Completed 09 Sep 2016 01:37 PM HKT

Disseminated 09 Sep 2016 01:44 PM HKT

Asia Pacific Equity Research

09 September 2016

Dry Bulk Shipping

Freight rates continue to rise; upside risks to 2016E
supply growth as scrapping continues to moderate
The BDI rose w/w, driven by higher rates across vessel segments except for
Handysize: Capesize earnings rose 11% w/w to $8.3K/day. Panamax earnings
rose 1% w/w to $6.3K/day for the week ending September 2. Supramax index
rose 1% while Handysize index was steady w/w. No period fixture was concluded
last week vs one period fixture concluded in the previous week at $9.0k for 12-16
months. Capesize time-charter rate rose 14% w/w to $8.3K/day (source:
Clarksons).
Capesize chartering activity fell 15% w/w but rose 14% y/y to 41 ships: 76%
will carry iron ore (81% a week ago), 24% coal (17%) and 0% others (2%). JanDec 2015 split: 77% iron ore (76% in 2014), coal 20% (18%), others 3% (6%).

Infrastructure, Industrial &

Transport
Karen Li, CFA

AC

(852) 2800-8589
[email protected]
Bloomberg JPMA KLI <GO>
J.P. Morgan Securities (Asia Pacific) Limited

Varun Ginodia, CFA

(91-22) 6157-3321
[email protected]
J.P. Morgan India Private Limited

China and Rest of Asias share of shipping demand rose while Europe's
share fell: 71% of the Capesize vessels were chartered to carry cargo to China
(from 69% a week ago), 100% carrying iron ore (94%) and 0% coal (6%). Baltic Dry Index
Europe's share of demand fell to 15% (17%) while Rest of Asia's share rose 13,500
slightly to 15% (14%). In Jan-Dec 2015, the split was China 70% (vs 71% in 12,000
10,500
2014), rest of Asia 14% (14%), Europe 15% (14%), other 1% (1%). JPM China
9,000
7,500
Metals & Mining team commented iron ore stocks at mills inched up to 22.6
6,000
days of use (historically 26.0 days), while stocks at Chinese ports retreated
4,500
marginally to 103.8Mt or 33 days of use (105.4mt in mid-August, historically 30
3,000
1,500
days).
0

02 03 04 05 06 07 08 09 10 11 12
Ship chartering activity fell in other vessel segments as well: In the Panamax
spot market, number of ships chartered fell 33% w/w to 32 vessels with coal/grain Source: Bloomberg
shipping demand driving 53%/28% of the ships chartered. The number of ships
Baltic Freight Indices Summary
fell 18% w/w for Handymax but a more significant 89% for Handysize.

JPM View Some upside risks to 2016E global dry bulk shipping supply
growth if scrapping continues to fall; demand has recovered driven by China
but sustainability is key to support freight rates: Current global dry bulk shipping
capacity implies only 1.7% growth annualized in 2016E, well below the 7% growth
implied by the orderbook. However, the rise in scrapping continues to moderate
(+3% y/y in Jan-Aug vs double-digit YTD growth in Jan-May and high single-digit
YTD growth in Jan-Jul). Annualized scrapping implies only c.5% of capacity vs
c.7% in Jan-Apr, 2016 and c.6% in May-Jun, 2016 as freight rates have recovered.
Lower scrapping was mostly driven by the Capesize segment whose contribution to
total scrapping went down from 61% in May, 2016 to just 22% in Aug, 2016. New
ship orders have completely dried up as well, down 84% YTD on top of 55% y/y
fall in 2015. Current orderbook implies 7.2% supply growth in 2016E. However,
like 2015, we believe net supply growth will be much lower as current deliveries are
implying a slippage of c.45%. Assuming slippage of c.45% in full year 2016 and
scrapping of c.3%, 2016E supply growth is expected at c.3.4% with upside risk if
scrapping remains low. On the demand side, Chinas iron ore and coal imports
have staged a smart recovery in 2016 so far (iron ore imports rose 9% y/y YTD
while coal imports rose 12% y/y and much better than 2015 growth) but coal
imports are expected to come under pressure going forward as China eases
supply restrictions. Capacity discipline and sustainability in demand recovery is

13 14 15 16

Index

W/W

YTD

Baltic Dry

720

0.0%

50.6%

Baltic Handysize

432

0.2%

60.0%

Baltic Supramax

721

0.8%

60.2%

Baltic Panamax

644

-6.3%

39.4%

1,054

5.3%

124.3%

Baltic Dirty Tanker

516

0.2%

-40.6%

Baltic Clean Tanker

437

-4.4%

-24.7%

Baltic Capesize*

Source: Bloomberg, as of Friday 2 September close. *The Baltic

Exchange introduced a new Capesize Index on 6th May 2014.

