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China

Recent Reports

SINA - Lower Growth and Uncertainty - SELL 3/9/2010
The Chinese government restricts indecent messages on internet and mobile, so that there are fewer small portal ads on sina.com.

We adjust our estimate of the rate of decline in ad revenues in 1Q10 – from 11% QOQ to 15% QOQ.

It may bring some uncertainty that Sina neither consolidated the real estate ad revenues nor added CRIC profits after operating profits.

P/E Band concludes a down side of 27% and a target price of USD30.  Downgrade to SELL.
VISN - China Ad Co - Strong Growth - 80% Upside 3/9/2010

During 2009 VISN’s display based market share rose to 77% in the mobile TV industry, compared to 42% in 2008.

Powered by private equity funding, the competitor Towana has not given up; therefore, we believe the ongoing price war will negatively impact 1Q10, the media industry’s weak season.

We believe our estimate of a flat EPS for 2010 is conservative, as Towana cannot bear the price war for a long period of time given its minor market share.

P/E band suggests an upside of 78% and a target price of USD9.  BUY
SHANDA - 30% DECLINE YTD - CLOSE TO OUR PRICE TARGET - UPGRADE FROM SELL TO HOLD 3/3/2010
SNDA’s 30% share price decline year-to-date has brought the shares close to our target price – we are upgrading the shares from SELL (which we recommended in December) to HOLD. We believe the Company is now fairly valued.

BAIDU (BIDU) - GOOGLE EVENT IS A POSITIVE SIGNAL - UPGRADE TO BUY 2/23/2010
Google (Nasdaq: GOOG), Baidu’s only competitor, threatened to leave China, which reflects that Google lost patience with its business in China.

LIHUA (LIWA) – POSITIVE EXTERNAL ENVIRONMENT – BUY 2/18/2010
LIWA is the largest provider of copper wire when measured by gross profits.  Larger than the market leader in terms of revenues, Jinda (SS: 600577).

YUCHENG (YTEC) -- DEFAULT EVENT DROVE PRICE CLOSE TO TANGIBLE BOOK VALUE -- BUY 2/9/2010
A default case ruined YTEC’s 4Q09 financial results, but we believe that kind of event will not be repeated.

SOHU - MEDIA BUSINESS UNDERVALUED - UPGRADE TO BUY 2/4/2010
Almost all Sohu’s public comments focus on its game business, but we believe the ad business will provide the most important growth momentum in next two years.

LIHUA INTERNATIONAL (LIWA) - PLAY ON CONTINUED WHITE GOODS GROWTH IN CHINA - SITE VISIT REPORT - BUY 2/2/2010

We met with LIWA’s management and visited its facility in Danyang on January 22.

CLEAR MEDIA - PROFIT WARNING FOR 2009, BUT RECOVERING SIGNALS FOR 2010 - INITIATE WITH BUY 1/6/2010
CCTV (China Central Television), the flagship of China media, gained a record high contract value for 2010, which signals a recovery for China’s media industry.

SHANDA - NO. 1 POSITION WAS REPLACED - DOWNGRADE TO SELL 12/10/2009
Shanda’s No. 1 position in the China game market was replaced in 3Q09 and among the top five game operators in China, Shanda was the only company whose market share declined.

FOCUS MEDIA - CANNOT BREAKEVEN IN 2010 - SELL 12/10/2009
We believe, in 2010, Focus Media will not be able to breakeven even without impairments; however Focus Media will be forced to continue to dispose subsidiaries.

GIANT - BUSINESS RESTRUCTURING WILL TAKE TIME - DOWNGRADE TO SELL 12/1/2009
Both the number of players and ARPU (Average Revenue Per User) decreased in 3Q09 due to the close of “Treasury Box”.

AIRMEDIA (AMCN) – COVERAGE CLOSE 12/1/2009
AIRMEDIA (AMCN) – COVERAGE CLOSE
VISN - CHINA AD RATES RISE - NEW MEDIA BENEFITS FROM JAN 1ST REGULATIONS RESTRICTING AMOUNT OF TV ADS - BUY 11/30/2009
The record high contract values in the CCTV Ad Auction signals recoveries for China’s media industry and economy in 2010.

SINA - CHINA REGULATORY CHANGE WILL DRIVE AD SPEND TO OTHER MEDIA - BUY 11/24/2009
Advertisers will have to transfer part of their budgets from TV to other media due to the restrictions of “No. 61 Policy” coming into force Jan. 2010.

TENCENT - REPLACES SHANDA AS NO. 1 GAME OPERATOR IN CHINA - UPGRADE TO BUY 11/19/2009
Tencent’s competitors have not yet released their 3Q results, but we’ve learned from multiple local sources that Tencent became the largest game operator in China in place of Shanda (Nasdaq: SNDA).

