Corporation Limited - H Xu, Patrick CNY OW 1072.HK 4.06 -1.46 6.00 47.8 1,619 0.9 2020 0.38 0.40 -7.4 4.3 9.8 9.4 0.4 0.4 3.9 4.0 6.1 7.5

Nari Technology - A Xu, Patrick CNY N 600406.SS 20.62 -2.87 19.00 -7.9 13,453 85.4 2019 0.84 0.95 -9.1 12.6 24.4 21.7 3.2 2.9 13.4 13.9 1.6 1.8

Shanghai Electric Group Company Limited - A Xu, Patrick CNY UW 601727.SS 4.92 0.41 3.10 -37.0 10,523 18.7 2020 0.22 0.23 -3.0 4.5 22.1 21.1 1.1 1.1 5.2 5.2 1.2 1.3

Shanghai Electric Group Company Limited - H Xu, Patrick CNY OW 2727.HK 2.35 -0.84 3.40 44.7 4,595 2.2 2020 0.22 0.23 -3.0 4.5 9.6 9.2 0.5 0.5 5.2 5.2 2.8 2.9

Xinjiang Goldwind - A Hon, Alan CNY N 002202.SZ 9.91 -0.20 10.35 4.4 5,344 40.4 2020 0.88 0.95 71.8 7.8 11.3 10.5 1.3 1.2 9.3 9.8 2.8 3.0

Xinjiang Goldwind - H Hon, Alan CNY OW 2208.HK 7.28 -0.27 9.20 26.4 727 4.9 2020 0.88 0.95 71.8 7.8 7.6 7.0 0.8 0.8 9.3 9.8 4.2 4.5Mkt Cap Weighted Aggregates 40,144 179.7 19.4 17.9 1.7 1.6 8.4 8.6 2.1 2.4

Highways & Railtracks

Jiangsu Expressway - A Li, Karen CNY N 600377.SS 9.91 -0.90 9.60 -3.1 7,047 11.3 2019 0.88 0.49 0.9 -43.8 11.3 20.1 1.8 1.8 16.2 8.8 4.7 4.7

Jiangsu Expressway - H Li, Karen CNY OW 0177.HK 8.61 -1.82 10.70 24.3 5,597 7.0 2019 0.88 0.49 0.9 -43.8 9.0 16.0 1.4 1.4 16.2 8.8 5.9 5.9

Zhejiang Expressway (0576) Li, Karen CNY N 0576.HK 5.04 -1.56 6.50 29.0 2,824 5.8 2019 0.86 0.58 7.4 -32.4 5.4 7.9 0.8 0.8 15.6 9.9 8.1 8.1Mkt Cap Weighted Aggregates 15,468 24.0 9.4 16.4 1.5 1.4 16.1 9.0 5.7 5.7

Home Furnishings

Oppein Home Group - A Hsu, George CNY OW 603833.SS 108.28 1.22 115.00 6.2 6,424 26.0 2019 4.60 5.00 22.9 8.7 23.6 21.7 5.0 4.2 23.2 21.1 0.9 0.9

Suofeiya Home Collection - A Hsu, George CNY OW 002572.SZ 19.25 -0.41 23.00 19.5 2,479 30.1 2020 1.22 1.47 3.3 20.4 15.8 13.1 2.9 2.6 19.3 20.8 2.9 3.5Mkt Cap Weighted Aggregates 8,903 56.1 21.4 19.3 4.4 3.8 22.1 21.0 1.4 1.6

Hotels, Resorts & Cruise Lines

China CYTS Tours Holding Co - A Hsu, George CNY NR 600138.SS 10.16 -0.29 na na 1,038 29.3 2016 na na na na na na na na na na na na

Huangshan Tourism Development - A Hsu, George CNY NR 600054.SS 8.69 -0.46 na na 764 7.7 2016 na na na na na na na na na na na na

Jinmao Hotel (6139) Li, Ryan CNY N 6139.HK 2.45 0.00 3.70 51.0 632 0.0 2019 0.16 0.17 6.9 6.8 14.4 13.5 0.8 0.9 5.6 6.4 15.3 15.9

61







Household Appliances

Gree Electric Appliances - A Hsu, George CNY OW 000651.SZ 54.87 1.24 63.00 14.8 46,594 432.1 2019 4.10 4.19 -5.8 2.1 13.4 13.1 3.2 2.8 25.3 22.9 3.7 3.8

Hangzhou Robam Appliances - A Hsu, George CNY OW 002508.SZ 31.84 2.22 34.00 6.8 4,265 39.2 2019 1.67 1.79 7.4 7.5 19.1 17.8 4.4 3.9 24.6 23.4 2.6 2.8

Midea Group - A Hsu, George CNY OW 000333.SZ 51.99 1.15 62.00 19.3 48,333 253.6 2019 3.61 3.61 17.6 0.0 14.4 14.4 3.5 3.2 26.5 23.4 3.8 3.1

Zhejiang Supor - A Hsu, George CNY N 002032.SZ 67.68 0.50 68.00 0.5 7,846 18.7 2019 2.33 2.72 14.5 16.7 29.1 24.9 8.1 7.0 29.9 30.1 1.7 2.0Mkt Cap Weighted Aggregates 107,038 743.5 15.2 14.7 3.8 3.3 26.2 23.7 3.6 3.3

Hypermarkets & Super Centers

Sun Art (6808) Hsu, George CNY OW 6808.HK 12.90 3.20 14.00 8.5 15,879 24.2 2020 0.33 0.43 12.4 28.0 35.3 27.6 4.4 4.0 12.8 15.2 1.3 1.6

Yonghui Superstores - A Hsu, George CNY OW 601933.SS 10.80 0.19 13.00 20.4 14,590 129.0 2019 0.22 0.30 43.6 36.7 48.6 35.6 5.2 5.0 10.8 14.2 1.4 2.0Mkt Cap Weighted Aggregates 30,469 153.2 41.7 31.4 4.8 4.5 11.9 14.7 1.4 1.8

Independent Power Producers & Energy Traders

CGN Power (1816) Hon, Alan CNY OW 1816.HK 1.93 -0.52 2.35 21.8 11,318 6.2 2020 0.20 0.20 -2.5 3.6 9.0 8.7 0.9 0.9 10.7 10.4 4.5 4.7

China National Nuclear Power - A Hon, Alan CNY N 601985.SS 4.41 -1.12 5.45 23.6 9,690 18.5 2019 0.31 0.35 1.8 14.2 14.2 12.5 1.4 1.3 10.1 10.8 2.8 3.2

China Power International (2380) Tsui, Stephen T CNY N 2380.HK 1.54 2.67 1.30 -15.6 1,949 4.6 2019 0.16 0.17 44.6 2.4 8.7 8.5 0.4 0.4 5.2 5.2 5.8 4.1

China Resources Power Holdings (0836) Tsui, Stephen T HKD OW 0836.HK 8.96 -0.88 11.00 22.8 5,527 10.0 2019 1.47 1.59 78.1 8.1 6.1 5.6 0.6 0.5 9.7 9.9 6.5 7.1

Datang International - A Tsui, Stephen T CNY UW 601991.SS 2.12 -0.47 1.20 -43.4 5,538 4.0 2019 0.09 0.08 41.9 -17.8 22.4 27.3 0.8 0.8 3.8 3.1 2.2 1.5

Datang International - H Tsui, Stephen T CNY N 0991.HK 1.06 2.91 1.00 -5.7 2,531 1.0 2019 0.09 0.08 41.9 -17.8 10.3 12.5 0.3 0.3 3.8 3.1 4.9 3.2

Huadian Fuxin (0816) Hon, Alan CNY N 0816.HK 1.28 -0.78 1.31 2.3 1,389 1.8 2020 0.26 0.32 17.3 22.4 4.4 3.6 0.3 0.3 6.2 7.2 5.4 6.6Huadian Power International Corporation Limited - A Tsui, Stephen T CNY N 600027.SS 3.48 -0.85 2.50 -28.2 4,845 14.3 2019 0.32 0.29 119.0 -8.7 10.8 11.9 0.6 0.6 7.0 6.2 3.7 2.9Huadian Power International Corporation Limited - H Tsui, Stephen T CNY N 1071.HK 2.38 -0.42 1.90 -20.2 3,029 2.8 2019 0.32 0.29 119.0 -8.7 6.8 7.4 0.4 0.4 7.0 6.2 5.9 4.7

Huaneng Power Int'l - A Tsui, Stephen T CNY UW 600011.SS 4.22 0.48 3.20 -24.2 9,104 18.3 2019 0.30 0.26 535.0 -13.9 14.2 16.5 0.7 0.7 4.9 4.1 4.9 3.0

Huaneng Power Int'l - H Tsui, Stephen T CNY N 0902.HK 2.77 5.32 2.50 -9.7 5,462 13.6 2019 0.30 0.26 535.0 -13.9 8.5 9.9 0.4 0.4 4.9 4.1 8.2 5.1

SDIC Power - A Hon, Alan CNY N 600886.SS 7.39 -1.07 9.15 23.8 7,079 21.4 2019 0.68 0.68 9.5 0.0 10.8 10.8 1.2 1.1 12.2 11.3 3.3 3.3Mkt Cap Weighted Aggregates 67,461 116.6 11.4 12.1 0.8 0.8 7.9 7.6 4.5 3.9

Industrial Machinery

CIMC Enric Holdings Ltd Xu, Patrick CNY OW 3899.HK 3.47 0.00 7.00 101.7 900 2.4 2020 0.52 0.56 12.8 7.7 6.1 5.6 0.8 0.7 13.8 13.7 6.6 7.1

Estun Automation - A Li, Karen CNY OW 002747.SZ 10.70 0.28 15.00 40.2 1,278 25.3 2019 0.13 0.19 4.4 50.7 85.4 56.7 4.9 4.0 6.2 7.9 0.7 0.7

Haitian International Holdings (1882) Xu, Patrick CNY OW 1882.HK 13.98 -1.83 18.00 28.8 2,879 2.6 2020 1.14 1.33 3.1 16.5 11.2 9.6 1.4 1.3 13.3 14.0 2.9 3.4

Han's Laser - A Hariharan, Gokul CNY N 002008.SZ 29.01 -1.66 30.50 5.1 4,370 107.3 2019 0.81 1.36 -50.0 68.4 36.0 21.4 3.4 3.1 9.9 15.2 0.9 1.1

Jiangsu Hengli Hydraulic - A Xu, Patrick CNY UW 601100.SS 68.01 -1.15 38.00 -44.1 8,467 37.6 2019 1.25 1.54 31.8 23.0 54.3 44.2 11.1 9.4 22.2 23.0 0.6 0.7