See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
This document is being provided for the exclusive use of VIKTOR-KONSTANTINOS APSOKARDOS at JPMorgan Chase & Co. and clients of J.P. Morgan.

Karen Li, CFA

(852) 2800-8589
[email protected]

Asia Pacific Equity Research

09 September 2016

key to support freight rates.

This document is being provided for the exclusive use of VIKTOR-KONSTANTINOS APSOKARDOS at JPMorgan Chase & Co. and clients of J.P. Morgan.

Asia Pacific Equity Research

09 September 2016

Karen Li, CFA

(852) 2800-8589
[email protected]

Forward curve points to higher rates in 4Q16 in Capesize

and Panamax vessel segments which is traditionally a peak
season
FFA indications for Capesize TC are at $10.4K/day in 4Q16 (current: $6.8K/day),
$5.4K/day in 1Q17, $7.3K/day in 2Q17, $8.5K/day in 2017. FFA for Panamax TC
are at $6.9K/day for 4Q16 (current: $5.2K/day), $4.9K/day in 1Q17, $6.0K/day in
2Q17, $5.8K/day in 2017. FFA for Supramax TC are at $7.2K/day for 4Q16 (current:
$7.6K/day), $5.0K/day in 1Q17, $5.9K/day in 2Q17, $6.0K/day in 2017. FFA for
Handysize TC are at $5.9K/day for 4Q16 (current: $6.1K/day), $4.6K in 1Q17,
$5.3K/day in 2Q17, $5.2K/day in 2017 (source: Clarksons, SSY).

Recent News
1) Chinese government announced the relaxation of its policy on supply restrictions
on coal given demand-supply balance turned into deficit. The government will allow
some mines (with advanced productivity) to operate back to 330 days vs 276 days.
We believe this could slow the momentum in coal imports going forward driven by
higher domestic production and weaker seasonal demand in 4Q as we exit the peak
summer demand which is negative for the sector especially Capesize and Panamax
vessel segments. 2) Chinas iron ore imports rose 18% y/y in Aug-16 (steady m/m
from high base in July, 2016 which was the second highest level on record) resulting
in YTD growth of 9%, much better than 2% growth in 2015. Our Metals & Mining
Research team expects iron ore imports to remain elevated in the near-term as
seaborne supply continues to rise while construction lead indicators in China remain
firm. Chinas coal imports rose a significant 52% y/y in Aug, 2016 (+26% m/m and
highest level since Jan, 2015) resulting in YTD growth of 12% y/y, much better than
30% decline in 2015, mainly driven by the 276-day rule (vs 330-day rule before but
this is relaxed now and will likely put pressure on coal imports going forward), low
port inventories and seasonal summer demand. Having said that, the domestic output
is expected to rise as the supply side restrictions are being relaxed, miners turn
profitable and summer power demand fades. Please click here for more details.
Source: Clarksons, Bloomberg and CEIC database.

Share price performance was mixed last week

PacBasin (+26% w/w), Sinotrans Shipping (+7%) and Mitsui OSK (+6%) led while
Thoresen Thai, Precious Shipping and Korea Line (all down 4%) lagged.
Table 1: Baltic Freight Indices Summary
Baltic Dry
Baltic Handysize
Baltic Supramax
Baltic Panamax
Baltic Capesize*
Baltic Dirty Tanker
Baltic Clean Tanker

