Weekly Equity Review

Ucap Hong Kong Asset Management Limited

9th August 2016

Equity Strategy Highlights

� Global Markets Highlights

� The July monthly job report reassured investors and pushed US rates and the dollar higher, allowing US

banks to rebound.

� Pharma stocks are topping out after the weak Novo earnings and the stunning Bristol Myers trial miss.

� As the earnings season is coming to an end, the market will now have to wait until the Jackson Hole

central bankers meeting at the end of the month for any significant market moving information.

� Important Events This Week

� Tuesday: US Wholesale Inventories

� Thursday: US Jobless Claims, US Import Prices

� Friday: EU GDP, US Retail Sales, US PPI

9 August, 2016

Equity Strategy Highlights

� Global Leaders – 2016

� The US portfolio is still lagging despite a positive performance the recovery of the large US tech stocks is

helping the recovery.

� The European Portfolio remains very strong compared to indices.

� Europe: 0.4% YTD vs Euro Stoxx at -5.8% YTD (6.2% alpha).

� US: 4.2% YTD vs S&P at 8.2% YTD (-4.0% alpha).

� Stock-Picking List – 2016

� The average performance of our Stock-Picking YTD is +0.47%. The average alpha is +238 bps.

� We have closed positions for the time being.

9 August, 2016

Q2 EARNINGS SEASON

9 August, 2016

Q2 Earnings Season

9 August, 2016

The following chart shows the Q1 earnings distribution for the S&P 500 and the S&P Europe 350.

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

11 July 18 July 25 July 01 August 08 August 15 August

Earnings date distribution by week, weighted by market capitalization (in $Bn)

S&P 500

S&P Europe 350

% Report % Surprise % Growth % Surprise % Growth

S&P 500 87% 0.6% -0.5% 4.1% -4.4%

Energy 100% 2.0% -24.2% -9.5% -81.6%

Materials 96% -0.7% -7.4% 2.8% -8.8%

Industrials 96% 1.0% -1.0% 6.1% -2.1%

Consumer Discretionary 65% 1.7% 8.0% 6.4% 12.8%

Consumer Staples 78% -0.9% 0.4% 3.3% 0.2%

Health Care 88% 1.1% 9.1% 3.2% 4.9%

Financials 99% 0.1% 0.9% 2.0% -5.2%

Information Technology 81% 1.7% -0.1% 7.3% -2.3%

Telecommunication Services 100% -0.6% 9.6% -0.2% 3.5%

Utilities 89% -6.2% -3.2% 5.1% 6.5%

Sales Earnings

Earnings Surprise & Growth

9 August, 2016

Earnings in Europe and the US have so far exceeded expectations with two thirds of companies

already have reported. Energy stocks have disappointed again, despite low expectations.

% Report % Surprise % Growth % Surprise % Growth

S&P Europe 350 84% 0.2% -4.9% 4.5% -14.5%

Energy 92% 2.3% -24.0% -24.3% -51.9%

Materials 73% -2.3% -6.9% 6.8% -2.1%

Industrials 84% -1.0% -10.3% 18.6% 4.2%

Consumer Discretionary 83% 0.9% 6.6% 19.0% 19.2%

Consumer Staples 79% 0.3% 2.0% -5.9% 2.1%

Health Care 89% 0.3% 2.3% 3.9% 3.9%

Financials 84% 1.6% -2.9% 6.7% -28.1%

Information Technology 100% -1.0% 10.2% -1.9% -6.4%

Telecommunication Services 79% 0.3% 9.5% -17.7% -34.5%

Utilities 88% -4.4% -7.8% -9.6% -10.4%

Sales Earnings

US Q2 Earnings – Health Care

� Health Care

� Humana posted better-than-expected earnings and reaffirmed its guidance despite continuing issues in

its Obamacare business.

� Pharmaceuticals

� Pfizer’s earnings beat consensus but profit fell 23% as sales of its established drugs started to slow.

� Biotech

� Regeneron’s profit topped estimates but revenue trailed expectations hurt by low sales of its cholesterol

drug Praluent. The company reiterated its FY guidance.

9 August, 2016

US Q2 Earnings

� Technology

� Electronic Arts’ earnings topped consensus but revenue guidance came in slightly below expectations.

� Cognizant Technologies beat estimates but revenue projections fell short of analysts’ estimates on lower

projected spending from financial firms due to the Brexit.

