ORIENT FINANCE

SUMMARY OF ASIAN MARKETS

Mario Menendez Mato mme@bloomberg.net Renaud de Guignard rdegui@bloomberg.net

DECEMBER 2011
INDICES
HK & CHINA
Hang Seng Red Chips H-Shares Shanghai A-Shares (Page 3) 17989.35 3622.20 9508.94 2444.45 (Page 8) 1847.51 492.81 (Page 10) 6904.12 (Page 13) 2702.46 (Page 16) 995.33 (Page 19) 1472.10 (Page 21) 3715.08 (Page 22) 4211.04 (Page 24) 16123.46 (Page 26) 11532.83 (Page 27) 4119.80 431.87 392.97 4056.60 436.31 391.62 -1.53% 1.03% -0.34% -14.51% -16.90% -18.22% 11412.26 -1.05% -5.08% 15457.44 -4.15% -24.64% 4371.96 3.82% 4.07% 3821.99 2.88% 3.20% 1530.73 3.98% 0.78% 1024.73 2.95% -0.78% 2646.35 -2.08% -17.04% 7072.08 2.43% -21.18% 1825.74 500.18 -1.18% 1.50% -10.98% -2.06% 18434.39 3682.18 9936.48 2304.12 2.47% 1.66% 4.50% -5.74% -19.97% -11.70% -21.71% -21.64%

30/11/2011

31/12/2011 % MONTH

% 2011

KOREA
Kospi Kosdaq

TAIWAN
Taiex

SINGAPORE
Straits Times

THAILAND
SET Index

MALAYSIA
Kuala Lumpur Comp

INDONESIA
Jakarta Composite

PHILIPPINES
Philippines Composite

INDIA
Sensex 30

PAKISTAN
Karachi 100

AUSTRALIA
S&P/ASX 200

MSCI AC FAR EAST EX JAPAN MSCI AC ASIA PACIFIC EX JAPAN

CURRENCIES
VS EURO
HK $ CHINESE RENMINBI KOREAN WON TAIWANESE $ SINGAPORE $ THAI BAHT MALAYSIAN RINGGIT INDONESIAN RUPIAH PHILIPPINES PESO INDIAN RUPEE PAKISTANI RUPEE AUSTRALIAN $

30/11/2011
10.44 8.47 1523.13 40.25 1.72 41.51 4.22 12167.16 57.88 69.57 119.25 1.31

31/12/2011
10.06 8.13 1491.23 39.19 1.68 40.85 4.10 11719.87 56.66 68.74 116.52 1.27

%
3.72% 3.92% 2.09% 2.64% 2.63% 1.57% 2.90% 3.68% 2.12% 1.19% 2.29% 2.59%

VS US$
HK $ CHINESE RENMINBI KOREAN WON TAIWANESE $ SINGAPORE $ THAI BAHT MALAYSIAN RINGGIT INDONESIAN RUPIAH PHILIPPINES PESO INDIAN RUPEE PAKISTANI RUPEE AUSTRALIAN $

30/11/2011
7.77 6.38 1142.57 30.33 1.28 30.87 3.18 9113.00 43.58 52.21 88.69 1.03

31/12/2011
7.77 6.30 1152.45 30.28 1.30 31.56 3.17 9068.80 43.84 53.07 90.00 1.02

%
-0.01% 1.32% -0.86% 0.18% -1.15% -2.24% 0.31% 0.49% -0.59% -1.64% -1.47% 1.17%

ORIENT FINANCE

GENERAL FACTORS AFFECTING ASIA AS A WHOLE

Global and Asian equity markets were mixed in December. The month started on a positive note as six central banks cut the cost of borrowing US$ to help ease the European debt crisis and China took steps to stimulate domestic demand by cutting its reserve ratio for large banks. Then, S&Ps warning that 15 of 17 eurozone countries could see their credit ratings downgraded led markets to fall. Also Moodys reiterated that it will review the ratings of all EU sovereigns in 1Q12. In the second half of the month markets moved up as Germany and especially the US posted better-than-expected economic numbers, while the European Central Bank issued massive loans to EU banks. Risks of a systemic credit crunch still exist, especially in early 2012 with around EUR253bn worth of PIIGS papers due by April; further monetary easing by advanced economies central banks is a real possibility and this should keep global interest rates low. The EPS forecasts were revised down globally over December, the 12-month forward P/E multiples of most of the worlds markets are below their five-year averages, with the MSCI World and MSCI EM indices trading at 10.8x and 9.2x, respectively. US market performed well in December as several macro numbers point out that US economy is weathering EUs debt crisis. The data is quite strong. Consumer confidence improved. US companies cranked out more goods in December and pending sales of existing homes jumped in November for a 2nd month consecutively, pointing to a pickup in US economic growth as 2011 comes to a close. The number of Americans filing claims for unemployment benefits dropped to 375000 on average over the past four weeks, the fewest since June 2008. December was another intense month of meetings in the European Union, with the biggest drama being the UK vetoing the EU agreement after unsuccessfully trying to guarantee privileges for the City. Finally 26 of the 27 EU nations agreed to pursue tighter integration with stricter budget discipline (UK the exception). After seeing the expressions of Ms Merkel and Mr Sarkozy emerging to meet the media at 5am, one wonders what impact this will have on UK / EU relationship. Thanks to our British friends this profound change in EU will be done through bilateral agreements (outside the traditional EU framework). The geopolitical risk in Asia increased after the death of North Korean leader Kim Jong-il at 69. Media focused on North Korea, not regretting the loss but instead worrying about the future of the nuclear arms that the starving country is supposed to have. Scenes of inconsolable North Koreans weeping loudly in the streets is troubling on one of two levels: either they are so brainwashed that they are genuinely distraught at the death of a sort of demi-god; or they are crying in public because they are so in fear of not being seen to be upset. Or, it may be a mixture of both, you decide http://www.youtube.com/watch?v=kOquEimPp60 Tens of thousands of Russians marched in major cities decrying the recent parliamentary election results the largest protests since the fall of the Soviet Union 20 years ago. Syria has allowed an Arab League observer mission into the country to monitor a peace agreement that condemns the systematic human rights violations by Syria. Russia abstained from the vote originally but eventually agreed a resolution which quietly condemned violence by both sides in the conflict. Meanwhile western countries continue to push for tougher sanctions against Iran over their nuclear program, which could eventually lead to an oil embargo. New shipping alliances regarding Asia-Europe trade lanes were announced in December. The new partnerships are aimed at countering Maersk Lines launch of the Daily Maersk service in October. MSC and CMA CGM partnership in early December was followed within weeks by the creation of the G6 Alliance (by the six members of the Grand and New World Alliances) and was capped this week by an all-Asian agreement between Evergreen and the four carrier CKYH alliance. Spot pricing has edged up this month on Asia-Europe lanes after recently reaching historic lows. So... 2011 has been an eventful year... especially for dictators (Messieurs Ben Ali, Mubarak, Gaddafi, Saleh, Gbagbo, etc) and for European politicians (Messieurs Berlusconi, Zapatero, Papandreou, Strauss Kahn, etc). 2011 also saw Japans 9.1-magnitude earthquake, a subsequent tsunami (killing more than 15,000) and the Fukushima nuclear disaster. Also, horrible floods hit Thailand and Pakistan. Gaddafi, Kim Jong-Il and Bin Laden passed away. Unfortunately so did Steve Jobs, Seve Ballesteros and our former colleague Andre Marini. 2011 was also the year in which the eurozone came close to collapsing, the year in which European public opinion realised that our levels of debt were unsustainable, and all media talked on a daily basis about the spread yields versus German bunds and the rating agencies. Following all this, one would love to have a peaceful and boring 2012... Thank you all for your support and encouragement during 2011. We wish you all the best for 2012!!