Index
720
432
721
644
1,054
516
437

1W-Chg
0.0%
0.2%
0.8%
-6.3%
5.3%
0.2%
-4.4%

1M-Chg
11.6%
8.0%
8.7%
-2.1%
39.2%
-1.3%
-4.8%

YTD-Chg
50.6%
60.0%
60.2%
39.4%
124.3%
-40.6%
-24.7%

12M-Chg
-19.2%
-10.6%
-18.3%
-26.0%
-11.8%
-17.8%
-25.2%

12M Hi
978
485
870
879
2,096
1,065
719

Date Hi
21-Sep-15
4-Sep-15
3-Sep-15
19-Jul-16
21-Sep-15
4-Jan-16
6-Jan-16

Chg Hi
-26.4%
-10.9%
-17.1%
-26.7%
-49.7%
-51.5%
-39.2%

12M Lo
183
183
243
282
161
496
432

Date Lo
10-Feb-16
12-Feb-16
12-Feb-16
1-Feb-16
7-Mar-16
12-Aug-16
12-Jul-16

Chg Lo
293.4%
136.1%
196.7%
128.4%
554.7%
4.0%
1.2%

Source: Bloomberg. (September 2, 2016 closing). *The Baltic Exchange introduced a new Capesize index on 6th May 2014.

This document is being provided for the exclusive use of VIKTOR-KONSTANTINOS APSOKARDOS at JPMorgan Chase & Co. and clients of J.P. Morgan.

Asia Pacific Equity Research

09 September 2016

Karen Li, CFA

(852) 2800-8589
[email protected]

Table 2: Dry Bulk Shipping Valuation Comparison

Company

Ticker

Diana*
Dry
Eagle
Golden Ocean
Kawasaki*
Mitsui*
Norden
Pac-Basin*
Precious
Sincere
Sinotrans
Thoresen
U-Ming
Wisdom Marine
Average

Price
(LC)
2.60
0.49
7.69
34.30
264.00
248.00
97.30
1.08
5.90
18.25
1.20
8.85
22.30
32.15

DSX US
DRYS US
EGLE US
GOGL NO
9107 JP
9104 JP
DNORD DC
2343 HK
PSL TB
2605 TT
368 HK
TTA TB
2606 TT
2637 TT

MV
(US$B)
0.21
0.00
0.37
0.44
2.44
2.94
0.62
0.55
0.26
0.33
0.62
0.46
0.60
0.53

ROE (%)
2016E
2017E
-12.1
-12.0
NA
NA
NA
NA
-12.5
-8.2
-12.6
2.4
4.0
4.1
-4.1
1.5
-8.5
-4.0
-11.5
-2.9
3.7
2.9
-0.4
0.7
1.4
2.4
-4.6
-1.2
4.6
5.8
-3.5
1.4

P/E (x)
2016E
2017E
nm
nm
NA
NA
NA
NA
nm
nm
nm
nm
15.9
15.0
nm
93.6
nm
nm
nm
nm
14.0
19.9
nm
17.2
160.9
32.8
nm
nm
11.4
10.0
12.7
13.5

P/BV (x)
2016E
2017E
0.2
0.2
NA
NA
NA
NA
0.4
0.4
0.8
0.8
0.6
0.6
0.7
0.7
0.5
0.5
0.6
0.7
0.6
NA
0.3
0.3
NA
NA
0.8
0.8
0.6
0.6
0.6
0.6

EV/EBITDA (x)
2016E
2017E
nm
nm
NA
NA
NA
NA
nm
55.4
9.1
8.0
14.1
12.6
16.8
6.5
20.3
10.3
33.1
13.2
5.8
6.5
3.2
1.7
6.8
5.3
18.5
13.5
12.0
10.6
11.4
10.9

EPS growth (%)

16/15
17/16
84.9
-12.0
NA
NA
NA
NA
-76.8
-28.5
-23.7
nm
nm
5.8
-6.9
nm
60.9
-36.2
23.7
-64.0
-21.6
-29.7
-88.2
nm
-91.7
390.9
nm
-76.1
-37.6
13.2
-15.6
9.4

Source: Bloomberg for Not Covered companies and J.P Morgan estimates for covered companies. *Companies covered by J.P. Morgan. Note: Share prices are as of September 8, 2016 closing.
* FY17 and FY18 YE March year end for Kawasaki and Mitsui.