Shenzhen Inovance Technology Co. Ltd - A Li, Karen CNY OW 300124.SZ 30.20 0.94 38.00 25.8 7,086 48.7 2019 0.62 0.74 -12.0 19.3 48.9 41.0 7.4 6.4 15.7 16.6 0.6 0.7

62






Siasun Robot & Automation Co. Ltd - A Li, Karen CNY UW 300024.SZ 13.78 -0.86 11.20 -18.7 3,035 71.2 2019 0.22 0.23 -23.8 4.9 62.8 59.9 3.3 3.2 5.4 5.4 0.3 0.3

Techtronic Industries (0669) Xu, Patrick USD OW 0669.HK 56.95 2.43 78.00 37.0 13,447 41.3 2020 0.38 0.46 14.1 19.2 19.1 16.1 3.5 3.0 19.3 20.2 2.1 2.6

Yinghe Technology - A Wen, Rebecca Y CNY N 300457.SZ 40.68 -2.09 43.00 5.7 2,159 52.0 2019 0.52 1.07 -50.3 103.3 77.6 38.2 4.9 4.3 6.4 12.0 0.1 0.0Mkt Cap Weighted Aggregates 43,621 388.4 39.6 30.8 5.5 4.7 15.9 17.3 1.3 1.6

Insurance Brokers

Fanhua Inc. Kim, MW CNY NR FANH 20.62 0.29 na na 1,341 6.0 2018 na na na na na na na na na na na naMkt Cap Weighted Aggregates 1,341 6.0 na na na na na na na na

Integrated Oil & Gas

PetroChina - A Darling, Scott L CNY N 601857.SS 4.55 2.02 5.05 11.0 117,550 90.9 2020 0.06 0.08 -76.2 37.9 76.6 55.6 0.6 0.6 0.8 1.0 1.3 1.1

PetroChina - H Darling, Scott L CNY N 0857.HK 2.70 0.75 3.09 14.4 63,761 71.1 2020 0.06 0.08 -76.2 37.9 41.6 30.1 0.3 0.3 0.8 1.0 2.4 2.0

Sinopec Corp - A Darling, Scott L CNY OW 600028.SS 4.55 0.89 5.84 28.4 77,761 87.7 2020 0.28 0.31 -40.3 10.5 16.1 14.5 0.7 0.6 4.4 4.4 4.4 4.1

Sinopec Corp - H Darling, Scott L CNY OW 0386.HK 3.78 0.53 5.22 38.1 59,051 84.8 2020 0.28 0.31 -40.3 10.5 12.2 11.0 0.5 0.5 4.4 4.4 5.7 5.4Mkt Cap Weighted Aggregates 318,123 334.5 42.8 32.2 0.5 0.5 2.4 2.5 3.1 2.8

Integrated Telecommunication Services

China Telecom (0728) Wei, Michelle CNY OW 0728.HK 2.59 1.57 4.30 66.0 27,047 27.3 2020 0.26 0.28 1.9 9.4 9.2 8.4 0.5 0.5 5.9 6.3 4.9 5.4

China Tower (0788) Wei, Michelle CNY N 0788.HK 1.74 1.16 1.80 3.4 39,516 130.3 2020 0.04 0.05 28.2 27.6 41.8 32.8 1.5 1.5 3.6 4.5 1.2 1.6

China Unicom - H Wei, Michelle CNY OW 0762.HK 5.01 2.24 10.50 109.6 19,780 34.1 2020 0.39 0.44 4.7 13.1 11.8 10.5 0.4 0.4 3.7 4.1 3.4 3.8Mkt Cap Weighted Aggregates 86,343 191.8 24.7 20.0 1.0 0.9 4.3 5.0 2.9 3.3

Interactive Home Entertainment

Bilibili Yao, Alex CNY N BILI 30.20 5.71 25.00 -17.2 9,767 149.5 2019 -4.03 -5.45 51.9 35.1 na na 11.9 16.6 NM NM na na

Douyu Chen, Daniel CNY N DOYU 7.25 3.57 7.50 3.4 2,367 11.5 2020 2.29 3.49 1,581.5 52.2 22.4 14.7 2.4 2.0 13.6 16.8 na na

Huya Chen, Daniel CNY OW HUYA 15.44 1.78 19.00 23.1 3,581 56.3 2020 3.28 5.71 62.7 74.0 33.4 19.2 2.7 2.3 12.8 15.9 na na

NetEase Yao, Alex CNY OW NTES 348.67 1.24 400.00 14.7 45,147 282.3 2020 98.27 117.90 -4.1 20.0 25.2 21.0 5.1 4.4 26.5 27.1 1.2 1.5Mkt Cap Weighted Aggregates 60,862 499.6 21.5 17.3 6.0 6.1 20.9 21.7 0.9 1.1

Interactive Media & Services

Autohome Inc Yao, Alex CNY N ATHM 75.78 -0.49 70.00 -7.6 8,906 54.2 2020 29.04 34.91 8.8 20.2 18.5 15.4 3.5 2.8 22.3 21.4 na na

Baidu.com Yao, Alex CNY OW BIDU 101.75 0.34 140.00 37.6 35,333 521.4 2020 33.55 55.68 468.4 66.0 21.5 13.0 1.3 1.1 8.9 12.4 na na

BitAuto Holdings Limited Yao, Alex CNY OW BITA 11.51 3.51 18.00 56.4 891 5.0 2019 -0.93 10.29 -89.3 NM na 7.9 0.6 0.5 5.7 7.0 na na

Momo Inc Chen, Daniel CNY OW MOMO 22.99 0.92 36.00 56.6 4,792 118.7 2020 13.08 17.09 -0.6 30.6 12.5 9.5 2.4 1.9 21.5 22.2 na na

Phoenix New Media Ltd Yao, Alex CNY OW FENG 1.40 6.06 10.00 614.3 102 0.1 2018 na na na na na na na na na na na na

Sina Corp Yao, Alex USD OW SINA 33.15 0.27 54.00 62.9 2,438 27.1 2020 0.53 1.02 NM 92.2 62.2 32.4 0.5 0.5 5.8 6.6 na na

Sogou Yao, Alex USD UW SOGO 3.31 -1.19 4.00 20.8 1,295 4.4 2019 0.22 0.27 -14.0 23.5 15.1 12.3 1.2 1.1 9.8 10.8 na na

Tencent (0700) Yao, Alex CNY OW 0700.HK 411.60 0.54 530.00 28.8 501,243 1229.5 2020 10.66 14.14 9.5 32.6 35.3 26.6 6.4 5.2 22.7 23.8 0.3 0.3

63






Weibo Corporation Yao, Alex USD N WB 35.94 1.35 41.00 14.1 8,258 80.6 2020 1.87 2.55 -13.0 36.0 19.2 14.1 2.9 2.4 19.8 21.3 na naWise Talent Information Technology (Liepin) (6100) Yao, Alex CNY N 6100.HK 16.28 0.12 18.00 10.6 1,095 1.0 2020 0.34 0.59 48.8 70.5 43.3 25.4 2.5 2.3 7.9 11.6 0.0 0.0

YY Inc Chen, Daniel CNY OW YY 60.66 1.56 70.00 15.4 5,039 62.7 2020 5.37 25.20 -87.9 369.3 80.1 17.1 1.4 1.2 8.6 13.8 na naMkt Cap Weighted Aggregates 569,392 2104.8 34.2 25.1 5.9 4.8 21.5 22.8 0.2 0.3

Internet & Direct Marketing Retail

Alibaba Group Holding Limited Yao, Alex CNY OW BABA 209.96 1.26 280.00 33.4 550,830 3571.3 2020 56.68 45.18 69.7 -20.3 26.3 33.0 46.6 38.6 23.2 22.7 na na

JD.com, Inc. Chang, Andre CNY OW JD 44.99 4.05 52.00 15.6 65,759 735.5 2020 3.18 8.99 -62.0 182.4 na 35.5 8.8 7.7 9.8 17.2 na na

Maoyan Entertainment Wei, Michelle CNY OW 1896.HK 9.99 -1.87 17.00 70.2 1,457 3.0 2020 0.08 0.77 -79.7 824.5 na 11.9 1.1 1.0 2.6 12.2 0.0 0.0

Meituan Dianping (3690) Yao, Alex CNY OW 3690.HK 100.00 -1.28 120.00 20.0 70,851 386.9 2020 0.12 2.23 -71.3 1,811.6 na 41.0 5.8 5.0 3.7 15.6 na na

Pinduoduo Inc. Chang, Andre CNY UW PDD 52.15 2.38 21.00 -59.7 68,367 300.4 2020 -3.88 2.51 -36.1 NM na na 16.0 13.0 NM 17.4 na na

Tongcheng-Elong (0780) Kim, DS CNY OW 0780.HK 12.46 3.83 16.00 28.4 3,311 9.8 2020 0.21 0.62 -37.8 200.4 54.8 18.2 1.7 1.6 7.7 14.2 na na

Trip.com Group Ltd Yao, Alex CNY OW TCOM 23.00 -1.08 36.00 56.5 12,198 233.6 2020 -3.73 10.21 NM NM na 16.0 1.1 1.1 NM 9.0 0.0 0.0

Uxin Yao, Alex CNY N UXIN 1.57 3.29 2.30 46.5 440 3.0 2019 -4.79 -2.59 -68.0 -46.0 na na na na na 30.0 na na

Vipshop Chang, Andre CNY OW VIPS 17.55 0.98 20.00 14.0 11,706 104.7 2020 7.87 11.19 33.5 42.2 15.8 11.1 3.0 2.3 23.2 25.4 na na

Yunji Inc. Chang, Andre CNY N YJ 3.21 13.43 3.70 15.3 700 0.3 2020 0.79 1.73 NM 120.6 29.0 13.1 4.5 3.3 26.4 35.4 na naMkt Cap Weighted Aggregates 785,617 5348.5 18.9 30.3 35.4 29.3 17.9 20.9 0.0 0.0

Internet Services & Infrastructure

AtHub - A Hariharan, Gokul CNY N 603881.SS 58.33 -2.18 32.00 -45.1 1,734 68.5 2019 0.94 1.23 38.4 30.8 62.1 47.5 10.5 8.9 18.3 20.4 0.3 0.4

GDS Holdings Hariharan, Gokul CNY OW GDS 60.32 3.71 58.00 -3.8 8,908 81.5 2020 -0.35 1.19 -90.3 NM na na 5.5 5.3 2.3 4.5 na na