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ORIENT FINANCE

HONG KONG & CHINA

Hong Kong market recovered from the previous loss, as high hopes of more upcoming monetary relaxations in China buoyed sentiment. The PBoCs surprising decision to lower banks RRR lifted the banking and property sectors as improved liquidity conditions soothed concern about a China hard-landing. The cement & steel and construction sectors also fared well on the back of expectations of recovery in infrastructure investment and construction. Hang Seng Index edged up 2.5% MoM to end at 18,434.39, while H Shares Index surged 4.5% MoM to close 9,936. In China, Shanghai Composite Index dropped 5.74% to close at 2,304.12. China manufacturing PMI The PBoCs decision to lower banks RRR from Monday was not without basis. Chinas November PMI fell to a lower-than-expected 49.0, the first <50 reading in 32 months, signaling a contraction in manufacturing activity. Consensus was expecting a gentler decline to 49.8, but external orders fell by a much steeper 2.7 pts to 47.8. All major indices fell, with production down 1.4 pts to 50.9, and new orders down 2.7 pts to 47.8. Excluding Nov 08s 38.8 reading, this was the countrys weakest November on record. We expect 4Q11 GDP to slow to 8.8% YoY from 3Q11s 9.1% on the back of weaker external and domestic demand. Domestic demand, which has held up well so far, is starting to cool. A hard-landing for China remains a tail risk, with Novs PMI still some distance away from the lows experienced during the previous downturn. Still, the PBoCs latest policy shift is expected to cushion the economy from the drag of weaker demand. With the lowering of the RRR next week, we expect the central bank to formally announce a switch to a more accommodative policy very soon. Senior macro planners and top leaders ended their annual Economic Work Conference without fanfare, with the simple message that: China will maintain its prudent monetary policy and proactive fiscal policy in 2012. This is hardly surprising since underlying economic growth, though slower, is not losing too much steam. There will be no dramatic policy U-turn unless external demand falls off the cliff. In the property market, the policy makers added that China will unswervingly maintain its regulation policies in 2012 to make housing prices return to a reasonable level. China will speed up the construction of ordinary commercial residential housing to increase effective supply and promote the healthy development of the property market. In the face of rising external risks, the latest policy pronouncement can be taken as a shift to a pro-growth policy. Containing inflation is no longer the top priority; economic growth is. For 2012, we have penciled in another 2-3 RRR cuts in 1H12, with one likely to occur just before Lunar New Year. Considering that real interest rates remain low, interest rates are unlikely to be cut very soon. Instead, one in late 2Q12 or 3Q12 appears more likely, when inflation and growth would have slowed more substantially. The timeline may be brought forward if the euro crisis deepens and hurt the Chinese more than expected. Nonetheless, we should think there would be no sharp U-turn in monetary or fiscal policy. Chinas Nov CPI of 4.2% YoY is better than consensus estimate, though in line with our expectation that the current inflation cycle had peaked in 3Q11, and the CPI is now on the way down. MoM, prices fell for the first time in eight months, by 0.2% (+0.1% MoM in October). Food inflation was 8.8% YoY while non-food inflation was 2.2% YoY (11.9% and 2.7% in October). The PPI climbed 2.7% YoY, below consensus and our expectations of 3.4% and 3.5% respectively. Although food prices may temporarily rebound due to festive demand, we believe economic growth has become the No. 1 priority of Chinese policy makers. With economic growth slowing and prices in the property market moderating, price expectations are likely to be firmly anchored. We expect inflation to ease to 4.7% YoY in 4Q11 (6.3% in 3Q11, 4.7% in 4Q10) and maintain our 2011 forecast of 5.3%. For 2012, we expect 3.5% (3.8% in 1H12, 3.1% in 2H12). Expect further monetary easing in 1Q12. We expect banks reserve ratios (RRR) to drop again in early 1Q12, while an interest-rate cut is possible in late 2Q12. The timeline may be brought forward if the euro crisis deepens and hurt the Chinese more than expected in 1Q12. Nov exports topped consensus estimates but we expect slower growth ahead as weaker export orders start to bite. Export growth was 13.8% YoY in Nov (15.9% in Oct) or 2.8% MoM SA, beating consensus and our estimates of 10.9% and 12.2% respectively. Import growth surprised on the upside, at 22.1% YoY (18.8% in Oct) or -3.9% MoM SA, ahead of consensus and our forecasts of 18.8% and 18.3% respectively. Taken together, China booked a smaller trade surplus of US$14.5bn (US$17.0bn). Trade data thus far suggests that net exports will likely subtract 1.5-1.0% pts from 4Q11 GDP growth. While exports continued to surprise, we believe it is a matter of time before a more material slowdown occurs. Novs PMI for export orders is particularly worrying, falling to a 34-month low of 45.6. Recent export orders are eerily reminiscent of 3Q08, the MoMent before exports tanked. Exports to the EU have eased, slowing from 18.1% YoY growth in 3Q11 to 6.3% YoY in 4Q11. While demand from the US was firm, we do not expect the trend to sustain, considering that consumption is currently driven by savings and government attempts to rein in public spending in 2012. For 2011, we are maintaining our export growth forecast of 20.0%. This could slow to below-trend growth of 6.0-8.0% in 2012 if external demand falls off the cliff.