Table 3: Wet Bulk Shipping Valuation Comparison

Company

Ticker

CAPITAL
DHull
Frontline
Nordic
Sh Fin
TSAKOS
Average

Price
(LC)
3.62
4.42
7.58
10.48
15.45
5.27

CPLP US
DHT US
FRO US
NAT US
SFL US
TNP US

MV
(US$B)
0.44
0.41
1.19
0.93
1.44
0.46

ROE (%)
2016E
2017E
NA
NA
13.3
5.5
11.4
9.6
6.0
-1.8
15.6
13.7
7.9
6.4
10.4
7.1

P/E (x)
2016E
2017E
9.7
9.7
4.2
8.8
7.3
11.8
18.0
25.6
7.8
8.7
5.5
4.0
9.3
12.3

P/BV (x)
2016E
2017E
0.5
0.5
0.5
0.5
0.8
0.8
1.2
1.3
1.2
1.2
0.3
0.3
0.9
0.9

EV/EBITDA (x)
2016E
2017E
6.6
6.5
4.3
5.5
6.5
6.9
7.2
8.4
9.7
9.6
6.8
5.5
7.4
7.7

EPS growth (%)

16/15
17/16
-1.6
-0.3
13.7
-51.9
-73.6
-38.2
-54.9
-29.6
-7.9
-10.5
-42.5
38.4
-33.7
-18.9

Source: Bloomberg. Note: Share prices are as of September 8, 2016 closing.

Figure 1: Asia Bulk Shipping Share Price Performance One Week Absolute

Figure 2: Asia Bulk Shipping Share Price Performance One Week Relative

Thoresen Thai

Korea Line Corp

Precious Shipping

Chinese Maritime

Korea Line Corp

First Steamship

Chinese Maritime

U-Ming Marine

First Steamship

Sincere Navigation

U-Ming Marine

Mercator lines

Mercator lines

Kawasaki Kisen

Kawasaki Kisen

Thoresen Thai

Sincere Navigation

Sector Average

Sector Average

Precious Shipping

Nippon Yusen

SinoTrans Shipping

Mitsui OSK

Nippon Yusen

SinoTrans Shipping

Mitsui OSK

Pacific Basin

Pacific Basin

-10%

Source: Bloomberg.

-5%

0%

5%

10%

15%

20%

25%

30%

-10%

-5%

0%

5%

10%

15%

20%

25%

Source: Bloomberg.

This document is being provided for the exclusive use of VIKTOR-KONSTANTINOS APSOKARDOS at JPMorgan Chase & Co. and clients of J.P. Morgan.

Asia Pacific Equity Research

09 September 2016

Karen Li, CFA

(852) 2800-8589
[email protected]

Figure 3: Asia Bulk Shipping Share Price Performance YTD Absolute

Figure 4: Asia Bulk Shipping Share Price Performance YTD Relative

Nippon Yusen

SinoTrans Shipping

SinoTrans Shipping

First Steamship

Mitsui OSK

U-Ming Marine

First Steamship

Nippon Yusen

U-Ming Marine

Pacific Basin

Pacific Basin

Sincere Navigation

Sincere Navigation

Mitsui OSK

Sector Average

Chinese Maritime

Kawasaki Kisen

Sector Average

Chinese Maritime

Precious Shipping

Korea Line Corp

Korea Line Corp

Precious Shipping

Thoresen Thai

Thoresen Thai

Kawasaki Kisen
Mercator lines

Mercator lines
-40%

Source: Bloomberg.

-20%

0%

20%

40%

60%

80%

100%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Source: Bloomberg.

This document is being provided for the exclusive use of VIKTOR-KONSTANTINOS APSOKARDOS at JPMorgan Chase & Co. and clients of J.P. Morgan.

Feb-07

2,000

1,500

1,000

500

Figure 7: Baltic Panamax Index

12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0

3,200

2,800

1,600

1,200
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16

Aug-16

Feb-16

Aug-15

Feb-15

Aug-14

Feb-14

Aug-13

Feb-13

Aug-12

Feb-12

Aug-11

Feb-11

Aug-10

Feb-10

Aug-09

Feb-09

Aug-08

Feb-08

Aug-07

2,500

Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16

Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16

3,000

2,400
1,500

2,000
1,200

800
600

400
300

Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16

Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16

Karen Li, CFA

(852) 2800-8589
[email protected]
Asia Pacific Equity Research
09 September 2016

Figure 5: Baltic Handysize Index

Figure 6: Baltic Supramax Index

3,500

7,500
7,000
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

Figure 8: Baltic Capesize Index

22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0

Figure 9: Baltic Dirty Tanker Index

Figure 10: Baltic Clean Tanker Index

3,600
2,100

1,800

900

Source: Bloomberg.
50 day moving avg.