� Symantec’s cost cuts led to better-than-expected earnings.

� Media

� Time Warner beat estimates on higher-than-expected cable revenues but earnings still fell from a year

ago on box-office weakness and slowing revenue growth in HBO.

� Viacom’s quarterly profit tumbled as the TV network (MTV, Comedy Central, Nickelodeon, …) is losing

viewers and ad revenue.

� Energy

� Apache posted a record loss but the oil producer sees its 2016 spending at the high end of its $1.4bn-

$1.8bn guidance.

� Online Travel Agencies

� Priceline surpassed expectations benefitting from strong overseas bookings while Trip Advisor reported

lower-than-expected earnings hurt by weak hotel revenue and higher expenses.

9 August, 2016

US Q2 Earnings

� Financials

� Berkshire Hathaway’s profit jumped 25% boosted by recently acquired manufacturing companies and

strength in its insurance business.

� MetLife trailed analysts’ expectations hurt by low interest rates that led to increased reserves.

� Consumer Staples

� P&G reported better-than-expected earnings buoyed by costs cuts, but outlook remains sluggish on

weak global growth.

� CVS topped expectations and raised its FY earnings outlook fueled by the strong performance of its

pharmacy benefit business, while it cut its revenue guidance due to lower discretionary spending.

� Kraft Heinz exceeded earnings estimates boosted once again by cost cuts despite falling sales.

� Tyson topped consensus after reporting growth across all of its business segments and benefitting from

lower feeding costs. The company raised its FY guidance for the second time in three months.

� Kellogg surpassed earnings expectations on effective cost cutting measures despite falling revenue. The

company raised its forecast.

� Avon’s earnings topped estimates on cost cuts and higher sales.

� Autos

� Tesla reported a steeper-than-expected quarterly loss hurt by higher spending at its vehicle and battery

factories, and said adjusted profitability could be within sight if the company meets its delivery goals.

9 August, 2016

Europe First Half Earnings – Consumer

� Consumer Discretionary

� Adidas’ profitability forecast missed expectations despite raising its four time this year.

� Consumer Staples

� Heineken reported sales growth that missed expectations as demand waned in key regions such as

Africa, Russia and the Middle East.

� Beiersdorf sales trailed estimates hurt by weak European markets.

� Pharmaceuticals

� Novo Nordisk EBIT slightly missed and the pharmaceutical giant lowered its FY sales growth amid US

price pressure.

9 August, 2016

Europe First Half Earnings

� Banks

� Societe General’s earnings beat estimates on lower bad loan provisions and a one off gain from the sale

of its stake in Visa Europe.

� HSBC’s profit fell 40% but announced a $2.5bn share buyback to reward investors from the sale of HSBC

Brazil. The bank said its plan to achieve an RoE of 10% by the end of 2017 is no longer “achievable”.

� RBS posted a £2.05bn loss in the first half hurt by high restructuring and litigation costs. The Scottish

bank said its path to profitability may take longer-than-expected.

� ING’s Q2 earnings top estimates on strong lending, while its CET1 ratio rose to 13.1%.

� UniCredit beat expectations but its Tier1 ratio fell to 10.3% from 10.9% in March.

� Insurance

� AXA 1H net profit rose 4% on life and health insurance gains but still fell short of estimates.

� Allianz earnings missed expectations on higher disaster claims.

9 August, 2016

Europe First Half Earnings

� Industrials

� Siemens topped earnings consensus and raised its outlook for the second time this year after a jump in

large orders for power-generating equipment.

� Deutsche Post reported strong profits driven by e-commerce delivery.

� Autos

� Porsche Automobil’s first-half net profit plunged 41% reflecting lower earnings at Volkswagen, which is

grappling with its emissions scandal.

� Materials

� Lafarge Holcim beat on EBITDA and confirmed its 2016 outlook.

� Chemicals

� Air Liquide missed first-half earnings estimates amid a continued slump at its engineering division

suffering from a slowdown in energy projects.

� Utilities

� Veolia Environment first-half net profit fell 29% on restructuring costs. The water and waste group

expects a string of international acquisitions to boost second-half revenue.

9 August, 2016

INVESTMENT IDEAS

9 August, 2016

Global Leaders

9 August, 2016

The Global Leaders are quality companies that we believe are fit for a long-term investment.

