The Chinese economy has been growing well over the past year. We see improving earnings in the region, especially those large-cap private companies have recorded rapid growth in terms of corporate earnings. Besides, the profit of R&D investments in the new-economy sector made previous years is now being materialized, we should expect more profit generated from those projects from time to time. The China Insurance Regulatory Commission ("CIRC") has recently issued the Administrative Measures for the Use of Insurance Funds (the "Measures"), effective from April 1, 2018. So far, several Chinese provinces including Beijing and Anhui have entrusted approximately 430 billion yuan to the National Social Security Fund for professional investment, in which about 273.15 billion yuan has already transferred to the fund and invested in the capital market. China has about 4 trillion yuan in its pension fund balance, with the restriction of the pension funds to invest up to 30% of its total assets in domestic equities, the size of AUM of the pension fund that invests in equities can theoretically exceed 1 trillion yuan. We expect a portion of funds may invest in Hong Kong equity market through the SH-HK and SZ-HK stock connects. U.S. stocks recently recorded a sharp adjustment, and triggered sell-offs in the global equity markets. U.S. equity market may remain volatile in near term. The recent market adjustment has caused real damage to investor’s risk appetite, and as the Chinese Lunar New Year is approaching, we see HK equities to remain weak in the coming holiday season. We believe investors would prefer to invest in H-shares and large-cap private companies with great growth potential, investors are advised to buy into those stocks as a long term holding.

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