This document is being provided for the exclusive use of VIKTOR-KONSTANTINOS APSOKARDOS at JPMorgan Chase & Co. and clients of J.P. Morgan.

Asia Pacific Equity Research

09 September 2016

Karen Li, CFA

(852) 2800-8589
[email protected]

Table 4: Current Time-Charter Rate and FFA Indications

$/Day
Vessel type
Capesize
Panamax
Supramax
Handysize
Vessel type
Capesize
Panamax
Supramax
Handysize

Current
6,831
5,224
7,555
6,050

Peak season
4Q16
10,350
6,875
7,175
5,850

52%
32%
-5%
-3%

Low season
1Q17
2Q17
5,405
7,300
4,925
5,975
4,975
5,875
4,625
5,300
Versus current TC rate
-21%
7%
-6%
14%
-34%
-22%
-24%
-12%

CY2017
8,500
5,813
5,950
5,150
24%
11%
-21%
-15%

Source: Clarksons, SSY, FIS and Bloomberg.

Figure 11: Global Bulk Carrier Orderbook as % of Total Fleet (Based on DWT)
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Jan-16

Sep-16

May-15

Sep-14

Jan-14

Sep-12

May-13

Jan-12

May-11

Sep-10

Jan-10

Sep-08

May-09

Jan-08

May-07

Sep-06

Jan-06

Sep-04

May-05

Jan-04

May-03

Sep-02

Jan-02

May-01

Sep-00

Jan-00

May-99

Sep-98

Jan-98

May-97

Sep-96

Jan-96

Orderbook as % of total fleet

Source: Clarksons

Actual deliveries
Source: Clarksons.

Expected deliveries at the start of the year

Figure 13: Historical Newbuild Bulk carrier Delivery Slippages

20

-30%

-40%
Actual deliveries (LHS)

2015

-20%

2014

40

2013

-10%

2012

60

2011

0%

2010

80

2009

10%

2008

100

2007

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

160
140
120
100
80
60
40
20
0

2006

Figure 12: Newbuild Dry Bulk Vessel Deliveries (Actual vs Expected)

Delivery (Shortfall)/Surplus (RHS)

Source: Clarksons.

Table 5: Global dry bulk vessel order book and implied capacity growth (in vessel terms)

Source: Clarksons.

This document is being provided for the exclusive use of VIKTOR-KONSTANTINOS APSOKARDOS at JPMorgan Chase & Co. and clients of J.P. Morgan.

Karen Li, CFA

(852) 2800-8589
[email protected]

Asia Pacific Equity Research

09 September 2016

Table 6: Global Dry Bulk Vessel Order Book and Implied Capacity Growth (in million dwt)

Source: Clarksons.

Figure 9: Freight Rate as % of Iron Ore Price

50%
Brazil-China Freight Rate as % of Iron Ore Price (Historical average: 15%)
45%

Australia-China Freight Rate as % of Iron Ore Price (Historical average: 7%)

40%

35%

30%

25%

20%

15%

10%

5%

15-May-09
26-Jun-09
7-Aug-09
18-Sep-09
30-Oct-09
11-Dec-09
22-Jan-10
5-Mar-10
16-Apr-10
28-May-10
9-Jul-10
20-Aug-10
1-Oct-10
12-Nov-10
24-Dec-10
4-Feb-11
18-Mar-11
29-Apr-11
10-Jun-11
22-Jul-11
2-Sep-11
14-Oct-11
25-Nov-11
6-Jan-12
17-Feb-12
30-Mar-12
11-May-12
22-Jun-12
3-Aug-12
14-Sep-12
26-Oct-12
7-Dec-12
18-Jan-13
1-Mar-13
12-Apr-13
24-May-13
5-Jul-13
16-Aug-13
27-Sep-13
8-Nov-13
20-Dec-13
31-Jan-14
14-Mar-14
25-Apr-14
6-Jun-14
18-Jul-14
29-Aug-14
10-Oct-14
21-Nov-14
2-Jan-15
13-Feb-15
27-Mar-15
8-May-15
19-Jun-15
31-Jul-15
11-Sep-15
23-Oct-15
4-Dec-15
15-Jan-16
26-Feb-16
8-Apr-16
20-May-16
1-Jul-16
12-Aug-16

0%

Source: Bloomberg and Clarksons.