We launched this strategy in August 2011. Please read our special report for a full explanation of this strategy.

Benchmark: S&P 500Benchmark: Euro Stoxx 50

� European Portfolio � US Portfolio

*Since

August 2011

Portfolio Benchmark Delta Annualized Portfolio Benchmark Delta Annualized

Performance 96% 59% 36.9% 15% Performance 117% 99% 17.9% 17%

Performance YTD 0.4% -5.8% 6.2% Performance YTD 4.2% 8.2% -4.0%

Volatility 15.9% 22.2% -6.2% Volatility 13.6% 14.5% -0.8%

Max DrawDown -18.7% -27.8% 9.1% Max DrawDown -13.1% -13.0% -0.2%

-15

5

25

45

65

85

105

125EU Global Leaders Benchmark

-10

10

30

50

70

90

110

130

US Global Leaders Benchmark

Global Leaders – Current List

� European Portfolio � US Portfolio

9 August, 2016

Name Weight Mkt Cap ($bn) Sector

Apple 6.62% 568 Information Technology

Accenture 5.39% 73 Information Technology

Adobe 2.59% 49 Information Technology

Amazon 6.33% 365 Consumer Discretionary

Bristol Myers 5.70% 127 Health Care

Costco 5.39% 73 Consumer Staples

CVS 2.78% 100 Consumer Staples

Walt Disney 2.91% 155 Consumer Discretionary

Facebook 6.32% 357 Information Technology

Alphabet 6.59% 544 Information Technology

Goldman Sachs 2.68% 69 Financials

Honeywell 5.49% 88 Industrials

Johnson & Johnson 3.15% 344 Health Care

JP Morgan 6.06% 234 Financials

Mastercard 2.79% 104 Information Technology

Altria 1.89% 132 Consumer Staples

Merck & Co 5.84% 162 Health Care

Microsoft 6.45% 440 Information Technology

Nike 5.52% 93 Consumer Discretionary

Pepsico 5.82% 157 Consumer Staples

Philip Morris 1.92% 155 Consumer Staples

Reynolds 1.77% 71 Consumer Staples

Starbucks 2.74% 85 Consumer Discretionary

AT&T 3.07% 267 Telecommunication Services

Time Warner 2.64% 60 Consumer Discretionary

Visa 2.96% 184 Information Technology

Verizon 3.01% 224 Telecommunication Services

Walgreen 2.74% 86 Consumer Staples

Wells Fargo 3.04% 243 Financials

Exxon 3.16% 361 Energy

Name Weight Mkt Cap ($bn) Sector

Inditex 6.72% 109 Consumer Discretionary

Vinci 6.12% 45 Industrials

Fresenius 6.10% 41 Health Care

Essilor 5.91% 28 Health Care

Philips 5.79% 25 Industrials

Dassault Systemes 5.69% 21 Information Technology

Nestlé 5.48% 250 Consumer Staples

Unilever 5.19% 140 Consumer Staples

Novo Nordisk 5.18% 146 Health Care

BATS 5.10% 118 Consumer Staples

L'Oréal 5.06% 107 Consumer Staples

Sanofi 5.05% 110 Health Care

Reckitt Benckiser 4.84% 69 Consumer Staples

Roche 3.63% 221 Health Care

Novartis 3.61% 218 Health Care

ABInbev 3.60% 204 Consumer Staples

LVMH 3.27% 87 Consumer Discretionary

Allianz 3.20% 65 Financials

Heineken 3.14% 53 Consumer Staples

AXA 3.10% 49 Financials

Daimler 2.12% 72 Consumer Discretionary

BMW 2.06% 56 Consumer Discretionary

Stock-Picking List – Performance

� Hit Ratio 35%

� Hit Ratio Alpha 58%

� Average Perf. 0.47%

� Average Alpha 2.38%

� Nb. of Trades 31

� Open Trades 0

9 August, 2016

Average alpha of each stock strategy when compared to its

index (S&P or Euro Stoxx) over the same holding period.

Average performance of each stock strategy.

Please ask for more details.

