SHOWS: HONG KONG, CHINA (JANUARY 9, 2012) (REUTERS - ACCESS ALL)

FAN CHEUKWAN, HEAD OF RESEARCH, PRIVATE BANKING ASIA PACIFIC, CREDIT SUISSE

1. REPORTER OFF CAMERA SAYING:

'You have overweight H-shares and neutral on China's A-shares. Why?

2. FAN CHEUKWAN SAYING:

'Comparing the offshore Hong Kong-listed H-shares versus the domestic A-shares, in fact both category of China shares are quite attractive value as compared with the historical average. But we do see a more attractive investment outlook for H-shares given that the domestic A-share market still are faced the structural issue of oversupply of new shares, given the pipeline of significant IPO, as well as the conversion of non-tradable shares into tradable shares. So the supply of new shares in the domestic A-share market will remain very substantial in the new year, although the macro driver and investment sentiment has notably improved in the domestic stock market. This will bring trading opportunities from time to time. But for more sustainable uptrend in equity market, I would see better outlook for H-shares versus the A-shares. Another key point that investors should also take note is that the domestic A-share market is well known to be very policy-driven. So moving ahead, I think the key data points and news flow related to the next phase of the market-oriented structural reform in China would be a driver for the A-share market, but there's still many uncertainties regarding the concrete measures for the next round of structural reforms. So the volatility of the A-share market is expected to stay higher than the H-shares.'

3. REPORTER OFF CAMERA SAYING:

'What is the upcoming earnings season going to look like? Asian earnings momentum showed further signs of bottoming in the third quarter of 2012.

4. FAN CHEUKWAN SAYING:

'I think the earnings downgrade cycle of the Asian market is showing clear bottoming signs because we have already seen the consensus 2013 EPS of the Asian market staying flat for 4 consecutive months. So this shows that a firm bottom seems to be in formation for the earnings cycle. And the next step that investor would like to see is an uptrend in consensus EPS revision in the upcoming reporting season. I think the market have largely factored in quite a lackluster Q4 earnings growth because the macro improvement will take time to filter through to corporate earnings. But as we can see from some latest data point, take for example the Chinese industrial profit growth has accelerated to 22.8% in November up from 20.5% in October. And the uptrend in Chinese industrial profit growth is an indicator to show the macro improvement is starting to filter through into corporate earnings. So looking ahead, the more important driver for the equity market would be the management guide regarding operational performance in 2013, the sales and profit target of company for the new year would be a key data point for equity investor to watch out in the coming weeks.'