Sinnet - A Hariharan, Gokul CNY OW 300383.SZ 25.54 -2.63 22.30 -12.7 5,551 261.0 2019 0.68 1.16 57.1 71.0 37.5 21.9 4.7 4.0 13.2 19.5 0.4 0.7

Wangsu - A Hariharan, Gokul CNY N 300017.SZ 8.68 -3.45 15.00 72.8 2,981 138.9 2019 0.75 0.64 128.3 -15.2 11.5 13.6 2.1 1.9 19.3 14.3 1.0 2.2Mkt Cap Weighted Aggregates 19,174 549.9 18.3 12.8 5.2 4.7 9.5 11.8 0.3 0.6

Investment Banking & Brokerage

China Galaxy Securities Co (6881) Huang, Jemmy S CNY N 6881.HK 3.72 -1.33 4.60 23.7 4,866 10.4 2019 0.45 0.46 57.6 1.8 7.6 7.4 0.5 0.5 6.7 6.5 4.2 4.2

China International Capital Corporation (3908) Huang, Jemmy S CNY OW 3908.HK 11.06 0.00 18.40 66.4 5,687 19.9 2019 1.03 1.20 21.6 17.2 9.9 8.4 0.9 0.9 10.0 10.8 2.0 2.4

China Merchants Securities Company Ltd - A Huang, Jemmy S CNY UW 600999.SS 17.98 -1.69 8.90 -50.5 17,003 55.2 2019 0.97 1.03 46.7 6.2 18.6 17.5 1.7 1.6 8.4 8.5 1.9 2.0

China Merchants Securities Company Ltd - H Huang, Jemmy S CNY N 6099.HK 8.39 -0.12 9.80 16.8 7,253 1.9 2019 0.97 1.03 46.7 6.2 7.9 7.4 0.7 0.7 8.4 8.5 4.4 4.7

CITIC Securities - A Huang, Jemmy S CNY UW 600030.SS 22.92 -1.16 17.30 -24.5 35,644 622.6 2019 0.98 1.08 26.7 9.7 23.3 21.3 1.7 1.7 7.6 8.0 1.9 2.1

CITIC Securities - H Huang, Jemmy S CNY OW 6030.HK 14.20 -0.56 19.00 33.8 20,186 50.9 2019 0.98 1.08 26.7 9.7 13.2 12.1 1.0 1.0 7.6 8.0 3.4 3.7

GF Securities Co Ltd - A Huang, Jemmy S CNY UW 000776.SZ 13.63 -0.51 10.70 -21.5 14,663 90.8 2019 0.95 1.08 68.9 13.5 14.3 12.6 1.1 1.1 8.2 8.7 2.4 2.8

GF Securities Co Ltd - H Huang, Jemmy S CNY OW 1776.HK 8.11 -0.86 11.80 45.5 7,975 8.1 2019 0.95 1.08 68.9 13.5 7.8 6.8 0.6 0.6 8.2 8.7 4.5 5.1

Guotai Junan Securities - A Huang, Jemmy S CNY UW 601211.SS 16.70 -0.48 12.40 -25.7 20,542 99.9 2019 0.99 1.01 41.5 1.4 16.8 16.6 1.2 1.2 7.5 7.2 2.3 2.4

Guotai Junan Securities - H Huang, Jemmy S CNY N 2611.HK 10.84 -0.37 13.60 25.5 12,188 2.6 2019 0.99 1.01 41.5 1.4 10.0 9.8 0.7 0.7 7.5 7.2 3.9 4.0

64






Haitong Securities - A Huang, Jemmy S CNY UW 600837.SS 12.80 -0.54 9.50 -25.8 17,319 177.4 2019 0.78 0.84 72.0 7.6 16.4 15.3 1.2 1.1 7.4 7.5 1.8 2.0

Haitong Securities - H Huang, Jemmy S CNY OW 6837.HK 6.92 0.29 10.50 51.7 8,558 23.1 2019 0.78 0.84 72.0 7.6 8.1 7.5 0.6 0.5 7.4 7.5 3.7 4.0

Huatai Securities - A Huang, Jemmy S CNY UW 601688.SS 17.71 -0.95 14.10 -20.4 17,906 231.8 2019 0.85 0.89 28.1 4.8 20.9 20.0 1.3 1.3 6.6 6.6 1.8 2.0

Huatai Securities - H Huang, Jemmy S CNY OW 6886.HK 12.66 0.32 15.50 22.4 11,701 13.6 2019 0.85 0.89 28.1 4.8 13.7 13.1 0.9 0.8 6.6 6.6 2.8 3.1Mkt Cap Weighted Aggregates 201,490 1408.2 15.8 14.8 1.2 1.1 7.6 7.8 2.6 2.8

Leisure Facilities

Shenzhen Overseas Chinese Town - A Li, Ryan CNY OW 000069.SZ 6.33 1.44 9.00 42.2 7,331 43.7 2019 1.47 1.76 13.9 19.6 4.3 3.6 0.8 0.6 18.9 19.4 5.8 6.9Mkt Cap Weighted Aggregates 7,331 43.7 4.3 3.6 0.8 0.6 18.9 19.4 5.8 6.9

Life & Health Insurance

China Life Insurance - A Kim, MW CNY N 601628.SS 28.09 0.57 29.00 3.2 112,075 67.9 2020 1.56 1.78 -24.2 13.7 18.0 15.8 2.0 1.9 11.1 12.5 1.9 2.2

China Life Insurance - H Kim, MW CNY OW 2628.HK 15.82 0.00 33.00 108.6 57,696 116.6 2020 1.56 1.78 -24.2 13.7 9.2 8.1 1.0 1.0 11.1 12.5 3.8 4.3

New China Life Insurance - A Kim, MW CNY UW 601336.SS 43.26 0.07 19.00 -56.1 19,050 86.1 2020 3.00 4.11 -35.8 37.2 14.4 10.5 1.5 1.3 10.6 13.3 1.7 2.4

New China Life Insurance - H Kim, MW CNY N 1336.HK 24.65 0.20 23.00 -6.7 9,922 40.0 2020 3.00 4.11 -35.8 37.2 7.5 5.5 0.8 0.7 10.6 13.3 3.3 4.6

Ping An Insurance Group - A Kim, MW CNY OW 601318.SS 72.16 0.12 90.00 24.7 186,198 774.8 2020 6.23 8.91 -23.9 43.0 11.6 8.1 1.7 1.5 15.9 19.9 2.6 3.7

Ping An Insurance Group - H Kim, MW CNY OW 2318.HK 78.05 0.32 100.00 28.1 183,512 446.9 2020 6.23 8.91 -23.9 43.0 11.4 8.0 1.7 1.5 15.9 19.9 2.6 3.7Mkt Cap Weighted Aggregates 568,454 1532.4 12.6 9.6 1.7 1.5 14.2 17.4 2.6 3.5

Life Sciences Tools & Services

Genscript Biotech Corporation (1548) Li, David USD NR 1548.HK 13.18 2.49 na na 2,823 14.4 2019 na na na na na na na na na na na na

Viva Biotech Li, David CNY OW 1873.HK 4.77 1.27 5.50 15.3 961 2.6 2020 0.29 0.42 53.4 45.7 15.0 10.3 3.0 2.4 20.8 24.5 na na

WuXi AppTec - A Li, David CNY OW 603259.SS 102.30 -2.71 120.00 17.3 21,381 197.2 2020 1.46 2.02 29.0 37.7 69.9 50.7 9.2 8.1 14.5 17.6 0.3 0.4

WuXi AppTec - H Li, David CNY OW 2359.HK 109.10 -2.85 120.00 10.0 2,400 16.9 2020 1.46 2.02 29.0 37.7 68.1 49.5 8.9 7.9 14.5 17.6 0.3 0.4

Wuxi Biologics (2269) Li, David CNY OW 2269.HK 121.50 1.25 140.00 15.2 20,343 95.9 2020 0.99 1.41 31.3 42.5 na 78.6 10.9 9.6 12.0 14.9 0.0 0.0Mkt Cap Weighted Aggregates 47,908 327.0 34.9 58.7 9.2 8.1 12.7 15.5 0.2 0.2

Marine

COSCO SHIPPING Holdings Co Ltd - A Li, Karen CNY N 601919.SS 3.79 1.88 4.80 26.6 5,466 17.8 2019 0.31 0.05 154.3 -84.3 12.4 78.7 1.2 1.3 12.3 1.6 0.0 0.0

COSCO SHIPPING Holdings Co Ltd - H Li, Karen CNY OW 1919.HK 2.09 0.00 3.00 43.5 2,755 2.7 2019 0.31 0.05 154.3 -84.3 6.2 39.7 0.6 0.6 12.3 1.6 0.0 0.0Mkt Cap Weighted Aggregates 8,221 20.5 10.3 65.6 1.0 1.1 12.3 1.6 0.0 0.0

Marine Ports & Services

China Merchants Port Holdings Co Ltd (0144) Wong, Calvin C HKD NR 0144.HK 9.08 -0.22 na na 3,866 10.8 2019 1.37 1.44 -37.7 5.4 6.6 6.3 0.4 0.4 5.9 6.1 6.5 6.8

COSCO SHIPPING Ports Ltd (1199) Wong, Calvin C USD OW 1199.HK 3.70 -4.39 10.00 170.3 1,502 3.5 2019 0.09 0.10 -13.7 13.8 5.2 4.6 0.3 0.3 5.8 6.0 7.7 8.7

Shanghai International Port (Group) - A Wong, Calvin C CNY UW 600018.SS 4.29 0.23 5.10 18.9 14,033 21.9 2019 0.41 0.47 -8.5 16.1 10.6 9.1 1.2 1.1 12.0 12.8 3.5 4.1Mkt Cap Weighted Aggregates 19,402 36.2 9.4 8.2 1.0 0.9 10.3 11.0 4.4 5.0

65






Movies & Entertainment

Alibaba Pictures Wei, Michelle CNY N 1060.HK 0.94 0.00 1.60 70.2 3,230 5.8 2020 -0.01 0.03 13.1 NM na 33.7 1.6 1.5 NM 5.0 0.0 0.0

China Film - A Wei, Michelle CNY OW 600977.SS 12.36 -0.96 16.00 29.4 3,257 25.5 2019 0.56 0.63 -30.2 11.9 22.1 19.8 2.0 1.9 9.1 9.7 2.3 2.5