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ORIENT FINANCE Credit tightening has taken a more visible toll on the economy with industrial production slowing further last month. Industrial output expanded at a slower 12.4% YoY last month, the weakest since Aug 09s +12.3%, slightly below consensus and our forecasts of 12.6% and 12.8% respectively (13.2% in October). Fixed asset investment (FAI) also grew at a slower 24.5% in 11M11 (24.9% in 10M11). More positively, retail sales rose 17.3% YoY, beating consensus and our estimates of 16.8% and 16.0% (17.2% in October), spurred by strong property-related sales. Adjusted for prices, retail sales growth rose to a 10-month high of 13.1% YoY. The slowdown was to be expected, as credit tightening, weaker external demand and higher year-ago bases combined to bite. However, macroeconomic data still points to admirable growth of 8.5-8.8% YoY in 4Q11, prompting us to maintain our full-year forecast of 9.2%. For 2012, expect below-trend growth of 8%, as a confluence of headwinds work to slow the Chinese economy down further. Domestic consumption remains generally firm. Expect growth to be highlighted as a key concern in the upcoming economic work conference next week. We expect a looser monetary policy amid rising external risks and a moderation in domestic production. Fiscal policy should remain accommodative, considering the transition to a new leadership, with the fiscal balance expected to be around -2.5 to -1.5% of GDP. Mid month, new bank loans stood at 562bn yuan (586bn yuan October), with M2 money supply +12.7%; no th surprise. On December 15 , HSBC Flash Manufacturing gave a stronger indication with the December figure improving to 49 from 47.7 in November. As for Hong Kong, October retail sales +23% were much stronger than 20% expected (24% September); and the same applied for the volume, +15% vs +13% expected. November PMi dipped slightly to 48.7 from 49 in October. 3Q Industrial production grew 0.2% (+2% 2Q) with PPi +9.6% in 3Q from +9% in 2Q. Unemployment rate remained at 3.4%, while November CPi improved somewhat to +5.7% from +5.8% in Oct. Chinese banks was the best performing sector in Dec, on the lowering of RRR. Banks in Hong Kong were also supported by the positive sentiment, leading to an uptick in the sector. Separately, Chinese insurers gained 3.1% MoM, supported by PICC on a capital injection from Asia Financial. Construction and building materials advanced on the back of potential monetary relaxation, inducing hopes of improvement in fixed assets investment. The cement & steel sector rose, led by Angang and Maanshan Iron which were up in the month. GIC increased its stake in Angang, while Maanshan received board approval to invest to set up railway equipment companies. Constructors gained as China Communication Construction climbed 5.4% MoM. Chinese property stocks reacted positively in the month amid the atmosphere of credit easing, giving hope of a resilient real estate market ahead. The sector surged with the biggest gainers being Sino Ocean Land, Shimao Properties and China Resources Land, soaring. Hong Kong property stocks, up 4.8% MoM, also outperformed the market on expectation that hot money would flow from China into the Hong Kong. As new home sales in the city rose 46% YoY in Nov, Sino Land, Cheung Kong and Sun Hung Kai advanced. Elsewhere in China, F&B plummeted, dragged down by the 27.0% slump of Mengniu as the company announced that moly feeds given to cows had led to excessive levels of toxin in milk. Miners dropped as gold price fell 9.1% in the month. In Hong Kong, shipping operators performed the best. CSCL hiked as the company consider acquisition opportunities in the industry in 2012 as shipping lines struggle with overcapacity and low cargo rates. China COSCO advanced in the month on the announcement of its partnership with other operators for Asia-Europe trades as carriers join hands to counter the current difficult situations. On the other hand, Hong Kong retailers lost and conglomerates slipped. Gaming operators continued their previous loss and dropped in Dec, while utilities fell slightly by under the market turbulence. Corporate News: Alibabas shares slumped after Reuters quoted sources as saying parent Alibaba Group was seeking up to US$4bn in debt financing to help it buy back a 40% stake from Yahoo. Bank of East Asia aimed to step up hiring and open more branches on the mainland to boost the loan business for small- and medium-sized enterprises. BEA wanted to increase the profit contribution from the mainland to almost 50% of total profit in the next three years, up from 35% now, Brian Li Man-bun, the bank's deputy chief executive, told a media briefing. Bank of Chinas investment banking subsidiary expected to get approval for membership of the LME by the end of the first quarter. A bastion of old London trading will meet a new global economic force next

