Dim Sum Express

Investment Strategy: Property weakness, new LT theme and removal of economicuncertainties three factors potentially ending current consumer strength.

    Leading consumer names have outperformed recently due to the delayed impact from propertymarket strength in 2016. We believe these consumer industries might not see a slowdown until aftermid-2017as a result of the recent downturn in the property market. In addition, only when othersectors or investment themes supported by a promising long-term rationale emerge could investorfunds be drawn away from leading consumer names, putting an end to the latter’s outperformance.Lastly, the price premium of consumer stocks will disappear only when uncertainties in the economicand policy environment are reduced.Environmental: Sector demand to strengthen on recent pollution incidents and tighteningenvironmental standards.

    Recent water pollution incidents, along with inspection reports of substandard water quality in someof the first-tier cities and environmental issues in the to-be-established Xiongan new zone, haveindicated that the focus of water treatment should shift from equipment installation to better treatmenteffects. Within this context, the government will attach greater importance to the sustainablecompliance with environmental standards, which leading companies are better equipped to achieverelying on their technical strength, access to financing, and ability to ensure sustainable serviceprovision.