LI NING (2331.HK) – LEADING SPORTS BRAND IN CHINA IS CURRENTLY UNDERVALUED COMPARED TO PEERS - BUY 11/16/2009
Li Ning’s stock price has appreciated 91% year-to-date, much less their competitors

ZHONGPIN (HOGS) - DON'T SELL ON GUIDANCE REDUCTION, PRICE COULD DOUBLE -- MAINTAIN BUY 11/12/2009
The guidance reduction in 3Q release should not be a major concern.

CHINA TELECOM (CHA) - ENCOURAGING OPERATING DATA IN 3Q09 - BUY 11/9/2009
Mobile subscribers continued to rise rapidly by about 6% month over month in 3Q09.

CHINA UNICOM - SMUGGLED IPHONE PRICES RECOVERING, WEAK 3Q - SELL 11/5/2009
In the mobile business, ARPU declined 2.8% QOQ and MOU rose 1.6% QOQ in 3Q09.

VISION CHINA -- WON ADVERTISERS IN PRICE WAR, ACQUISITION WILL ADD VALUE - MAINTAIN BUY 11/5/2009
After the acquisition of DMG, VISN will have a market share of 60% in the China mobile TV market and the 99% in China subway mobile TV.

CHINA MOBILE - LOWERING PRICES TO GAIN MARKET SHARE, BUT THE STOCK IS OVERSOLD - UPGRADE TO BUY 10/29/2009
CHL is attracting subscribers with price cuts, but the competition still pulled down revenue.

BAIDU - CLOSE OF CLASSIC EDITION WILL IMPACT Q4 RESULT - HOLD 10/29/2009
Baidu will close the classic edition of the online marketing business, which will negatively impact the 4Q financials.

RAFFLES EDUCATION - WELL-POSITIONED & GEOGRAPHICALLY DIVERSE COMPANY IN A REBOUNDING SECTOR - BUY 10/15/2009
We believe that the stock should trade at 20x, half the multiple of the peer group, which represents an upside of 64% - BUY


AJISEN - CONTROL COSTS WELL - UPGRADE TO BUY 9/28/2009
We assume the operating margin will be stable in 2010, as the
Company slows down its site expansion and controls the payroll well.
FMCN - MORE DISPOSALS AND WEAKNESS IN RENEWALS - MARKET IS WRONG - SELL 9/24/2009
FMCN will dispose part of the internet division, which means the Company’s restructuring has not yet ended.

SNDA - UNDERPERFORMANCE BRINGS SHARE PRICE TO LEVEL REFLECTING SLOWDOWN - UPGRADE FROM SELL TO HOLD 9/14/2009
Shanda’s shares have underperformed and fallen to our last target.

SINA - Acquisition Delay a Postive - 2010 Upside - BUY 9/9/2009
Delay or cancellation of the out-of-home network acquisition may not be bad news.  We believe revenues will grow and the operating margin will improve in 2010.

CHU - Overvalued - Strategically Flawed - SELL 9/8/2009
CHU will have a lower operating margin, lower EPS, and negative cash flow in 2010 due to an aggressive CAPEX budget.

CHA - Cheapest of the Chinese Telcos - BUY 9/8/2009
 We assume the operating margin can improve to 17% in 2010 versus 14% in 2009.  The Company controls CAPEX well and we believe CHA will reduce its mobile subsidies and its mobile advertising budget in 2010.

CMB - Results Weak - Fully Valued - HOLD 9/8/2009
China Merchants Bank (CMB) reported a 37.6% y-o-y decline in net profit for 1H09.  Net interest income contracted by 22.8% y-o-y due to the faster decline in earnings yield against cost of funding.  Upcoming rights issue will hurt the shares
CHINA RAILWAY CONSTRUCTION (1186.HK) - STRONG GROWTH UNSUSTAINABLE - SHARES OVERPRICED - HOLD 9/3/2009
We believe the revenue growth will slow down, because the stimulus package supported growth is not sustainable.

BEIJING AIRPORT - SOME RECOVERY BUT FULLY VALUED - HOLD 9/1/2009
We believe net revenues will grow 11% in 2009 and 19% 2010.

CHINA CONSTRUCTION BANK (939.HK) - STRONG 1H09 RESULTS - UPGRADE TO BUY FROM HOLD 8/28/2009
China Construction Bank (CCB) reported a 4.9% y-o-y decline in net profit to RMB55,806m in 1H09, better than market expectations.

CHINA MOBILE - SLOWER GROWTH AND DECLINING METRICS - HOLD 8/26/2009
CHL’s total revenues grew 8.9% YOY in 1H09 compared to 9.2% YOY in 1Q09 and 15.5% YOY in 2008.