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ORIENT FINANCE year when the London Metal Exchange is expected to admit a top Chinese bank. For LME traders the benefits of an enlarged market are likely to outweigh share lost to the newcomer. Cathay Pacific Airways has cut capacity growth to 10% from the planned 17% next year by deferring delivery of two new freighters amid a bleak industry outlook. Cheung Kong launched 32 units at the third phase of its Festival City development in Tai Wai at below secondary-market prices, the developer announced. China Construction Bank shareholder sold 400m Hshares worth HK$2.08bn. This was the second time in two weeks that a major shareholder has offloaded holdings in the bank. The stake was sold at HK$5.19 a share, compared with the initial offering price of between HK$5.17 and HK$5.30 after close of trade on Tuesday, according to Deutsche Bank, which arranged the deal. China Development Bank has signed two agreements with Kazak copper giant Kazakhmys PLC, granting the mine and refinery operator US$1.34bn and Rmb1bn (US$158m) for a new project. According to the agreements signed on Friday in Urumqi, capital city of northwest China's Xinjiang Uygur autonomous region, both the loans, with a term of 15 years, will be used to fund development of a new mine in Aktogay, east Kazakhstan China Petroleum & Chemical Corp., Asias biggest refiner considered its not the time to talk about raising its joint HK$15.3bn ($2bn) bid with ENN Energy Holdings Ltd. for China Gas. According to Sinopecs Chairman Fu Chengyu, the company hopes China Gass board of directors can consider seriously the HK$3.50 a share offer. Sinopec's US$2.2bn unsolicited bid for privately held China Gas may need to be sweetened, as the state-run energy giant seeks to seize control of the company in order to expand its resources footprint. The offer, made jointly with ENN Energy, may also face regulatory scrutiny, adding a twist to a transaction that is seeing a rare unsolicited bid by a Chinese company and involves three mainlandfocused energy companies. China Gas received "an unsolicited offer" from a consortium including Sinopec, the mainland's biggest offshore oil and gas firm. It was offered HK$16.69bn in cash and that could create the nation's biggest city piped-gas firm. China Datang Corporation Renewable Power Co., Limited is set to see its profits for 2011 increase by 50% on a year-on-year basis, according to a senior executive of the company, the first anniversary of its listing on the Hong Kong H Shares market. CNOOC has added leakage at a pipeline linked to a major gas field to the challenge of it meeting an already-curtailed production target for this year. The incident, the fifth production problem it has reported since April, might see regulators increase safety scrutiny of the industry, according to analysts. China Petrochemical, parent of listed China Petroleum & Chemical has signed a preliminary agreement to substantially boost its commitment to buy natural gas from an Australian project and increase its stake in it. The pact, which is expected to be firmed up to a binding contract soon, would allow the project's developers to build the infrastructure needed to extract gas trapped between coal seams in Queensland state, liquefy it and ship it via tankers to its Asian customers. China Petroleum & Chemical (Sinopec) is the favourite to buy part of BG Group's stake in some of Brazil's most promising offshore oil areas, increasing its holdings in a fast-growing frontier believed to hold enough oil to supply China for 15 years. The winner could pay US$20bn or more for the stake held by oil company BG, based on previous purchases in the area. China Polymetallic Mining planned to spend Rmb1.55bn (HK$1.89bn) until the end of next year to buy mining rights and to fund development and operating costs. The Yunnan firm claimed it would weather depressed equity-market valuations to launch a share offering because of its role as a consolidator of the province's metals-mining sector. China Rongsheng Heavy Industries is a step closer to meeting its order target of US$2.5bn this year after securing a deal to build up to 20 oil tankers for a mainland shipping company. The contract was inked with Global Union Shipping, a previously unknown company that was linked to a state-owned enterprise which has a long-term oil transport contract. China Shenhua Energy Companys parent Shenhua Group planned to build Asia's biggest thermal power plant in the southern region of Guangxi, the official Xinhua news agency reported yesterday. The plant, to be located in the coastal city of Beihai, will consist of eight one gigawatt power generators and will be constructed in about five years according to the report. Citic Pacifics request to bar police from viewing company documents in a fraud investigation was denied on The High Court. Judge Alan Wright ruled the 1,500-odd documents - now seized by police - are 5/28

ORIENT FINANCE exempted from legal privilege because there is an obvious case of conspiracy to defraud. Citic Pacifics officers didnt know the implications of the companys currency exposure when they failed to disclose potential losses, a lawyer for the steelmaker and property developer told a Hong Kong court. CNOOC Ltd and Canada's Nexen Inc. have agreed to a joint venture deal that gives China's largest offshore producer of offshore crude oil and natural gas working interests in as many as six deepwater exploration wells in the Gulf of Mexico. The deal is the latest in a string of CNOOC investments in North America, aimed at building up its production and reserves growth. It comes hot on the heels of its failure to buy BP PLC assets in Argentina last month. Dongfeng Motor planned to invest more than Rmb30bn (HK$36.7bn) to triple annual sales of its own brand by 2016 and reduce reliance on profits from making cars for Nissan Motor and Peugeot Citroen. Esprit Holdings shares suffered their biggest decline in nearly two months following the resignation of the company's chief financial officer amid a restructuring plan to revive earnings. Esprit Holdings Ltd Chief Financial Officer Chew Fook Aun quit for personal reasons as the largest Hong Kong-listed apparel company seeks to revive earnings after profit plunged 98% last fiscal year. Guodian Technology and Environment planned to spend a total of Rmb6bn (HK$7.32bn) in this year's second half and next year on its power-plant pollution controls and clean-energy business development, and will plug the gap in proceeds from its initial public offering (IPO) with bank loans and operating cash. Hang Tens shares surged to a 12-month high yesterday on news of a takeover bid by Victor Fung Kwok-lun and his brother William, owners of trading firm Li & Fung. The offer values Hang Ten's more than 982mn shares in issue at HK$2.65bn. Honghua Group has been selling seven units of onshore drilling rigs worth about US$300m (HK$2.34bn) to National Drilling Co of the United Arab Emirates. The order is the largest single land drilling rig contract for Qidong- based Honghua this year. HSBC Holdings Thai credit card and retail business, which are worth up to US$1.28bn (HK$9.98bn) is tipped to be bought by Thailand's Bank of Ayudhya, the country's fifth-largest lender, upon winning the bid, according to sources close to the deal. HSBC Holdings is continuing to dispose of noncore assets selling its private banking business in Japan to Credit Suisse. HSBC said the value of the gross assets of the business being sold was US$2.7bn (HK$21bn) as of end-October, but it did not disclose the sale price. The transaction is expected to be completed during the second quarter of 2012. HSBC Holdings may escape US$1.5bn (HK$11.7bn) of additional costs after the British government diluted plans requiring British lenders to raise extra loss- absorbing capital. Hutchison Telecom Hong Kong aimed to secure business from 40-50% of exchange participants as the local bourse upgrades its network infrastructure from next year. Hutchison is one of three vendors selected more than a month ago to improve the stock exchange's Securities and Derivatives Network, or SDNet/1, which facilitates equity trading, clearing and settlement. The second generation, SDNet/2, to be phased in from the third quarter next year, promises more capacity and better performance. Hutchison Whampoa's health and beauty chain Watsons planned to triple the number of its stores on the mainland to 3,000 in the next five years as it revs up expansion in a mammoth but competitive consumer market. Mainland banks, keen to meet their loans quota for the year amid a cut in the reserve ratio - which has freed up more funds - are boosting lending New loans by China's four largest banks - Industrial and Commercial Bank of China, China Construction Bank, Bank of China and Agricultural Bank - during the December 10-15 period surpassed Rmb40bn (HK$49.01bn). Li & Fung is set to buy apparel maker Hang Ten for about HK$2.7bn. Perfect Lead Investments, a unit of Li & Fung, announced the deal jointly with Hang Ten. The offer of HK$2.7 per share is 58.8% above Hang Ten's share price of HK$1.7 before the company was suspended. Lifestyle International was awarded a commercial site in Shanghai after a winning Rmb2.47bn (HK$3.02bn) bid in a government tender. The site in Zhabei district, north of the centre, is 50,154 square metres, and could be developed into a commercial project with a total gross floor area of 175,537 square metres. Link REIT strengthened its foothold in Tseung Kwan O after agreeing to buy Maritime Bay Mall for HK$588m from Sino Land. The mall - consisting of a gross floor area of 63,466 square feet - is the trust's second acquisition in the district. The REIT currently has a portfolio of 11mn sq ft of retail space and about 80,000 parking spaces. Melco Crown Entertainment claimed it will not need to tap equity markets to fund its planned Studio City casino complex. The company's pending listing in Hong Kong "by way of introduction" will see the firm's