IMAX China Wei, Michelle USD N 1970.HK 11.30 -1.91 18.00 59.3 510 0.6 2020 0.09 0.13 -25.8 36.6 15.5 11.4 1.7 1.5 11.9 14.3 2.7 2.8

iQiyi Yao, Alex CNY N IQ 18.43 -0.75 23.00 24.8 11,513 191.0 2020 -11.29 -7.73 -20.2 -31.6 na na 10.4 9.4 NM NM na na

Tencent Music Entertainment Yao, Alex CNY OW TME 11.12 1.46 15.00 34.9 17,625 92.9 2020 2.06 2.79 -15.0 35.6 38.3 28.2 2.8 2.6 9.3 11.5 na na

Wanda Film - A Wei, Michelle CNY N 002739.SZ 14.99 -1.38 17.00 13.4 4,398 58.1 2019 0.78 0.92 6.4 17.6 19.2 16.3 1.6 1.5 9.4 9.3 0.8 1.0

Zhejiang Huace Film & TV Co. Ltd - A Wei, Michelle CNY N 300133.SZ 7.47 -2.23 8.30 11.1 1,851 27.5 2019 -0.73 0.19 NM NM na 38.4 2.4 2.2 NM 6.0 0.2 0.1Mkt Cap Weighted Aggregates 42,384 401.4 19.8 19.3 4.5 4.1 5.7 7.3 0.3 0.3

Multi-line Insurance

China Pacific Insurance Group - A Kim, MW CNY N 601601.SS 29.21 1.00 27.00 -7.6 35,621 130.2 2020 2.33 2.89 -24.0 24.2 12.6 10.1 1.5 1.4 12.0 14.5 4.1 4.8

China Pacific Insurance Group - H Kim, MW CNY OW 2601.HK 24.00 0.21 29.00 20.8 26,753 64.1 2020 2.33 2.89 -24.0 24.2 9.4 7.6 1.1 1.1 12.0 14.5 5.5 6.4Mkt Cap Weighted Aggregates 62,374 194.2 11.2 9.0 1.4 1.3 12.0 14.5 4.7 5.5

Office Services & Supplies

Shenzhen Selen - A Hariharan, Gokul CNY N 002341.SZ 5.57 -1.24 7.00 25.7 906 86.1 2019 0.32 0.36 24.1 10.6 17.2 15.5 1.2 1.1 7.0 7.3 0.5 0.6Mkt Cap Weighted Aggregates 906 86.1 17.2 15.5 1.2 1.1 7.0 7.3 0.5 0.6

Oil & Gas Drilling

China Oilfield Services Limited - A Mu, Lei CNY OW 601808.SS 12.90 7.77 15.73 21.9 8,689 38.1 2020 0.67 0.84 17.0 24.7 19.2 15.4 1.9 1.7 9.2 11.6 1.2 1.2

China Oilfield Services Limited - H Mu, Lei CNY OW 2883.HK 5.94 1.89 9.00 51.5 3,657 19.9 2020 0.67 0.84 17.0 24.7 8.1 6.5 0.8 0.7 9.2 11.6 2.9 2.9Mkt Cap Weighted Aggregates 12,346 58.0 15.9 12.7 1.5 1.4 9.2 11.6 1.7 1.7

Oil & Gas Equipment & Services

Offshore Oil Engineering Co., Ltd. - A Mu, Lei CNY OW 600583.SS 5.47 10.06 8.44 54.3 3,414 23.3 2020 0.35 0.44 5,512.1 23.2 15.4 12.5 0.7 0.5 5.2 4.3 1.9 2.4

Sinopec Oilfield Service - A Mu, Lei CNY OW 600871.SS 1.99 2.05 2.26 13.6 3,973 12.3 2020 0.06 0.07 19.8 18.0 34.5 29.2 2.6 1.7 10.2 6.9 0.0 0.0

Sinopec Oilfield Service - H Mu, Lei CNY OW 1033.HK 0.58 1.75 0.83 43.1 1,058 0.7 2020 0.06 0.07 19.8 18.0 9.2 7.8 0.7 0.4 10.2 6.9 0.0 0.0

Yantai Jereh Oilfield - A Mu, Lei CNY OW 002353.SZ 26.70 5.58 38.18 43.0 3,610 88.3 2020 1.86 2.38 30.7 28.1 14.4 11.2 2.0 1.6 15.9 16.2 0.8 1.0Mkt Cap Weighted Aggregates 12,055 124.7 20.9 17.2 1.7 1.2 10.5 8.9 0.8 1.0

Oil & Gas Exploration & Production

CNOOC (0883) Darling, Scott L CNY OW 0883.HK 8.44 2.43 11.75 39.2 48,622 141.5 2020 0.58 0.73 -57.8 27.1 13.4 10.5 0.8 0.7 5.7 7.0 4.5 4.5Mkt Cap Weighted Aggregates 48,622 141.5 13.4 10.5 0.8 0.7 5.7 7.0 4.5 4.5

Oil & Gas Storage & Transportation

Sinopec Kantons (0934) Darling, Scott L HKD OW 0934.HK 3.29 7.87 3.79 15.2 1,055 1.5 2019 0.56 0.52 11.3 -8.8 5.8 6.4 0.7 0.6 11.8 9.7 6.0 6.3

66







Packaged Foods & Meats

Angel Yeast Co - A Yin, Kevin CNY OW 600298.SS 37.63 -0.19 38.80 3.1 4,377 51.2 2020 1.24 1.49 13.6 20.2 30.3 25.2 5.4 4.8 19.1 20.2 1.2 1.4

China Feihe Limited Yin, Kevin CNY N 6186.HK 14.76 0.27 13.80 -6.5 17,013 31.7 2020 0.56 0.68 16.1 20.8 24.1 20.0 7.5 6.1 34.4 33.8 1.7 2.0

China Mengniu Dairy Yin, Kevin CNY OW 2319.HK 27.50 1.48 35.00 27.3 13,873 42.5 2020 1.04 1.28 -1.2 23.6 24.2 19.6 3.0 2.7 13.2 14.5 0.8 1.0

Dali Foods (3799) Yin, Kevin CNY OW 3799.HK 4.75 -0.21 6.40 34.7 8,393 4.6 2020 0.29 0.32 2.4 9.8 15.1 13.8 3.3 3.0 23.0 23.1 4.0 4.4

Haitian Flavoring & Food - A Yin, Kevin CNY OW 603288.SS 125.85 -0.45 130.00 3.3 47,987 76.8 2020 2.34 2.73 18.1 16.7 53.8 46.1 17.0 14.4 34.6 33.9 1.1 1.3

Inner Mongolia Yili - A Yin, Kevin CNY OW 600887.SS 30.73 1.32 32.50 5.8 26,370 235.1 2019 1.13 1.26 6.7 11.7 27.2 24.3 6.1 5.5 21.7 22.2 2.2 2.5

Shuanghui - A Yin, Kevin CNY OW 000895.SZ 41.56 -1.52 42.00 1.1 19,357 91.2 2020 1.82 2.02 10.2 11.3 22.9 20.6 8.0 7.7 35.7 38.3 3.9 4.4

Tingyi (0322) Yin, Kevin CNY OW 0322.HK 13.90 0.43 15.80 13.7 10,075 19.8 2020 0.49 0.53 -17.4 9.0 25.9 23.8 3.8 3.5 12.7 14.1 1.9 2.1

Uni-President China (0220) Yin, Kevin CNY OW 0220.HK 7.75 0.52 9.60 23.9 4,319 4.1 2020 0.33 0.37 5.7 10.0 21.2 19.3 2.2 2.1 10.4 11.1 3.8 4.2

Want Want (0151) Yin, Kevin CNY N 0151.HK 5.61 2.37 7.10 26.6 8,987 13.9 2020 0.29 0.31 5.1 5.7 17.6 16.6 4.0 3.9 23.4 23.8 4.8 5.1

WH Group (0288) Yin, Kevin USD OW 0288.HK 7.78 1.57 10.70 37.5 14,784 45.4 2020 0.10 0.10 -3.9 4.2 10.5 10.0 1.6 1.4 16.5 15.8 4.3 4.5Mkt Cap Weighted Aggregates 175,535 616.3 30.8 26.8 8.3 7.3 26.2 26.5 2.3 2.6

Paper Packaging

Yunnan Energy New Material - A Wen, Rebecca Y CNY N 002812.SZ 51.00 -1.22 40.00 -21.6 5,798 98.4 2020 1.24 1.61 17.7 30.0 41.1 31.6 7.5 6.3 20.0 21.7 0.2 0.5Mkt Cap Weighted Aggregates 5,798 98.4 41.1 31.6 7.5 6.3 20.0 21.7 0.2 0.5

Paper Products

Nine Dragons Paper Holdings Ltd (2689) Wei, Po CNY OW 2689.HK 7.28 -1.75 8.50 16.8 4,408 15.4 2020 0.86 0.87 4.7 0.3 7.7 7.7 0.8 0.7 10.4 9.8 4.4 4.4Mkt Cap Weighted Aggregates 4,408 15.4 7.7 7.7 0.8 0.7 10.4 9.8 4.4 4.4

Personal Products

Hengan (1044) Yin, Kevin CNY N 1044.HK 66.85 0.75 54.00 -19.2 10,262 36.3 2020 3.19 3.07 -2.9 -3.9 19.2 19.9 3.8 3.6 20.6 18.6 3.6 3.4

Shanghai Jahwa - A Yao, Qian CNY UW 600315.SS 30.58 10.00 24.30 -20.5 2,897 22.2 2020 0.66 0.75 -20.6 14.4 46.4 40.5 3.1 3.0 6.9 7.5 0.6 0.7Mkt Cap Weighted Aggregates 13,159 58.4 25.1 24.5 3.7 3.5 17.5 16.1 2.9 2.8

Pharmaceuticals

China Medical System (0867) Yin, Sherry CNY OW 0867.HK 9.43 -0.84 12.00 27.3 3,018 10.1 2019 0.83 0.88 10.9 6.4 10.4 9.8 2.2 2.0 22.8 21.3 3.8 4.0

China Resources Double-Crane - A Li, David CNY N 600062.SS 13.29 2.07 13.00 -2.2 1,957 27.9 2020 1.11 1.23 10.1 10.8 11.9 10.8 1.5 1.3 12.9 12.9 2.3 2.3China Resources Pharmaceutical Group (3320) Li, David HKD N 3320.HK 4.93 1.23 5.80 17.6 3,998 7.5 2020 0.56 0.63 7.4 12.2 8.8 7.8 0.7 0.7 8.4 8.8 2.4 2.7