Latest Equity Research

9 August, 2016

Date Document Strategy Stocks Covered Date Document Strategy Stocks Covered

August 8, 2016 Key Highlight Global Leaders Bristol-Myers May 11, 2016 Key Highlight Global Leaders Amazon

August 4, 2016 Key Highlight Global Leaders Time Warner May 5, 2016 Key Highlight Global Leaders Time Warner

July 29, 2016 Key Highlight Global Leaders Alphabet May 4, 2016 Key Highlight Global Leaders CVS

July 29, 2016 Company Primer Global Leaders Apple, Microsoft, CVS, Walgreens, Disney, Time Warner April 29, 2016 Key Highlight Global Leaders Amazon

July 28, 2016 Key Highlight Global Leaders Facebook April 28, 2016 Key Highlight Global Leaders Facebook

July 27, 2016 Key Highlight Global Leaders Apple April 27, 2016 Key Highlight Global Leaders Apple

July 22, 2016 Key Highlight Global Leaders Starbucks April 22, 2016 Key Highlight Global Leaders Essilor

July 20, 2016 Key Highlight Global Leaders Johnson & Johnson April 20, 2016 Key Highlight Global Leaders Johnson & Johnson

July 19, 2016 Key Highlight Thematic View IBM April 14, 2016 Key Highlight Global Leaders JPMorgan

July 15, 2016 Key Highlight Global Leaders JPMorgan April 13, 2016 Key Highlight Global Leaders Facebook

July 12, 2016 Key Highlight Global Leaders Amazon April 5, 2016 Weekly Report Thematic View Ctrip, Expedia, Priceline

July 8, 2016 Key Highlight Global Leaders PepsiCo April 1, 2016 SWOT Analysis Thematic View Ctrip

July 7, 2016 Key Highlight Global Leaders Walgreens April 1, 2016 SWOT Analysis Thematic View Expedia

July 4, 2016 Weekly Report Thematic View Nike, Under Armour April 1, 2016 SWOT Analysis Thematic View Priceline

June 30, 2016 Key Highlight Thematic View US Banks March 31, 2016 Key Highlight M&A Hon Hai

June 29, 2016 Key Highlight Global Leaders Nike March 16, 2016 Key Highlight Global Leaders Apple

June 28, 2016 Weekly Report Global Leaders Reckitt Benckiser, Unilever March 10, 2016 Key Highlight Global Leaders Inditex

June 20, 2016 Company Primer Global Leaders Heineken March 8, 2016 Weekly Report Thematic View 3M, GE, Honeywell, UTC

June 16, 2016 Key Highlight Global Leaders Inditex March 7, 2016 Key Highlight Global Leaders Novo Nordisk

June 14, 2016 Key Highlight Global Leaders Apple March 4, 2016 Key Highlight Global Leaders Time Warner

June 14, 2016 Weekly Report Global Leaders Accenture February 23, 2016 Weekly Report Thematic View IBM

June 9, 2016 Company Primer Global Leaders Starbucks February 19, 2016 Key Highlight M&A IBM

June 9, 2016 Company Primer Global Leaders Facebook February 2, 2016 Key Highlight Global Leaders Alphabet

June 9, 2016 Company Primer Global Leaders Amazon January 29, 2016 Key Highlight Global Leaders Microsoft

June 9, 2016 Company Primer Global Leaders Alphabet January 28, 2016 Key Highlight Global Leaders Facebook

June 7, 2016 Key Highlight Thematic View Bristol-Myers, Juno Therapeutics, Kite Pharma January 27, 2016 Key Highlight Global Leaders Apple

June 7, 2016 Weekly Report Tech Leaders Adobe, Broadcom, PayPal January 25, 2016 Key Highlight Earnings Eiffage

June 3, 2016 Key Highlight Global Leaders Johnson & Johnson January 15, 2016 Key Highlight Global Leaders JPMorgan

May 31, 2016 Weekly Report Global Leaders Alphabet, Amazon, Facebook January 13, 2016 Key Highlight Global Leaders Time Warner

May 27, 2016 Key Highlight Global Leaders Costco January 8, 2016 Key Highlight Global Leaders Walgreens

May 24, 2016 Weekly Report Thematic View Swisscom, Deutsche Telekom, Vodafone, BT Group January 7, 2016 SWOT Analysis Thematic View Siemens

May 17, 2016 Weekly Report Thematic View Heineken

Disclaimer

9 August, 2016

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completeness. Expressions of opinion herein are subject to change without notice.

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Past performance is not necessarily a guide to future performance. The value of any investment or income may go down as well as up and you may not receive back

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