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ORIENT FINANCE shares trade on both the local bourse and Nasdaq, where it has been listed since 2006. But the listing will not raise new funds since it does not involve selling new shares. MGM China's Macau casino unit is suing longtime VIP junket agent and North Korean tour operator Wong Sing-wa for failing to repay half of a three-year-old, HK$10m debt. OTO Holdings planned to expand mainland sales by opening consignment counters, rather than separate stores. OTO mainly sells massage chairs, slimming belts and blood pressure monitors. Ping An Insurance (Group) planned to sell as much as Rmb26bn (HK$31.7bn) of convertible bonds to provide additional working capital. The six-year convertible bonds will carry a coupon rate of no more than 3%. The plan was approved by the company's board and will be voted on at a meeting of shareholders on February 8. Shanghai Industrial Holdings planned to add a Hong Kong listing for its Singapore-listed subsidiary Asia Water Technology, as it aims to expand aggressively its water services business. Shangri-La Asia has given a vote of confidence to Hong Kong's hospitality industry after outbidding three competitors to win a waterfront site in Hung Hom for HK$2.328bn. Sino-Ocean Land sought to delay payments in a joint venture with Swire Pacific, in a move highlighting the strained financial situation of mainland developers as a determined central government tries to suppress a property bubble. Beijing's largest developer announced a non-binding agreement with bluechip Swire to develop a commercial project in Chengdu, Sichuan, on a 50-50 split. Standard Chartered Bank planned to open new branches in tourist hotspots in the city over the next five years in a bid to market its wealth management services to wealthy mainland visitors to Hong Kong. Sun Hung Kai Properties is a major beneficiary of the trend that European retailers increasingly head east to tap more robust sales amid global economic uncertainties. Tencent has completed its sale of US$600m worth of five-year US dollar-denominated bonds, the company's first international debt offering. Shenzhen-based Tencent expected net proceeds to reach US$592.44m after deducting underwriting fees and other expenses. Yanzhou Coal Mining is close to taking control of Australia's Gloucester Coal. The deal would see Yanzhou inject its existing Australian assets into listed Gloucester. The move would allow Yanzhou to meet its commitment to Australian securities regulators to float at least 30% of its Australian assets on the nation's bourse by the end of next year.

INDEX HSI

TOP GAINERS BANK OF CHINA SINO LAND BANK EAST ASIA

MOM% 18.67 16.91 13.29 MOM% 20.22 18.67 16.11 MOM% 11.48 10.49 9.60 BYD CO

TOP LOSERS LI & FUNG ESPRIT HLDGS BELLE INTL TOP LOSERS ZIJIN MINING GUANGZHOU AUTO TOP LOSERS SINOFERT HLDG LENOVO GRP CNOOC

MOM% -7.11 -6.70 -5.31 MOM% -10.15 -6.96 -6.90 MOM% -6.44 -3.36 -3.14

INDEX HSCEI

TOP GAINERS DONGFENG MOTOR BANK OF CHINA CHINA COSCO

INDEX HSCCI

TOP GAINERS BEIJING ENT POLY HK SINOTRUK

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ORIENT FINANCE

KOREA
In Dec, the Kospi saw a loss of 1.18%, down to 1825.74, meaning 2011 oversaw a contraction of just under 11%. The death of Kim Jong-Il led the market to plunge intraday as foreign investors pulled out on concerns of a troublesome transition for the new leader. However, the market was able to recover with expectations that the US economy is recovering. S&P maintain S. Korea's credit rating at 'A', the 6th highest level and also maintained the credit outlook at 'stable. In Dec, the MSCI Korea Index traded at a 12-month-forward P/E of 9.01x (vs. 8.71x in Nov), which was lower than its 5-year average of 10.39x. The index traded at a 16.4% discount to the MSCI World Index (10.78x), a 2.5% discount to the MSCI EM Index (9.25x), and a 13.4% discount to the MSCI Asia Pacific Ex-Japan Index (10.41x) as of Dec 23. By sector, construction was the strongest backed by government measures to boost the real estate market. Utilities extended its rally from last month due to expectations of further rate hikes while defensive and highdividend yielding telecom sector were also strong. On the other hand, transportation/equipment was weak over the shrinking domestic market, financials were weak on weak global macro concerns, while transportation/storage underperformed on weak passenger and cargo demand: Foreign investors and retail investors net sold while local ITCs net bought in the Kospi. Foreigners net sold in IT, steel and financials; whereas net bought in transportation/equipment, services, and chemicals. On the other hand local ITCs net bought in IT, steel and transportation/equipment, while net sold services, chemicals and pharmaceuticals. Korea's industrial production (IP) rose 6.2% YoY (while slipping 0.7% MoM) in October, exceeding the consensus forecast of 5.4% YoY growth. However, other manufacturing-related indicators remained sluggish: domestic shipments grew only 0.2% YoY, and the country's manufacturing utilization rate fell to 79.5% from 81.3% in September. Facility investments also faltered, declining for a fourth month in October, by 11.9% YoY. The jump in construction investment indicators suggests an imminent recovery of the construction market. Construction completions rose 3.1% YoY, the first YoY rise since May 2010, while construction orders jumped 56.3% YoY on healthy increases in both private and public sectors. Korea's composite leading indicator (CLI) fell for a third consecutive month in October, dipping 1% MoM, with eight components down MoM (construction orders and financial-institution liquidity were up MoM). Korean exports were up 13.8% YoY in November, beating the consensus estimate of 10.4%, as price hikes boosted growth in certain sectors despite on-year declines in exports to developed markets. By region, exports to the US and EU continued to slide over Nov 1-20, falling a respective 8.5% and 13.8% YoYsluggish demand in DMs is now weighing heavily on global trade and curbing growth in Asian trade. Meanwhile, Korean exports to Asia increased only 7.1% over Nov 1-20, down from double-digit growth in preceding months. Korean exports of petroleum products and automobiles recovered slightly in November, benefiting respectively from an upturn in oil prices and rising ASPs, the latter following an increase in proportion of high-end car exports. Korean exports still face two major downside risks-exports to DMs are rapidly drying up as a result of eurozone debt issues, while an unexpectedly steep slowdown in Chinese economic growth is triggering preemptive responses from the Chinese government. Korea's consumer price index (CPI) rose 4.2% YoY (0.1% MoM) in November, short of consensus forecast (4.3% YoY). Industrial-product prices and rents rose (by 0.7%, 0.5% MoM); agricultural and public service prices fell (by 1.5%, 0.2% MoM). Service prices climbed more slowly (0.1% MoM) than in October, but gas tariff and transportation fare hikes are likely to add to inflation in the near term. Core CPI growth turned up, coming in at 0.3% MoM and 3.5% YoY. The index's baseline year has been changed from 2005 to 2010 and the basket of goods comprising the index has been revised, lowering the estimate for the year's CPI growth through October from 4.4% to 4.0% YoY. The Bank of Korea (BOK) held its key rate steady at 3.25% for a sixth successive month at Monetary Policy Committee meeting-mindful of European debt contagion and turmoil in financial markets-with the policy rate unlikely to change before external factors stabilize. The BOK governor said that Korea's situation differs from countries that have lowered their interest rates and that the rates normalization stance remains unchangedalthough he said the level of what the bank considers a neutral rate may drop a bit, insinuating little chance for a rate cut any time soon. Spot price for mainstream DRAM products saw a significant and surprising jump during the week of 12-16 December 12-16), according to inSpectrum. Corporate News: Banks: household lending rate to be revised . Several media have reported that domestic banks are working on a revision to the household lending-rate structure. If the interest-rate benchmark for household loans were changed from a CD rate to a less volatile index, banks NIM might be deteriorated, but we would expect the overall impact on earnings to remain limited as the switch should lower the

