PWLLAI 10 Jan HONG KONG STOCKMARKET OUTLOOK 2007 By Peter W L LAI

PWLLAI 10 Jan

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10 First 10 biggest world stock market capitalization and PE Market CapPEYTD chanage As of 13 Nov 2006US$bnx% United States17, Japan4, United Kingdom3, France2, Hong Kong1, Germany1, Canada1, Switzerland1, Italy1, Spain

PWLLAI 10 Jan First 10 biggest world stock market capitalization and growth As of 30 Dec 2006US$bn% Market Cap2006 performance United States17, Japan4,873(1.6) United Kingdom3, France2, Hong Kong2, Germany1, Canada1, Switzerland1, Italy1, Spain

PWLLAI 10 Jan Asian individual stock market capitalization and PE Market CapPEYTD chanage As of 13 Nov 2006US$bnx% Japan4, Hong Kong1, South Korea India China Taiwan Singapore Malaysia Thailand Indonesia

PWLLAI 10 Jan First 10 biggest Asian stock market capitalization and growth As of 30 DecUS$bn% Market Cap2006 performance Japan4,873(1.6) Hong Kong2, China India South Korea Taiwan Singapore Malaysia Thailand

PWLLAI 10 Jan Economy Outlook I INTERNAL: Minimum intervention/maximum support from HKSAR Remain world’s most free city (for 15 years from 1991) Positive and Encouraging economic figures --improving job market, income, birth rate……. Abundant inflow of fund --more IPOs….. Positive impact from strong economic growth of China  ECONOMY WILL CONTINUE TO BOOM

PWLLAI 10 Jan Economy Outlook II REGIONAL China Economic Policy Reform – money supply/RMB re-valuation Stock reforms Potential tax reforms Industrial reform – oil sector/telecom sector Policies to Hong Kong -more open and supportive S E Asian countries -political stability -economic development (competitors?)

PWLLAI 10 Jan Economy Outlook III GLOBAL: US Economy -- interest rate drop (?) -- sustain healthy growth Oil price – drop (?) Political stability – US Vs Terrorists Relations among big countries -- US, Russia, China, Euro, Middle East (Iraq/Israel/Iran…….)

PWLLAI 10 Jan Risks Liquidity Flows Outflow of fund Large scale profit-taking Epidemic Diseases Natural Forces Tsunami/Earthquake/Typhoon Terrorists Attacks

PWLLAI 10 Jan CONCLUSION 1) INTERNAL GOOD 2) REGIONAL STABLE 3) GLOBAL UNCERTAIN UNDER NORMAL CIRCUMSTANCES  POSITIVE OUTLOOK IN HONG KONG ECONOMY Stock market forecast: --liquidity driven --news oriented --sentimentally driven  CHOPPY

PWLLAI 10 Jan RECOMMENDATIONS Property Cheung Kong (1) Sun Hung Kai (16) New World (17) Telecommunications China Tel (728) Conglomerates Hutchison (13) Bank China Construction Bank (939) Bank of Communications (3328)

PWLLAI 10 Jan Hotels -Jinjiang (2006) -Regal (78) China Retailers -Mengniu Dairy (2319) Olympic Concept -Li Ning (2331) -Win Hanverky (3322) Pharmaceutical -Guangzhou Phar (874) -Tong Ren Tang (8069) Automobile - Denway (203)