GIANT (GA) - REGULATORY CHANGES HURT GAMING CO.'S OUTLOOK - HOLD 8/26/2009
The Ministry of Culture restricted the usage of virtual currency, so that GA has to cancel the “Treasury Box” function, which was the most profitable function in the most important game, ZT Online.

BYD - INITIATING COVERAGE WITH A SELL RATING DUE TO STRETCHED VALUATION 8/20/2009
BYD is a leading Chinese player in the battery and mobile handset markets with reasonable presence in the auto segment. The company has evolved from being solely a handset component manufacturer to a diversified entity.

TENCENT - CHINESE ONLINE COMPANY POSTS STRONG GROWTH - FULLY VALUED - HOLD 8/19/2009
Tencent’s revenue increased 15% QOQ in 2Q09, (Exhibit 1) which was better than our estimate and Reuters analyst consensus.

YUCHNG - HEADCOUNT INCREASING MARGINS SET TO IMPROVE - BUY 8/18/2009
YTEC hired about 150 software engineers in 1H09 and is going to hire about 150 solution engineers in 2H09.
VISN - Price War Dampens Outlook and Stock - Short-term Pressure - Maintain BUY 8/12/2009
   Towana, VISN’s main competitor, launched a price war in order to sell itself at a higher offer price.  VISN reduces outlook for revenues and profits. We do not believe Towana will be able to maintain a low rate card for a long time...BUY
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Coverage