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ORIENT FINANCE default risk of borrowers. Concerns regarding an earnings decline from stricter restrictions and overcapitalization may weigh on investor sentiment for the sector, but we believe that banks overall valuation (0.6x FY12 P/B) is attributable to global macro-economic risk, which, if dissipated, could help the firms valuations to better reflect their fundamentals. CJCJ: The firm announced on Dec 16 that it decided to borrow KRW500b as a shortterm debt to prepare the acquisition of Korea Express. DSME announced order cancellation on 2 VLCCs and 2 bulkers, due to the default of the ship owner on intermediate payment. The contract was made in 2008 and the vessel construction had not begun. The announcement was simply a procedural process and the cancellation has little impact on the firm's financials. The firm also won an order for 3 submarines for Indonesian navy, and the total contract amount stands at USD1.1b. Including this order, the firm has overachieved its annual order target by 35%. CEO at KAMCO (19.1% stakeholder) interviewed that it plans to sell the stake by Nov 2012, a due date for liquidating nonperforming loans, set by Public Fund Oversight Committee. From the longterm perspective, it could be positive that a potential buyer should be less burdened for purchasing shares (31% now vs 50% previously). However, we believe overhang issues in the short term may limit upside potential for DSME shares. GS Retail was be listed Dec. 23rd on KOSPI. Its IPO price is KRW19,500, 13.5x 2012 P/E. Hanjin Shipping sold off a 2.22% stake in Jungseok Enterprise Corp., the defacto holding firm for the Hanjin Group, for 6.58bn won ($5.7mn), raising speculation that the company is on course to sever ties with its parent company. Himart: Eugene Corp announced that both Eugene Corp (major shareholder of Himart) and CEO Sun (the second largest shareholder) will sell their stake in HiMart to the third party. The third largest shareholder, HI Consortium will also sell its 8.9% stake. CEO Suns friendly shares (IAB Holdings 2.5% stake, Sun Hyunsuks 0.9% stake) and Eugene Corps friendly shares (Eugene Securities and Investments 1.1% stake) may also go up for bid and in this case over 60% of Himarts total stake may go up for sale Hyundai Heavy won USD0.9b worth of Nigerian offshore gas platform project. The firm does not reveal who the operator is, but it is known to be Chevron. Including this order, the firm has overachieved its annual order target by 23% Hyundai Merchant Marine: HMM has agreed to form The G6 Alliance with 5 leading container shipping lines. The new alliance partnership will start by April 2012( subject to be changed). G6 Alliance is expected to offer 1) frequent sailings, 2) extensive direct port coverage, 3)attractive transit times to meet customers needs. Hyundai Motor (HMC) will likely post 2011 global retail sales volume of 4.02m units, beating its guidance of 3.9m units. We believe the success will carry over into 2012, and investors will reward HMCs qualitative growth. In particular, we expect sales of the new i40 to gain Momentum in Europe, boosting fleet sales hampered by the lack of strong Dandover segment models. Insurance: non-life insurers November results, it slow affected by one-offs including valuation losses and early retirement package. Net profit, by insurer; Samsung F&M: below KRW60b; Hyundai M&F: around KRW30b; Dongbu Ins: KRW37b; LIG Ins: KRW17b; Meritz F&M: KRW11b. Although December results could be weak with seasonal factors, Jan-Mar 2012 results to be solid. Internet: Nexon IPO, with the Dec 14 listing in Japan of casual game company, Nexon, meeting with disappointing demand and the firms share price falling after the IPO, valuations for Korean online game firms have become a concern. Kepco: implements electricity tariff hikes on Dec 5, that averages 4.5%with industry receiving the biggest increase at 6.5%but leaves residential and agricultural tariffs unchanged in light of burdens on the middle class and price stabilization. Korean Re: Losses from Tai flood have not yet been confirmed. Until now, Samsung F&M and Korean Re expect around KRW70b of losses, respectively. Someone comments about premium hike from 2012, however it will take about 5 years to recovery these massive losses. Lotte Chilsung: The firm announced on Dec 15 that it would acquire Lotte Asahi's wine division on Jan 01 of 2012 to manage Lotte Group's liquor businesses efficiently. NHN: portal's monopoly issue... Discussions at the Korea Communications Commission on adding value-added communications businesses to its monopoly watch list sent NHN and Daum Communications' shares tumbling on concerns that the firms will be found to be too dominant in the world of Internet portals. 9/28