This document is being provided for the exclusive use of VIKTOR-KONSTANTINOS APSOKARDOS at JPMorgan Chase & Co. and clients of J.P. Morgan.

Asia Pacific Equity Research

09 September 2016

Karen Li, CFA

(852) 2800-8589
[email protected]

Table 7: Top Global Capesize Fleet Owners

Source: Clarksons. Current vessel number includes orderbook as well.

Figure 14: Global Bulk Shipping Demand Breakdown By Commodity

Others
4%
Steel Products
7%

Forest Products
7%

Iron Ore
29%

Anthracite
1%
Nickel Ore
1%
Pig Iron
0%
Petroleum Coke
1%
Coke
0%
Cement
2%
Scrap
2%
Fertilizers
3%
Agribulks
3%
Sugar
1%
Phosphate Rock
1%
Bauxite/Alumina
3%

Steam Coal
19%

Soyabean
3%
Wheat/Coarse Grain
7%

Coking Coal
5%

Source: Clarksons.

This document is being provided for the exclusive use of VIKTOR-KONSTANTINOS APSOKARDOS at JPMorgan Chase & Co. and clients of J.P. Morgan.

Karen Li, CFA

(852) 2800-8589
[email protected]

Asia Pacific Equity Research

09 September 2016

Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research
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individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
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intervention.
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Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research
website, www.jpmorganmarkets.com.
Coverage Universe: Li, Karen: BTS Group Holdings (BTS.BK), Beijing Capital International Airport (0694.HK), CIMC ENRIC
HOLDINGS LTD (3899.HK), CRRC Corp - A (601766.SS), CRRC Corp - H (1766.HK), Changsha Zoomlion Heavy Industry - A
(000157.SZ), Changsha Zoomlion Heavy Industry - H (1157.HK), China Communications Construction - A (601800.SS), China
Communications Construction - H (1800.HK), China Cosco Holdings - A (601919.SS), China Cosco Holdings - H (1919.HK), China
Merchants Port Holdings Co Ltd (0144.HK), China Railway Construction - A (601186.SS), China Railway Construction - H (1186.HK),
China Railway Group Limited - A (601390.SS), China Railway Group Limited - H (0390.HK), Dongfang Electric Corporation Limited A (600875.SS), Dongfang Electric Corporation Limited - H (1072.HK), Jiangsu Expressway - A (600377.SS), Jiangsu Expressway - H
(0177.HK), Lonking Holdings Ltd (3339.HK), Orient Overseas Int'l Ltd (0316.HK), Pacific Basin Shipping (2343.HK), ST Engineering
(STEG.SI), Sany Heavy Industry - A (600031.SS), Shanghai International Airport - A (600009.SS), Sinopec Engineering Group
(2386.HK), Weichai Power - A (000338.SZ), Weichai Power - H (2338.HK), Zhejiang Expressway (0576.HK), Zhuzhou CRRC Times
Electric Co Ltd (3898.HK)
J.P. Morgan Equity Research Ratings Distribution, as of July 1, 2016

J.P. Morgan Global Equity Research Coverage

IB clients*
JPMS Equity Research Coverage
IB clients*

Overweight
(buy)
43%
52%
42%
68%

Neutral
(hold)
45%
49%
50%
65%

Underweight
(sell)
12%
37%
8%
51%

*Percentage of investment banking clients in each rating category.

For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table
above.

10

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Karen Li, CFA

(852) 2800-8589
[email protected]

Asia Pacific Equity Research

09 September 2016

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Karen Li, CFA

(852) 2800-8589
[email protected]

Asia Pacific Equity Research

09 September 2016

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Copyright 2016 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
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Karen Li, CFA

(852) 2800-8589
[email protected]

Asia Pacific Equity Research

09 September 2016

13

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