UBS_All you need to know about MMA

沪港通

Chief Investment Office WM5 August 2014

Chinese equitiesAll you need to know about MMA

The Mutual Market Access program (MMA), expected to launch in

October, will allow investors in Shanghai and Hong Kong (HK) to

trade in selected shares on both markets' stock exchanges, subject

to an investment quota on both directions in the initial stage.Louisa Fok, CFA, analyst, UBS AGlouisa.fok@ubs.complaysMMA themesStocksDatang International PowerCheung Kong

Hutchison Whampoa

Lenovo

Melco International

PradaSands China MMA could benefit selected sectors or stocks in the Shanghaiand Hong Kong stock markets although it doesn't change ourfundamental view on the markets. While the price and valuationgap of certain dual-listed stocks could converge, MMA also offersinvestors from both Hong Kong and China access to some unique

sectors and themes currently unavailable in their local stock market.

Mainland Chinese investors also get a rare opportunity to invest

directly overseas, and helps diversify their investments.Source: UBS, as of 4 August 2014 We focus on potential beneficiaries that are listed in the Hong Kong

stock market (i.e., the southbound trade) as most foreign and HK

investors are not able to trade A-share at the moment. The most

likely winners are stocks listed in both markets with large share-

price gaps (COSL, Datang), high-quality regional and global leaders

(AIA Group, Hutchison Whampoa, Cheung Kong, Lenovo),

and those that provide scarcity value or unique sector exposure

(Chow Tai Fook, Prada, Melco International Development,

Sands China).

What is MMA?

The Shanghai-Hong Kong Stock Connect scheme, commonly referred to

as the Mutual Market Access program (MMA), will connect the Hong

Kong and Shanghai stock exchanges, allowing investors in one market to

trade and settle selected shares in the other through their local exchange

accounts. The program will open up the Chinese equity market, initially

the Shanghai Stock Exchange, to Hong Kong and overseas investors

("northbound trading link") and provide mainland Chinese investors access

to stocks listed on the Hong Kong Stock Exchange ("southbound trading

link"). The program is widely expected to be launched in October, although

the final "go live" date has yet to be officially announced.Fig. 2: A- and H-shares price discount/premiumPrice difference in % between Chinese stocks listed

in both China (A-shares) and Hong Kong (H-shares) 140 130 120 110 100 90A-shareat discount to H-share 80Jan-11Jan-12Jan-13Jan-14A-H price premium/discountSource: Bloomberg, as of 4 August 2014

This report has been prepared by UBS AG. Please see important disclaimers and disclosures that begin on page 9. Past performance is no indication of future performance. Themarket prices provided are closing prices on the respective principal stock exchange. This applies to all performance charts and tables in this publication.

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