ORIENT FINANCE Nong Shim: The firm announced on Nov 25 that it would raise ramen ASP by 6.2% on Nov 26. The firm announced on Dec 13 that it was notified a cancellation of contract for Samdasoo distribution by Jeju government. Posco is targeting to ship 32.5m tonnes of carbon steel in 2012, lowering from this year's plan of 33m tonnes. In case of double dip, the firm is planning to cut additional 2m tonnes. Retailers: department and discount store sales decreased 0.5% YoY in Nov on unusually warm weather that affected the sales of Kimchi products (Kimchi products sell well when weather is cold) and winter apparels. Samsung Electronics announced its plans to build a flash memory chip plant in China, seen costing some $4bn, as a boom in smartphones and tablet computers is set to fuel the $22bn chip industry's growth next year. Samsung Elec is buying Sony's entire stake in its JV for S-LCD for W1.08tn. Also Samsung Elec is buying the 50% interest of SEMCO in Samsung LED at W283bn (much cheaper than the market expectation of W500bn). SBS: As GPCs began operation in Dec, the company declared that it would begin directly selling ads through SBS Media Holdings' media rep, "Media Creative," instead of former "KOBACO." INDEX KOSPI50 TOP GAINERS LG UPLUS CORP DAEWOO ENG & CON DAEWOO SECS MOM% 11.28 10.18 10.17 TOP LOSERS DAEWOO SHIPPING NHN CORP INDUSTRIAL BANK MOM% -15.18 -14.92 -14.09

TAIWAN
December was a volatile month, where we witnessed the intra-day low of the year of 6,633 on 19th December, which was followed by rally boosted by government buying ahead of the Presidential election in January 2012. Taiex ended the month gaining 2.43% to finish at 7072.08 points. Government buying saw the 7,000 point level as critical defense. Vice Premier come out and said the government was already buying in the market. Big cap tech shares such as HTC, TPK, Epistar and Delta Electronics outperformed during the second half of the month. Year end window dressing activity by local funds also boosted small and med-cap shares such as Solar and PCB. Investors were also hopeful that European debt crisis would be eased by the cooperation between euro zone governments. Sector wise, we saw strong gains for Plastics as Formosa Plastic was prime target for government to support the index. Financials also rallied on hopes that a change in government regulation would improve Life Insurers bottom-lines. Pulp sector continued to underperform as pulp prices weaken on slow Chinese demand. Construction sector also weakened as property prices in Taiwan start to show signs of weakness and new government regulations such as actual price taxing caused negative sentiment for developers. Steel sector slows as demand from China and local constructions demand also weaken. Auto sector slumped on a fall in car sales and worry that slow down in local consumption will impact car sales for 2012. Foreign institutional investors net bought NT$26.8bn, while local ITC net sold NT$0.24bn and local prop bought $0.17bn for the month. Taiwan Government announced that the National Stabilization Fund will enter to support the stock market. The fund size is NT$500bn, and telecom, rubber, car, machinery, chemical, cement, biotech, plastics, and distribution shares are speculated to be targets. Taiwan Economy may face pressure from low exports, low consumption, low investment, and high unemployment, according to a research report from the Taiwan Central Bank, and market speculates the Taiwan Central Bank may lower interest rates at its year-end meeting on December 29. The Chinese government spokesman indicated that the Economic Cooperation Framework Agreement (ECFA) signed by the China and Taiwan last year has realized its function to reduce tariffs for each side and the Early Harvest Program listed products of the ECFA, which can export to China with low tariffs, may expand from 14% to 94% in 2012. November Import-Exports decreased YoY for the first time in two years. The total amount decreased 4.5% YoY to US$46.2bn, as imports decreased 10.4% YoY to US$21.5bn, and exports increased 1.3% YoY but decreased 8.7% MoM to US$24.7bn. Also, the Taiwan Government reported the November export orders amount was US$36.65bn, up 2.54% YoY, the lowest level in the past 26 months. The amount may turn negative growth in December. Taiwan 2012 GDP Target AT 4.3%. The CEPD set its economic growth target for Taiwan at 4.3% for 2012. It also raised per capita GDP to US$20,649 in 2012, and predicted unemployment rate at 4.2% for 2012. Taiwan Unemployment in November dropped 0.02 %age points from October to 4.28%. 10/28

ORIENT FINANCE Taiwan November M1B & M2: Central bank data yesterday showed that annual growth of M1B and M2 money supply fell in November due to a continuous net outflow of foreign capital and slowing growth in bank loans. M1B rose 4.22% YoY, down from its 5.12% increase in October and the lowest level since February 2009. The broader M2 monetary measurement increased 5.07% YoY last month, down from 5.54% in October. Financial Supervisory Commission (FSC) will allow insurance companies to start using forex reserves to replace real forex hedges, which will help companies save hedging costs of NT$80bn every year. Market expects insurance companies with big foreign investment positions, including Cathay Life, a subsidiary of Cathay FHC, Shin Kong Life, a subsidiary of Shin Kong FHC, Fubon Life, a subsidiary of Fubon FHC. FSC allows life insurance firms special booking of losses: FSC yesterday announced, for this year only, to allow life insurers to measure unrealized stock losses based on the average share price for the past six months, rather than based on the closing prices on the final trading day of the year. Market thinks this policy may ease the stock selling pressure from some insurance firms as the index continues to fall and closed at its yearly low yesterday. Separately, Taiwan government plans to allow Chinese banks to invest in Taiwanese banks. The new rule would allow any one Chinese bank to own up to 5% of a Taiwanese bank, and for Chinese banks to own up to 10% of any one Taiwanese bank. President Ma reinstated the real estate transaction tax as based on real market price and to be passed by the Legislative Yuan this Wednesday to avoid speculation in real estate. Housing Transactions in 2011 are likely to reach an 8-year low as October transaction volume declined 8.7% nationwide. In New Taipei City, transaction volume declined as much as 18% due to the implementation of a luxury tax and higher down payment requirements. The Legislative Yuan of Taiwan yesterday passed new regulations requiring real estate transaction taxes be based on real market price starting July 1, 2012. Real Estate market in northern Taiwan in December is very cold. According to a report, there are no new presale projects in Taipei City in December so far, and there are only 5 projects worth NT$6bn in northern Taiwan, the lowest situation in the past 10 years. Corporate News: Acer. Market speculates ACER's NB shipments to challenge 40mn units in 2012, up 10% YoY. For the China market, ACER is targeted to reach sales of US$3.0bn (or NT$90bn) up 20-25% YoY. Acer has seized a notebook computer order worth NT$1.0bn from Australia's Queensland DET. Shipments will be out by the end of the year to support the company's efforts to turn from a loss to profits in 4Q11. Adata acquired low cost inventory from Elpida (JP) and Hynix (KR) and is expecting to profit NT$300350mn, which translates to EPS of NT$1.35-1.57. Apple supply chain. Market speculates that Apple's iPad 3 component suppliers will start to ship products in December, and it is likely these component suppliers will operate throughout the Chinese New Year holiday to meet demand. Thus, 1Q12 demand is likely to stay firm despite earlier speculation that 1Q12 would be weak. Asus sold 15k units of its Zenbook during the IT Month exhibition and its component suppliers are reported to have received rush orders during December. Asus will recall its Transformer Prime tablet due to Wi-Fi problems reported by customers. Asus management said Transformer shipments outstanding remain relatively small and the product launch in the US will not be affected. Asustek expects NB shipments to reach 5.8mn units in 4Q11, setting a historical high and with at least 10% global market share. Market speculates Asustek 2012 NB shipments to increase 20% YoY to challenge Dell's third place in global market shipments. In the tablet PC space, Asustek is targeted to lead in shipments for both Android and Windows 8 platforms. AUO Chairman Lee said company has received additional rush orders amid exceptional Black Friday sales of LCD TV in the US. The Chairman expects the company to turn the tide in 2012 as panel prices have increased for some models and OBMs are coming out with new models as soon as JanuaryFebruary 2012. AUO will focus on AMOLED and LTPS technology R&D as the company expects a major increase in demand for the technology application. Banks: Financial Supervisory Commission (FSC) announced that China banks will be allowed to invest in Taiwanese banks or financial holding companies from January 2, 2012. Market speculates Cathay FHC, Sinopac FHC and Chinatrust FHC will be the most popular targets. Cathay FHC announced yesterday it will spend NT$4.7bn, or NT$18.3 per share, to acquire 41% of Taishin FHC preferred stock from Newbridge Capital (US). Cement prices in Guandong and Fujian provinces in China are expected to increase before the Chinese New Year due to a shortage in supply. Taiwan Cement and Goldsun will benefit. China Airlines announced plans to add an additional 27 flights every week to Japan before March 2012. 11/28

