<P><FONT size=6>MS 摩根斯坦利：中国策略报告</FONT></P>
<P><FONT size=6>－中国不可能从全球市场风险免役</FONT></P>
<P><FONT size=6>August 17, 2007 8页</FONT></P>
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<P><FONT size=5>Impact on Our Views: I reiterate my Cautious view on<BR>China equity markets despite the plunge we have<BR>witness so far (15.7% in 18 trading days for HSCEI). I<BR>do not see China as a defensive play when global<BR>investors de-risk portfolios. Catching a falling knife is a<BR>much greater risk for investors than missing a rebound.<BR>What's New: The unfolding of credit risk driven panic in<BR>global financial markets is raiding the China equities<BR>market no less than the developed markets in the past<BR>couple of days. HSCEI has underperformed the<BR>S&P500 by 10.1% in the past 13 trading days. I expect<BR>the underperformance to stay that way throughout the<BR>de-risking process.<BR>Investment Thesis: Investors should sell offshore listed<BR>China equities on rebound, not buy on dip, before the<BR>current global de-risking campaign is over, as they are<BR>no more defensive than the developed markets. When<BR>holding cash is not an option, I suggest investors sit<BR>close to the exit and overweight liquidity stocks with<BR>earnings based on volume growth rather than illiquid<BR>stocks with earnings based on asset prices, which are<BR>more vulnerable to de-risking (de-pricing could follow<BR>and deflate earnings outlook for these companies).<BR>Risk to our call: We are assuming that de-risking in<BR>global financial markets will continue. In the unlikely<BR>event of a swift risk appetite rebuilding in the developed<BR>markets such as US, Europe and Japan, our Cautious<BR>market view would not continue to work.</FONT></P>