China Resources Sanjiu - A Li, David CNY OW 000999.SZ 29.85 -0.03 35.00 17.3 4,125 55.1 2020 1.90 2.15 -12.9 13.4 15.7 13.9 2.1 1.8 13.9 14.1 1.2 1.2

CSPC Pharmaceutical Group (1093) Yin, Sherry CNY OW 1093.HK 15.94 0.76 21.00 31.7 12,827 79.7 2020 0.69 0.88 15.0 28.5 21.3 16.5 4.3 3.6 21.5 23.7 1.6 2.0

Hengrui - A Wang, Ling CNY N 600276.SS 96.05 -1.49 97.00 1.0 59,966 300.2 2020 1.48 1.88 22.5 27.0 64.9 51.1 13.7 10.9 23.5 23.8 0.1 0.1

Shanghai Fosun Pharmaceutical Group - A Li, David CNY OW 600196.SS 36.39 -1.91 37.00 1.7 13,165 230.8 2019 1.25 1.62 18.7 29.6 29.0 22.4 3.1 2.8 11.1 13.2 0.9 1.0

67






Shanghai Fosun Pharmaceutical Group - H Li, David CNY OW 2196.HK 29.65 2.24 35.00 18.0 9,806 18.3 2019 1.25 1.62 18.7 29.6 21.6 16.7 2.3 2.1 11.1 13.2 1.2 1.4

Sino Biopharm (1177) Wang, Ling CNY OW 1177.HK 11.26 1.62 13.80 22.6 18,289 88.6 2020 0.26 0.34 19.8 33.4 40.0 30.0 3.8 3.5 11.3 13.4 0.5 0.6Mkt Cap Weighted Aggregates 127,150 818.2 44.4 34.8 8.1 6.6 18.3 19.4 0.7 0.8

Property & Casualty Insurance

PICC Group - A Kim, MW CNY UW 601319.SS 6.27 -0.63 2.70 -56.9 37,548 63.6 2020 0.41 0.51 -20.6 22.7 15.2 12.4 1.3 1.2 9.2 10.4 1.2 1.6

PICC Group - H Kim, MW CNY OW 1339.HK 2.47 -1.59 3.00 21.5 13,569 15.4 2020 0.41 0.51 -20.6 22.7 5.5 4.5 0.5 0.4 9.2 10.4 3.2 4.5

PICC Property and Casualty (2328) Kim, MW CNY OW 2328.HK 7.22 -1.37 10.50 45.4 20,721 31.0 2020 0.84 1.08 -22.6 27.5 7.8 6.1 0.8 0.7 10.7 12.6 4.5 5.7

ZhongAn Online P&C Insurance (6060) Kim, MW CNY N 6060.HK 25.00 -1.77 22.00 -12.0 4,002 22.2 2020 -0.28 0.61 -34.7 NM na 37.4 1.7 1.6 NM 5.4 0.0 0.0Mkt Cap Weighted Aggregates 75,839 132.3 10.6 10.6 1.1 1.0 9.1 10.8 2.4 3.2

Publishing

China Literature Limited (0772) Yao, Alex CNY UW 0772.HK 30.90 1.15 24.00 -22.3 3,581 14.7 2019 1.12 1.36 10.2 21.9 25.3 20.7 1.5 1.4 5.9 7.9 0.0 0.0Mkt Cap Weighted Aggregates 3,581 14.7 25.3 20.7 1.5 1.4 5.9 7.9 0.0 0.0

Railroads

Daqin Railway - A Li, Karen CNY OW 601006.SS 6.82 0.59 12.20 78.9 14,312 29.8 2019 0.92 0.92 -6.0 0.4 7.4 7.4 0.9 0.8 12.5 11.8 6.7 6.8

Guangshen Railway Co Ltd - A Xu, Patrick CNY N 601333.SS 2.36 -0.42 2.40 1.7 2,360 10.1 2020 0.11 0.13 3.4 22.9 21.6 17.6 0.6 0.6 2.6 3.2 2.6 3.2

Guangshen Railway Co Ltd - H Xu, Patrick CNY OW 0525.HK 1.55 0.65 2.60 67.7 1,417 0.9 2020 0.11 0.13 3.4 22.9 13.0 10.5 0.3 0.3 2.6 3.2 4.4 5.4Mkt Cap Weighted Aggregates 18,089 40.8 9.7 9.0 0.8 0.8 10.4 10.0 6.0 6.2

Real Estate Development

Agile Group Holdings Ltd (3383) Li, Ryan CNY OW 3383.HK 8.14 0.37 12.20 49.9 4,114 10.2 2020 2.05 2.28 5.8 11.2 3.6 3.3 0.5 0.5 14.0 15.5 12.9 14.0

China Aoyuan Group Chan, Karl Man Ho CNY OW 3883.HK 8.88 0.79 13.50 52.0 3,083 12.5 2020 2.25 2.83 43.6 26.0 3.6 2.9 1.1 0.9 32.9 32.1 9.7 12.2

China Evergrande Group (3333) Li, Ryan CNY N 3333.HK 12.96 1.89 10.00 -22.8 22,138 44.3 2020 1.79 2.03 36.0 13.6 6.6 5.8 1.0 0.9 14.8 15.4 7.5 8.6

China Jinmao (0817) Li, Ryan CNY N 0817.HK 5.21 0.97 5.60 7.5 7,912 18.0 2020 0.72 0.87 30.5 20.3 6.6 5.5 0.9 0.8 15.2 14.6 6.1 7.3China Merchants Shekou Industrial Zone Holdings - A Li, Ryan CNY OW 001979.SZ 17.17 3.37 26.00 51.4 19,157 31.9 2019 2.28 2.68 18.4 17.5 7.5 6.4 1.7 1.4 22.0 22.6 6.8 8.0

China Overseas Land & Investment (0688) Li, Ryan HKD OW 0688.HK 26.20 0.58 32.00 22.1 37,039 63.3 2020 5.12 5.73 9.8 11.8 5.1 4.6 0.8 0.7 14.4 14.4 4.8 5.5

China Resources Land (1109) Li, Ryan CNY OW 1109.HK 31.10 0.97 40.00 28.6 28,615 71.5 2020 4.34 4.83 5.5 11.2 6.5 5.9 1.0 0.9 13.0 13.2 4.1 4.7

China SCE Group Chan, Karl Man Ho CNY OW 1966.HK 3.30 0.30 5.60 69.7 1,781 6.4 2020 1.06 1.36 24.3 28.8 2.9 2.2 0.6 0.5 17.8 19.5 9.2 12.5

China Vanke - A Li, Ryan CNY OW 000002.SZ 26.00 -0.50 36.00 38.5 35,689 344.7 2020 4.01 4.65 15.2 16.0 6.5 5.6 1.3 1.1 22.1 21.9 5.2 6.1

China Vanke - H Li, Ryan CNY OW 2202.HK 24.45 -0.20 38.50 57.5 4,978 31.0 2020 4.01 4.65 15.2 16.0 5.6 4.8 1.1 1.0 22.1 21.9 6.0 7.1

CIFI Holdings Chan, Karl Man Ho CNY OW 0884.HK 5.63 1.99 7.80 38.5 5,729 18.3 2020 1.08 1.31 22.2 20.9 4.8 3.9 1.1 0.9 23.0 23.6 7.4 8.9

Country Garden Holdings (2007) Li, Ryan CNY OW 2007.HK 9.62 2.01 14.50 50.7 26,866 42.1 2020 2.19 2.36 22.2 7.7 4.0 3.7 1.0 0.9 28.2 25.1 7.7 8.3

Financial Street - A Li, Ryan CNY OW 000402.SZ 6.69 -0.45 11.00 64.4 2,823 10.1 2019 1.25 1.38 14.5 10.3 5.3 4.8 0.6 0.5 11.3 11.5 6.7 6.7

Gemdale Corp. - A Li, Ryan CNY N 600383.SS 13.16 -0.60 12.70 -3.5 8,385 67.0 2019 2.02 2.35 12.8 16.2 6.5 5.6 1.1 1.0 18.0 18.5 6.0 7.0

68






Grandjoy Holdings Group - A Li, Ryan CNY N 000031.SZ 5.29 -0.75 7.00 32.3 2,932 11.9 2019 0.72 0.83 -5.4 14.1 7.3 6.4 1.1 1.0 19.4 15.6 1.9 2.2

Greenland Holdings - A Li, Ryan CNY OW 600606.SS 5.36 -0.56 9.00 67.9 9,207 37.6 2019 1.20 1.48 28.0 23.8 4.5 3.6 0.8 0.7 18.5 20.1 6.4 8.1

Guangzhou R&F Properties (2777) Li, Ryan CNY OW 2777.HK 9.34 -0.11 17.50 87.4 3,883 20.1 2020 3.07 3.39 2.3 10.4 2.8 2.5 0.4 0.3 12.4 12.7 14.3 16.7

KWG Group (1813) Li, Ryan CNY OW 1813.HK 11.32 0.89 14.50 28.1 4,619 13.5 2020 1.89 2.18 -14.6 15.7 5.5 4.7 0.8 0.7 16.0 16.7 9.3 10.7

Logan Property Chan, Karl Man Ho CNY N 3380.HK 11.90 0.51 13.50 13.4 8,449 10.1 2020 2.20 2.67 22.6 21.6 4.9 4.1 1.4 1.0 30.6 28.8 8.1 9.8

Longfor Group (0960) Li, Ryan CNY OW 0960.HK 38.35 1.59 42.00 9.5 29,612 38.3 2020 3.34 3.98 6.8 19.2 10.5 8.8 2.0 1.7 18.5 19.7 4.0 4.7

Midea Real Estate Chan, Karl Man Ho CNY OW 3990.HK 19.00 1.17 30.00 57.9 3,017 5.0 2020 4.23 5.26 17.1 24.5 4.1 3.3 0.9 0.8 23.5 24.7 9.5 11.8

Poly Developments & Holdings - A Li, Ryan CNY OW 600048.SS 15.89 -0.38 22.00 38.5 26,599 189.6 2019 2.33 3.09 46.3 32.8 6.8 5.1 1.4 1.1 20.8 23.2 4.1 5.5

Ronshine China Holdings Chan, Karl Man Ho CNY OW 3301.HK 7.68 -0.26 10.00 30.2 1,700 3.3 2020 2.19 2.56 17.4 16.8 3.2 2.7 0.6 0.5 20.9 20.8 9.3 10.8

Seazen Group Chan, Karl Man Ho CNY OW 1030.HK 6.81 1.49 9.00 32.2 5,183 18.1 2020 1.43 1.67 23.8 17.0 4.4 3.7 1.1 0.9 29.2 26.2 8.0 9.4