Air China (0753.HK) Add to my Watch List
AIRMEDIA (AMCN) Add to my Watch List
Ajisen Holdings (0538.HK) Add to my Watch List
Aluminum Corporation of China (2600.HK) Add to my Watch List
Angang Steel Company Ltd. (0347.HK) Add to my Watch List
Anhui Conch Cement (0914.HK) Add to my Watch List
Anhui Expressway (0995.HK) Add to my Watch List
Asia Water Treatment (ASWT.SI) Add to my Watch List
Asiainfo (ASIA.O) Add to my Watch List
AsiaPharm (ASPH.SI) Add to my Watch List
Baidu.com (BIDU.O) Add to my Watch List
Baoshan Iron & Steel Co., Ltd. (600019.SH) Add to my Watch List
Baoye Group (2355.HK) Add to my Watch List
Beauty China Holdings (BCHI.SI) Add to my Watch List
Beijing Airport (0694.HK) Add to my Watch List
Best World (BWL.SP) Add to my Watch List
Bio-Treat (BIOT.SI) Add to my Watch List
BYD Company Ltd. (1211.HK) Add to my Watch List
CDC Corporation (CHINA) Add to my Watch List
Celestial Nutrifoods (CELE.SI) Add to my Watch List
Chaoda Modern Agriculture (0682.hk) Add to my Watch List
Cheung Kong Infrastructure Holdings Limited (1038) Add to my Watch List
China Automotive Sys (CAAS.O) Add to my Watch List
China Coal Energy (CCE) Add to my Watch List
China Communications Construction Company (1888.HK) Add to my Watch List
China Construction Bank (939.HK) Add to my Watch List
China Dairy (CHDA.SI) Add to my Watch List
China Eastern Airlines (CEA) Add to my Watch List
China Eratat Sports Fashion Ltd (CESF.SI) Add to my Watch List
China Essence (CEGL.SI) Add to my Watch List
China Farm Equipment Ltd (CFE SP) Add to my Watch List
China Flexible Packaging (CHFL.SI) Add to my Watch List
China Life Insurance (2628.HK) Add to my Watch List
China Mengniu (MENGNIU) Add to my Watch List
China Merchants Bank (3968.HK) Add to my Watch List
China Milk Products (CHNM.SI) Add to my Watch List
China Mobile (HKG) Ltd (CHL) Add to my Watch List
China National Building Material Co. Ltd (3323.hk) Add to my Watch List
China Netcom (0906.HK) Add to my Watch List
China Oilfield Services Limited (COSL) Add to my Watch List
China Railway Construction (1186.HK) Add to my Watch List
China Shenhua Energy (1088.HK) Add to my Watch List
China Sky (CSKY) Add to my Watch List
China Southern Airlines (ZNH) Add to my Watch List
China Sun (CSUN.SI) Add to my Watch List
China Techfaith (CNTF.O) Add to my Watch List
China Telecom (0728.HK) Add to my Watch List
China Unicom (0762.HK) Add to my Watch List
China Yuchai International (CYD.N) Add to my Watch List
China Yurun Food (YURUN) Add to my Watch List
China.com (8006.HK) Add to my Watch List
CIFH (0183.HK) Add to my Watch List
Clear Media (0100.HK) Add to my Watch List
CNOOC Limited (0883.HK) Add to my Watch List
Comba Telecom System Holdings (2342.HK) Add to my Watch List
CTrip (CTRP.O) Add to my Watch List
CWT Limited (CWT.SP) Add to my Watch List
Deswell Industries (DSWL.O) Add to my Watch List
Dynasty Fine Wine (0828.HK) Add to my Watch List
eLong (LONG.O) Add to my Watch List
Fibrechem (FIBR) Add to my Watch List
First Natural Food (1076.HK) Add to my Watch List
First Tractor Company Limited (0038.HK) Add to my Watch List
Focus Media (FMCN) Add to my Watch List
Food Empire Holdings (FEMP.SI) Add to my Watch List
Fu Ji Food (1175.hk) Add to my Watch List
Fung Choi Printing and Packaging (FUNG.SI) Add to my Watch List
Giant Interactive (GA) Add to my Watch List
Guangshen Railway Company (0525.HK) Add to my Watch List
Hana Tour Service Inc. (039130 KS) Add to my Watch List
Honam Petrochemical (011170.KS) Add to my Watch List
Hong Kong Exchange (0388.HK) Add to my Watch List
Hongguo Intl Holdings (HGUO.SI) Add to my Watch List
Huaneng Power (0902.HK) Add to my Watch List
Hung Hing Printing (450) Add to my Watch List
Hurray! Holding Co. Ltd (HRAY) Add to my Watch List
Hyflux (HYFL.SI) Add to my Watch List
ICBC (Asia) (0349.HK) Add to my Watch List
Jiangxi Copper Company Ltd (0358.HK) Add to my Watch List
Jianxi Ganyue Expressway (600269.SS) Add to my Watch List
Jilin Chemical Corp (00420.S7) Add to my Watch List
Jobs 51 (JOBS.O) Add to my Watch List
Kongzhong Corp (KONG.O) Add to my Watch List
Korean Custom Work (Korea) Add to my Watch List
Lenovo Group Limited (0993.HK) Add to my Watch List
Li Heng (LIHENG) Add to my Watch List
Li NIng (2331.hk) Add to my Watch List
Lihua International (LIWA) Add to my Watch List
Linktone (LTON.O) Add to my Watch List
Longcheer Holdings (LOHO.SI) Add to my Watch List
Lotte Confectionery Co. (LOTTE) Add to my Watch List
Luzhou Bio-Chem Technology Ltd (LUZH.SI) Add to my Watch List
Maanshan Iron & Steel (0323.HK) Add to my Watch List
Macau Gaming (Macau Gaming) Add to my Watch List
Man Wah Holdings Ltd. (MANW.SI) Add to my Watch List
Nam Tai Electronics Inc (NTE) Add to my Watch List
Netease.com (NTES) Add to my Watch List
New Dragon Asia Corp (NWD) Add to my Watch List
Nine Dragons Paper (2689:HK) Add to my Watch List
Ninetowns Digital World Trade Holdings Ltd. (NINE) Add to my Watch List
Perfect World (PWRD) Add to my Watch List
Pine Agritech Ltd (PINE.SI) Add to my Watch List
Qingdao Haier (600690.CH) Add to my Watch List
Radica Games (RADA) Add to my Watch List
Raffles Education Corp. (RLS SP) Add to my Watch List
Road King Infrastructure (1098.HK) Add to my Watch List
SCUD Group (1399) Add to my Watch List
Semiconductor Manufacturing International (SMI) Add to my Watch List
Shanda Interactive Ltd. (SNDA) Add to my Watch List
Shenzhen Expressway (600548) Add to my Watch List
SIM Technology (1855.hk) Add to my Watch List
SINA Corp (SINA) Add to my Watch List
Singapore Exchange Ltd (SGX) Add to my Watch List
SinoMem Technology (Sino) Add to my Watch List
Sinopipe Holdings (SPIP.SI) Add to my Watch List
SinoTrans (0598.HK) Add to my Watch List
SOHU (SOHU) Add to my Watch List
SP Chemicals (SPC) Add to my Watch List
Surface Mount Technology (SMT) Add to my Watch List
Synear Food Holdings (SYFH.SI) Add to my Watch List
Tencent Inc. (HKSE: 700) Add to my Watch List
Tiangong International (0826.HK) Add to my Watch List
Time Watch Investments (TWH) Add to my Watch List
Tom Online (TOMO) Add to my Watch List
United Envirotech Ltd (UEL) Add to my Watch List
UTStarcom (UTSI) Add to my Watch List
VisionChina Media Inc. (VISN) Add to my Watch List
Weichai Power (2338.hk) Add to my Watch List
Wuhan Iron and Steel Company (WUHAN IS) Add to my Watch List
Yanzhou Coal (YZC) Add to my Watch List
Yucheng Technologies Ltd. (YTEC) Add to my Watch List
Yunnan Copper (000878.SZ) Add to my Watch List
Zhongpin (HOGS) Add to my Watch List