Seazen Holdings - A Chan, Karl Man Ho CNY OW 601155.SS 30.65 0.29 43.00 40.3 9,771 70.7 2019 5.21 6.60 47.3 26.6 5.9 4.6 1.8 1.3 34.2 32.7 5.8 7.1

Shanghai Shimao - A Li, Ryan CNY OW 600823.SS 4.07 -0.25 5.60 37.6 2,155 7.2 2019 0.89 1.01 39.1 13.3 4.6 4.0 0.6 0.5 13.4 14.0 12.2 13.8

Shimao Property Holdings (0813) Li, Ryan CNY OW 0813.HK 30.65 0.82 38.00 24.0 13,682 36.6 2020 3.82 4.54 15.5 18.7 7.3 6.2 1.2 1.1 15.9 16.4 5.1 6.1

Shui On Land Ltd (0272) Li, Ryan CNY N 0272.HK 1.29 0.00 1.60 24.0 1,342 1.9 2019 0.34 0.26 43.5 -23.8 3.5 4.6 0.2 0.2 4.0 2.3 9.0 9.1

Sino-Ocean Group Holding Limited (3377) Li, Ryan CNY N 3377.HK 1.90 -1.55 2.20 15.8 1,867 2.8 2020 0.44 0.51 25.7 15.4 4.0 3.4 0.3 0.2 6.0 6.7 10.1 11.7

SUNAC China Li, Ryan CNY OW 1918.HK 33.05 1.23 46.00 39.2 19,793 154.1 2020 6.68 7.10 7.4 6.3 4.5 4.3 1.3 1.0 31.4 26.5 5.5 6.0

Times China Holdings (1233) Chan, Karl Man Ho CNY OW 1233.HK 12.24 -0.65 20.00 63.4 3,067 13.1 2020 3.31 3.91 15.5 18.1 3.4 2.9 0.9 0.7 29.9 28.4 8.9 10.5

Yuzhou Properties (1628) Chan, Karl Man Ho CNY OW 1628.HK 3.21 1.90 5.10 58.9 2,163 4.1 2020 0.91 1.14 29.9 25.4 3.2 2.6 0.6 0.5 19.0 20.2 10.8 13.5

Zhenro Properties Group Chan, Karl Man Ho CNY N 6158.HK 4.90 1.87 4.50 -8.2 2,762 4.0 2020 0.73 0.89 22.6 22.2 6.2 5.0 1.0 0.9 15.0 15.8 3.0 3.7Mkt Cap Weighted Aggregates 360,111 1413.6 6.1 5.2 1.2 1.0 20.3 20.0 6.0 7.0

Real Estate Operating Companies

Poly Property Development Chan, Karl Man Ho CNY N 6049.HK 78.40 -1.94 69.00 -12.0 5,395 18.7 2019 0.95 1.35 55.6 41.6 75.4 53.3 6.7 6.3 16.0 12.5 0.3 0.5

Sichuan Languang Justbon Chan, Karl Man Ho CNY OW 2606.HK 39.15 -2.12 72.00 83.9 900 4.9 2020 3.37 4.41 8.7 30.7 10.6 8.1 2.4 2.0 24.9 27.1 3.8 4.9Mkt Cap Weighted Aggregates 6,295 23.5 66.2 46.8 6.1 5.7 17.3 14.5 0.8 1.1

Real Estate Services

Colour Life Services Chan, Karl Man Ho CNY OW 1778.HK 3.46 -1.42 8.00 131.2 635 1.7 2019 0.38 0.42 8.8 10.1 8.3 7.6 1.2 1.0 14.7 14.6 4.6 5.3Mkt Cap Weighted Aggregates 635 1.7 8.3 7.6 1.2 1.0 14.7 14.6 4.6 5.3

Regional Banks

Bank of Nanjing - A Cai, George CNY N 601009.SS 7.36 -0.14 7.60 3.3 8,812 42.8 2019 1.50 1.48 14.7 -1.3 4.9 5.0 0.8 0.7 14.9 14.0 6.1 5.8

Bank of Ningbo - A Cai, George CNY OW 002142.SZ 23.40 0.30 32.00 36.8 17,205 103.9 2019 2.58 2.71 20.0 5.3 9.1 8.6 1.5 1.3 14.4 13.9 2.0 2.1

Chongqing Rural Commercial Bank (3618) Lei, Katherine CNY N 3618.HK 3.09 -1.28 3.10 0.3 3,987 5.6 2019 0.99 0.93 9.5 -6.3 2.8 3.0 0.4 0.3 12.8 11.3 7.5 7.0

Huishang Bank (3698) Lei, Katherine CNY UW 3698.HK 2.78 2.21 2.50 -10.1 4,360 0.2 2019 0.81 0.83 12.9 1.5 3.1 3.1 0.4 0.3 12.7 10.9 2.6 2.6Mkt Cap Weighted Aggregates 34,364 152.5 6.5 6.3 1.1 0.9 14.1 13.3 3.8 3.7

69






Renewable Electricity

Datang Renewable (1798) Hon, Alan CNY OW 1798.HK 0.60 1.69 0.72 20.0 563 0.3 2020 0.15 0.19 33.7 27.8 3.6 2.8 0.2 0.2 8.1 8.4 7.2 9.1

Longyuan (0916) Hon, Alan CNY OW 0916.HK 3.70 -0.54 5.60 51.4 3,837 7.2 2020 0.63 0.69 17.8 9.4 5.3 4.9 0.5 0.4 9.3 9.4 3.7 4.1

Sichuan Chuantou - A Hon, Alan CNY UW 600674.SS 8.51 -1.85 8.45 -0.7 5,288 10.5 2019 0.74 0.74 -9.1 0.0 11.5 11.5 1.4 1.3 12.6 11.6 3.2 3.2

Yangtze Power - A Hon, Alan CNY OW 600900.SS 17.30 0.46 20.55 18.8 53,725 53.2 2019 1.04 1.05 1.0 0.8 16.7 16.5 2.5 2.4 15.6 14.9 3.9 3.9Mkt Cap Weighted Aggregates 63,413 71.2 15.4 15.3 2.3 2.2 14.9 14.3 3.9 3.9

Research & Consulting Services

Centre Testing International Group - A Xu, Patrick CNY N 300012.SZ 16.80 0.72 16.00 -4.8 3,931 61.5 2020 0.33 0.46 14.2 40.8 51.2 36.4 7.7 6.4 16.1 19.2 0.2 0.3Mkt Cap Weighted Aggregates 3,931 61.5 51.2 36.4 7.7 6.4 16.1 19.2 0.2 0.3

Restaurants

Xiabuxiabu (0520) Yin, Kevin CNY OW 0520.HK 6.83 0.00 16.50 141.6 942 5.0 2019 0.53 0.64 22.8 20.5 11.7 9.7 2.6 2.2 23.5 24.3 4.8 9.1

Yum China Holdings Inc Yin, Kevin USD OW YUMC 45.66 2.75 52.00 13.9 17,214 158.2 2020 0.40 1.77 -78.8 343.3 na 25.7 5.6 4.9 4.9 20.3 1.1 1.1Mkt Cap Weighted Aggregates 18,155 163.1 0.6 24.9 5.5 4.7 5.9 20.5 1.2 1.5

Semiconductor Equipment

Daqo Hon, Alan USD OW DQ 47.21 5.71 75.00 58.9 627 17.3 2020 10.81 12.86 397.5 18.9 4.4 3.7 0.9 0.7 23.4 22.2 na na

Xinyi Solar (0968) Hon, Alan HKD OW 0968.HK 4.65 -1.69 6.30 35.5 4,849 26.6 2020 0.39 0.49 29.5 26.5 12.0 9.5 1.8 1.6 20.8 23.4 3.9 4.9Mkt Cap Weighted Aggregates 5,476 43.8 11.1 8.8 1.7 1.5 21.1 23.3 3.4 4.4

Semiconductors

LONGi Green - A Hon, Alan CNY N 601012.SS 27.85 -1.07 28.75 3.2 14,838 254.7 2019 1.48 1.51 58.7 2.0 18.9 18.5 3.8 3.2 23.1 19.0 0.7 0.8

San’an Optoelectronics - A Hariharan, Gokul CNY N 600703.SS 20.31 -1.60 13.50 -33.5 11,636 423.4 2018 na na na na na na na na na na na na

SMIC (0981) Hariharan, Gokul USD UW 0981.HK 14.56 -2.93 10.50 -27.9 10,875 198.9 2020 0.02 0.03 -46.7 36.2 87.0 63.9 1.7 1.7 2.0 2.6 0.0 0.0Mkt Cap Weighted Aggregates 37,348 876.9 32.8 25.9 2.0 1.8 9.8 8.3 0.3 0.3

Specialized Finance

Far East Horizon (3360) Huang, Jemmy S CNY OW 3360.HK 6.07 -0.98 9.20 51.6 3,095 3.1 2020 1.15 1.30 0.6 13.0 4.8 4.3 0.7 0.6 13.8 14.2 5.4 6.1Mkt Cap Weighted Aggregates 3,095 3.1 4.8 4.3 0.7 0.6 13.8 14.2 5.4 6.1

Specialty Chemicals

Beijing Easpring Material - A Fu, Han CNY UW 300073.SZ 23.58 -1.67 17.00 -27.9 1,454 83.3 2020 0.53 0.85 NM 59.3 44.3 27.8 2.7 2.4 6.9 10.3 0.0 0.0

Ningbo Shanshan - A Wen, Rebecca Y CNY N 600884.SS 10.95 -1.08 10.00 -8.7 1,735 45.7 2019 0.37 0.54 -62.9 47.0 29.7 20.2 1.1 1.1 3.8 5.4 0.7 0.3

Putailai New Energy - A Wen, Rebecca Y CNY OW 603659.SS 70.68 0.40 72.00 1.9 4,342 62.6 2020 2.06 2.40 38.0 16.1 34.2 29.5 7.5 6.3 23.9 23.2 0.6 0.9

Shenzhen Capchem - A Wei, Po CNY N 300037.SZ 38.75 -0.90 21.00 -45.8 2,036 60.7 2019 0.89 1.06 3.8 18.8 43.4 36.5 4.6 4.1 10.6 11.3 0.0 0.0

Tianqi Lithium Corp - A Wei, Po CNY UW 002466.SZ 18.89 -2.07 17.00 -10.0 3,045 280.1 2019 -2.45 0.35 NM NM na 54.0 3.0 2.9 NM 5.5 0.0 0.2

70






Wanhua Chemical - A Ong, Parsley Rui Hua CNY OW 600309.SS 42.91 0.14 50.00 16.5 16,560 143.8 2020 3.12 3.69 -3.1 18.1 13.7 11.6 2.8 2.3 21.6 21.5 2.9 3.4Mkt Cap Weighted Aggregates 29,172 676.1 19.9 21.8 3.5 3.0 17.1 17.8 1.8 2.1

Specialty Stores

China International Travel - A Hsu, George CNY NR 601888.SS 86.56 0.74 na na 23,857 171.8 2016 na na na na na na na na na na na naMkt Cap Weighted Aggregates 23,857 171.8 na na na na na na na na

Steel

Angang Steel - A Wei, Po CNY N 000898.SZ 2.66 -0.37 3.00 12.8 2,717 8.0 2020 0.12 0.18 -34.5 46.5 21.4 14.6 0.5 0.5 2.2 3.2 1.4 2.1

Angang Steel - H Wei, Po CNY N 0347.HK 1.92 -0.52 2.40 25.0 1,792 4.3 2020 0.12 0.18 -34.5 46.5 14.1 9.6 0.3 0.3 2.2 3.2 2.1 3.1

Baoshan Iron & Steel Co Ltd - A Wei, Po CNY N 600019.SS 4.83 0.00 6.60 36.6 15,182 43.2 2019 0.55 0.57 -43.6 3.5 8.8 8.5 0.6 0.6 6.9 7.0 5.8 6.0

Maanshan Iron & Steel - A Wei, Po CNY UW 600808.SS 2.50 -1.19 2.20 -12.0 2,106 12.9 2020 0.15 0.20 2.9 30.4 16.6 12.7 0.7 0.7 4.3 5.4 3.2 4.4

Maanshan Iron & Steel - H Wei, Po CNY UW 0323.HK 2.24 0.00 2.00 -10.7 501 1.8 2020 0.15 0.20 2.9 30.4 13.6 10.4 0.6 0.6 4.3 5.4 3.9 5.4Mkt Cap Weighted Aggregates 22,298 70.1 11.6 9.8 0.6 0.6 5.6 6.0 4.7 5.2

Systems Software

Aisino - A Zhang, Kevin CNY N 600271.SS 19.43 -1.47 21.00 8.1 5,109 63.0 2019 0.67 1.00 -22.7 48.3 28.9 19.5 3.1 2.9 11.0 15.2 1.7 2.6Mkt Cap Weighted Aggregates 5,109 63.0 28.9 19.5 3.1 2.9 11.0 15.2 1.7 2.6

Technology Hardware, Storage & Peripherals

Inspur - A Hariharan, Gokul CNY N 000977.SZ 39.26 -1.87 27.00 -31.2 7,145 332.9 2019 0.67 0.91 30.2 36.3 59.0 43.3 5.1 4.7 9.1 11.3 0.5 0.4

Lenovo Group Limited (0992) Hariharan, Gokul USD OW 0992.HK 4.26 -1.39 7.00 64.3 6,604 31.7 2020 0.05 0.07 5.4 24.9 10.5 8.4 1.6 1.4 21.6 23.8 6.5 6.5

Xiaomi (1810) Hariharan, Gokul CNY UW 1810.HK 10.16 0.40 9.00 -11.4 31,768 301.1 2020 0.36 0.49 -12.6 35.5 25.9 19.1 2.4 2.1 11.4 13.1 0.0 0.0Mkt Cap Weighted Aggregates 45,517 665.7 28.9 21.4 2.7 2.4 12.5 14.3 1.0 1.0

Telecommunications Equipment -- Discontinued effective 04/30/2003.

BYD Electronic International (0285) Zhang, Kevin CNY UW 0285.HK 16.78 4.22 10.00 -40.4 4,878 33.0 2019 0.71 0.55 -27.0 -22.9 21.6 28.1 2.0 1.9 9.7 7.0 0.6 0.7

Zhongji Innolight - A Hariharan, Gokul CNY OW 300308.SZ 62.08 -0.74 56.30 -9.3 4,166 69.1 2018 na na na na na na na na na na na naMkt Cap Weighted Aggregates 9,045 102.2 11.7 15.1 1.1 1.0 5.3 3.8 0.3 0.4

Textiles

Best Pacific (2111) Yao, Qian HKD N 2111.HK 1.39 0.00 1.80 29.5 186 0.0 2020 0.25 0.32 -12.0 24.0 5.5 4.4 0.5 0.5 9.7 11.0 3.7 4.6

Huafu Fashion - A Yao, Qian CNY OW 002042.SZ 5.30 -0.56 7.70 45.3 1,137 6.2 2019 0.33 0.50 59.3 52.5 16.1 10.6 1.1 1.1 7.1 10.4 3.1 4.7

Luolai Lifestyle - A Yao, Qian CNY N 002293.SZ 8.93 -1.00 8.10 -9.3 1,047 4.3 2020 0.62 0.70 -5.5 13.0 14.3 12.7 1.7 1.6 12.2 12.9 3.5 3.9

Luthai Textile - A Yao, Qian CNY N 000726.SZ 8.41 0.00 9.70 15.3 1,097 6.5 2019 0.85 0.93 -2.7 8.9 9.9 9.1 1.0 1.0 10.7 11.1 5.3 5.8

Pacific Textiles (1382) Yao, Qian HKD N 1382.HK 3.78 -3.57 6.20 64.0 705 2.1 2020 0.57 0.60 -3.8 5.0 6.6 6.3 1.6 1.6 25.0 25.4 13.6 13.5Mkt Cap Weighted Aggregates 4,173 19.0 11.9 9.7 1.3 1.2 12.5 13.8 5.6 6.3

71






Water Utilities

Beijing Capital Co Ltd - A Tsui, Stephen T CNY UW 600008.SS 3.24 0.31 2.60 -19.8 2,600 13.3 2020 0.18 0.19 4.6 7.1 18.4 17.2 0.8 0.8 4.6 4.9 2.6 2.8

Beijing Enterprises Water (0371) Tsui, Stephen T HKD N 0371.HK 2.96 -0.67 3.80 28.4 3,824 8.3 2019 0.53 0.56 9.7 6.7 5.6 5.3 0.9 0.9 18.0 17.1 6.6 7.3

Grandblue Environment Co Ltd - A Tsui, Stephen T CNY OW 600323.SS 20.68 0.53 23.50 13.6 2,237 26.6 2020 1.33 1.56 11.4 17.8 15.6 13.2 2.1 1.9 14.6 15.2 1.1 1.2

Guangdong Investment Limited (0270) Tsui, Stephen T HKD OW 0270.HK 15.72 -0.25 19.50 24.0 13,261 19.1 2019 0.78 0.80 1.6 2.6 20.2 19.7 2.5 2.4 12.4 12.4 3.7 3.9Mkt Cap Weighted Aggregates 21,922 67.3 16.9 16.2 2.0 1.9 12.7 12.6 3.8 4.1

Wireless Telecommunication Services

China Mobile (0941) Wei, Michelle CNY OW 0941.HK 61.50 0.08 73.00 18.7 162,481 222.3 2020 5.26 5.50 1.0 4.6 10.7 10.2 1.0 1.0 9.6 9.8 5.2 5.5

China Unicom - A Wei, Michelle CNY UW 600050.SS 5.24 -0.95 4.10 -21.8 22,950 127.2 2020 0.15 0.17 -5.3 9.9 34.5 31.3 1.1 1.1 3.3 3.6 1.1 1.2Mkt Cap Weighted Aggregates 185,431 349.5 13.6 12.8 1.0 1.0 8.8 9.1 4.7 5.0 JPM Country Average 8,562,683 38289.0 17.9 16.7 6.0 5.1 14.6 15.3 3.0 3.2

Source: Bloomberg, J.P. Morgan Estimates

w

72



Disclosures

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 the research analyst’s 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 recommendationsor views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, if applicable, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention.

All authors named within this report are research analysts unless otherwise specified. In Europe, Sector Specialists may be shown on this report as contacts but are not authors of the report or part of the Research Department.

Research excerpts: This note includes excerpts from previously published research. For access to the full reports, including analyst certification and important disclosures, investment thesis, valuation methodology, and risks to rating and price targets, please contact your salesperson or the covering analyst’s team or visit www.jpmorganmarkets.com.

Important Disclosures

This report is a product of the research department's Global Quantitative and Derivatives Strategy group. Views expressed may differ from the views of the research analysts covering stocks or sectors mentioned in this report. Structured securities, options, futures and other derivatives are complex instruments, may involve a high degree of risk, and may be appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. Because of the importance of tax considerations to many option transactions, the investor considering options should consult with his/her tax advisor as to how taxes affect the outcome of contemplated option transactions.

MSCI: The MSCI sourced information is the exclusive property of 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 and the MSCI indexes are services marks of MSCI and its affiliates.

Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan–covered companies by visiting https://www.jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected].

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 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 ex-India) 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.jpmorganmarkets.com.

73



J.P. Morgan Equity Research Ratings Distribution, as of April 04, 2020

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 46% 40% 14%IB clients* 52% 49% 37%

JPMS Equity Research Coverage 44% 42% 14%IB clients* 75% 68% 57%

*Percentage of subject companies within each of the "buy," "hold" and "sell" categories for which J.P. Morgan has provided investment banking services within the previous 12 months. Please note that the percentages might not add to 100% because of rounding.For purposes only of FINRA 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. This information is current as of the end of the most recent calendar quarter.

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.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email [email protected]. For material information about the proprietary models used, please see the Summary of Financials in company-specific research reports and the Company Tearsheets, which are available to download on the company pages of our client website, http://www.jpmorganmarkets.com. This report also sets out within it the material underlying assumptions used.

Explanation of Emerging Markets Sovereign Research Ratings System and Valuation & Methodology:Ratings System: J.P. Morgan uses the following issuer portfolio weightings for Emerging Markets sovereign credit strategy: Overweight (over the next three months, the recommended risk position is expected to outperform the relevant index, sector, or benchmark credit returns); Marketweight (over the next three months, the recommended risk position is expected to perform in line with the relevant index, sector, or benchmark credit returns); and Underweight (over the next three months, the recommended risk position is expected to underperform the relevant index, sector, or benchmark credit returns). NR is Not Rated. In this case, J.P. Morgan has removed the rating for this security because of either legal, regulatory or policy reasons or because of lack of a sufficient fundamental basis. The previous rating no longer should be relied upon. An NR designation is not a recommendation or a rating. NC is Not Covered. An NC designation is not a rating or a recommendation. Recommendations will be at the issuer level, and an issuer recommendation applies to all of the index-eligible bonds at the same level for the issuer. When we change the issuer-level rating, we are changing the rating for all of the issues covered, unless otherwise specified. Ratings for quasi-sovereign issuers in the EMBIG may differ from the ratings provided in EM corporate coverage.

Valuation & Methodology: For J.P. Morgan's Emerging Markets Sovereign Credit Strategy, we assign a rating to each sovereign issuer (Overweight, Marketweight or Underweight) based on our view of whether the combination of the issuer’s fundamentals, market technicals, and the relative value of its securities will cause it to outperform, perform in line with, or underperform the credit returns of the EMBIGD index over the next three months. Our view of an issuer’s fundamentals includes our opinion of whether the issuer is becoming more or less able to service its debt obligations when they become due and payable, as well as whether its willingness to service debt obligations is increasing or decreasing.

J.P. Morgan Sovereign Research Ratings Distribution, as of April 4, 2020

Overweight Marketweight Underweight Global Sovereign Research Universe 13% 71% 16%

IB clients* 71% 46% 67%

*Percentage of subject issuers within each of the "buy, "hold" and "sell" categories for which J.P. Morgan has provided investment banking services within the previous 12 months. Please note that the percentages might not add to 100% because of rounding.The Sovereign Research Rating Distribution is at the issuer level. Issuers with an NR or an NC designation are not included in the table above. This information is current as of the end of the most recent calendar quarter.

Analysts' Compensation: The 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 J.P. Morgan Securities LLC, may not be registered as research analysts under FINRA rules, may not be associated persons of J.P. Morgan Securities LLC, and may not be subject to FINRA Rule 2241 or 2242 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

Other Disclosures

J.P. Morgan is a marketing name for investment banking businesses of JPMorgan Chase & Co. and its subsidiaries and affiliates worldwide.

74



All research reports made available to clients are simultaneously available on our client website, J.P. Morgan Markets. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your sales representative.

Any data discrepancies in this report could be the result of different calculations and/or adjustments.

Any long form nomenclature for references to China; Hong Kong; Taiwan; and Macau within this research report are Mainland China; Hong Kong SAR, China; Taiwan, China; Macau SAR, China.

Options and Futures related research: If the information contained herein regards options or futures related research, such information is available only to persons who have received the proper options or futures risk disclosure documents. Please contact your J.P. Morgan Representative or visit https://www.theocc.com/components/docs/riskstoc.pdf for a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options or http://www.finra.org/sites/default/files/Security_Futures_Risk_Disclosure_Statement_2018.pdf for a copy of the Security Futures Risk Disclosure Statement.

Changes to Interbank Offered Rates (IBORs) and other benchmark rates: Certain interest rate benchmarks are, or may in the future become, subject to ongoing international, national and other regulatory guidance, reform and proposals for reform. For more information, please consult: https://www.jpmorgan.com/global/disclosures/interbank_offered_rates

Principal Trading: J.P. Morgan trades or may trade as principal in the derivatives or the debt securities (or related derivatives) that are the subject of this report.

Private Bank Clients: Where you are receiving research as a client of the private banking businesses offered by JPMorgan Chase & Co. and its subsidiaries (“J.P. Morgan Private Bank”), research is provided to you by J.P. Morgan Private Bank and not by any other division of J.P. Morgan, including but not limited to the J.P. Morgan corporate and investment bank and its research division.

Legal entity responsible for the production of research: The legal entity identified below the name of the Reg AC research analyst who authored this report is the legal entity responsible for the production of this research. Where multiple Reg AC research analysts authored this report with different legal entities identified below their names, these legal entities are jointly responsible for the production of this research.

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. Canada: J.P. Morgan Securities Canada Inc. is a registered investment dealer, regulated by the Investment Industry Regulatory Organization of Canada and the Ontario Securities Commission and is the participating member on Canadian exchanges. U.K.: JPMorgan Chase N.A., London Branch, is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and to limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from J.P. Morgan on request. J.P. Morgan Securities plc (JPMS plc) is a member of the London Stock Exchange and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England & Wales No. 2711006. Registered Office 25 Bank Street, London, E14 5JP. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch which is regulated by the Bundesanstalt für Finanzdienstleistungsaufsich and also by J.P. Morgan AG (JPM AG) which is a member of the Frankfurt stock exchange and is regulated by the Federal Financial Supervisory Authority (BaFin), JPM AG is a company incorporated in the Federal Republic of Germany with registered office at Taunustor 1, 60310 Frankfurt am Main, the Federal Republic of Germany. South Africa: J.P. Morgan Equities South Africa Proprietary Limited is a member of the Johannesburg Securities Exchange and is regulated by the Financial Services Board. 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 and/or J.P. Morgan Broking (Hong Kong) Limited (CE number AAB027) is regulated by the Securities and Futures Commission in Hong Kong. JP Morgan Chase Bank, N.A., Hong Kong is organized under the laws of U.S.A. with limited liability. China: J.P. Morgan Securities (China) Company Limited has been approved by CSRC to conduct the securities investment consultancy business. Korea: This material is issued and distributed in Korea by or through J.P. Morgan Securities (Far East) Limited, Seoul Branch, which is a member of the Korea Exchange(KRX) and is regulated by the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS). Australia: J.P. Morgan Securities Australia Limited (JPMSAL) (ABN 61 003 245 234/AFS Licence No: 238066) is regulated by ASIC and is a Market, Clearing and Settlement Participant of ASX Limited and CHI-X. 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 (Corporate Identity Number - U67120MH1992FTC068724), having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz - East, Mumbai – 400098, is registered with Securities and Exchange Board of India (SEBI) as a ‘Research Analyst’ having registration number INH000001873. J.P. Morgan India Private Limited is also registered with SEBI as a member of the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited (SEBI Registration Number – INZ000239730) and as a Merchant Banker (SEBI Registration Number -MB/INM000002970). Telephone: 91-22-6157 3000, Facsimile: 91-22-6157 3990 and Website: www.jpmipl.com. For non local research reports, this material is not distributed in India by J.P. Morgan India Private Limited. Thailand: This material is issued and distributed in Thailand by JPMorgan Securities (Thailand) Ltd., which is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission and its registered address is 3rd Floor, 20 North Sathorn Road, Silom, Bangrak, Bangkok 10500. Indonesia: PT J.P. Morgan Sekuritas Indonesia is a member of the Indonesia Stock Exchange and is regulated by the OJK a.k.a. BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the Philippines and the Securities Investor Protection Fund. It 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 or through J.P. Morgan Securities Singapore Private Limited (JPMSS) [MCI (P) 018/04/2020 and Co. Reg. No.: 199405335R], which is a member of the Singapore Exchange Securities Trading Limited and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) [MCI (P) 070/09/2019], both of which are regulated by the Monetary Authority of Singapore. Thismaterial is issued and distributed in Singapore only to accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289 (SFA). This material is not intended to be issued or distributed to any retail investors or any other investors that do not

75



fall into the classes of “accredited investors,” “expert investors” or “institutional investors,” as defined under Section 4A of the SFA. Recipients of this document are to contact JPMSS or JPMCB Singapore in respect of any matters arising from, or in connection with, the document. Japan: JPMorgan Securities Japan Co., Ltd. and JPMorgan Chase Bank, N.A., Tokyo Branch are regulated by the Financial Services Agency in Japan. 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 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. 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. Russia: CB J.P. Morgan Bank International LLC is regulated by the Central Bank of Russia. Argentina: JPMorgan Chase Bank Sucursal Buenos Aires is regulated by Banco Central de la República Argentina (“BCRA”- Central Bank of Argentina) and Comisión Nacional de Valores (“CNV”- Argentinian Securities Commission”)

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. Further information about J.P. Morgan's conflict of interest policy and a description of the effective internal organisations and administrative arrangements set up for the prevention and avoidance of conflicts of interest is set out at the following link https://www.jpmorgan.com/jpmpdf/1320742677360.pdf. 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. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. 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 term "wholesale client" has the meaning given in section 761G of the Corporations Act 2001. J.P. Morgan’s research coverage universe spans listed securities across the ASX All Ordinaries index, securities listed on offshore markets, unlisted issuers and investment products which Research management deem to be relevant to the investor base from time to time. J.P. Morgan seeks to cover companies of relevance to the domestic and international investor base across all GIC sectors, as well as across a range of market capitalisation sizes. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch which is regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Limited, Seoul Branch. Singapore: As at the date of this report, JPMSS is a designated market maker for certain structured warrants listed on the Singapore Exchange where the underlying securities may be the securities discussed in this report. Arising from its role as designated market maker for such structured warrants, JPMSS may conduct hedging activities in respect of such underlying securities and hold or have an interest in such underlying securities as a result. The updated list of structured warrants for which JPMSS acts as designated market maker may be found on the website of the Singapore Exchange Limited: http://www.sgx.com. In addition, JPMSS and/or its affiliates may also have an interest or holding in any of the securities discussed in this report – please see the Important Disclosures section above. For securities where the holding is 1% or greater, the holding may be found in the Important Disclosures section above. For all other securities mentioned in this report, JPMSS and/or its affiliates may have a holding of less than 1% in such securities and may trade them in ways different from those discussed in this report. Employees of JPMSS and/or its affiliates not involved in the preparation of this report may have investments in the securities (or derivatives of such securities) mentioned in this report and may trade them in ways different from those discussed in this report. Taiwan: Research relating to equity securities is issued and distributed in Taiwan by J.P. Morgan Securities (Taiwan) Limited, subject to the license scope and the applicable laws and the regulations in Taiwan. According to Paragraph 2, Article 7-1 of Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers (as amended or supplemented) and/or other applicable laws or regulations, please note that the recipient of this material is not permitted to engage in any activities in connection with the material which may give rise to conflicts of interests, unless otherwise disclosed in the “Important Disclosures” in this material. 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 "wholesale clients" (as defined in the Financial Advisers Act 2008). 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: This report is distributed in Canada by or on behalf of J.P.Morgan Securities Canada Inc. The information contained herein is not, and under no circumstances is to be construed as 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. 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. Dubai: This report has been distributed to persons regarded as professional clients or market counterparties as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 0800-7700847 / [email protected].

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 indicative 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 April 04, 2020.

Copyright 2020 J.P. Morgan Securities (China) Company Limited and 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

Completed 26 Apr 2020 07:26 PM HKT Disseminated 26 Apr 2020 07:28 PM HKT

China Equity Strategy

Documents

Transcript of China Equity Strategy