ORIENT FINANCE Chunghwa Telecom will lower ADSL rates by up to 25%, its steepest price cut ever, as soon as the end of this year, benefiting up to 2.1mn users. Delta's CEO indicated yesterday that the company will outperform in 2012 and will target iPhone components, network computing and cloud computing businesses. In addition, DELTA will hire 700-800 employees in 2012. Epistar. Global LED lighting makers are teaming up with Epistar to secure upstream epitaxial wafer to compete with Korean LED lighting makers. LED shares are seen by analysts as the first stocks to rebound amid global governments move towards clean energy and better-than-expected sales of LED TV. Evergreen Marine , together with CKYH carriers (COSCO Container Lines, "K" Line, Yang Ming, and Hanjin Shipping), or the green alliance, will form a partnership on the Asia-Europe trade route starting from 2Q12. The alliance will run eight loops from Asia to Northern Europe and four from Asia to the Mediterranean, all operated with ships of between 8,000 to 13,000 TEUs in the future. Gaming Industry. International Games System is speculated to benefit from China's economic policy to include the gaming industry as one of its top focuses for economic growth. In 2012, the Chinese government will issue more than 1,000 gaming licenses, and market expects IGS to benefit, with 2011 and 2012 EPS forecast to reach NT$14.18 and NT$17.54. Gloria Material will form a strategic alliance with Hitachi Metals (JP). Hon Hai Chairman Terry Kuo said the company will not have any layoffs next year, but will instead increase hiring, even if faced with difficult economic circumstances. The chairman also expects sales growth to be no less than 15% while analysts estimate consolidated full-year sales of NT$4.0tn in 2012. Hon Hai is planning on doubling its hiring at the Foxconn Zhengzhou plant in 2012 to meet higher iPad and iPhone production capacity, making it the world's largest smartphone production facility. Hon Hai will form an alliance with Nvidia to develop a automobile entertainment business center in Tianjin, China and has received orders from Audi and will start shipments in 2012. HTC lost to Apple (US) in a patent infringement case as the US International Trade Commission (ITC) ruled that HTC had infringed on one of APPLE's four patents related to portable electronic devices. The ITC will impose a ban on the sale of some HTC smartphones in the US starting April 19, 2012. HTC 's 4G LTE smartphone the Rezound saw a price cut from US$299 to US$199 on the Amazon (US) website, as HTC engages in the smartphone price war. HTC will buy back 100mn shares as treasury stock in a price range of NT$445-650 from December 20 for three months. Lea Lea announced that it has spent NT$344mn to buy 9,115k shares of China Petrochemical Development , and totally held 3.2% stakes in the company. LED and Solar companies are expected to benefit from the Executive Yuan's passing of an economic revitalization policy that will install 320k LED public street lamps and 25k units of sun roof panels totaling 75MW. Macronix 's serial flash application on auto products was used by Freescale (US) and will lead the company into European, US and Japanese markets. Mediatek was ordered to make a supplementary sales tax payment of NT$300mn to the National Tax Administration. M-Star and Mediatek may see an increase in market share as CSR (UK) will withdraw from the digital TV and silicon tuner businesses. Packaging and testing companies ASE and Spil may benefit from additional orders. Optics makers Largan and Genius are holding back 2H11 expansion plans amid expectation for an economic slowdown. Kinko, on the other hand, is following through with expansion plans to cope with higher demand for Canon (JP) DSLR lenses. Panel sector. Both US and Korean courts have issued fines to Taiwanese panel makers for price manipulation. AUO is being fined by Korean court to pay NT$760mn and still appearing to higher courts in the US. CMO-Innolux is being fined by US courts for NT$2.34bn plus Korean court's NT$30mn. Both companies indicate that these fines will not affect their daily operations. Pegatron is rumored to receive iPhone 4S order and total shipments for 2012 may challenge 15mn sets, up 83% YoY. The company refused to comment on market speculation. Plastics concepts: Market speculates that plastics manufacturers may outperform in 4Q11 due to increasing plastics prices this week and monetary policy loosening implemented by China's government. Formosa , USI and China Petrochemical may benefit as a result. 12/28

ORIENT FINANCE Quanta and Hon Hai are estimated by a foreign sell-side research institution to face profit erosion of 11.9% and 2.8%, respectively, if the renminbi were to depreciate by 0.5%. Silitec, Youngfast and Career (all non-Apple tablet makers) are facing greater uncertainties for Chinese New Year sales as distributors report tablet sales in China were dominated by Apple (US) products. Sino-American Chairman Lu said the solar industry will bottom in 1Q12 and slowly recover in 2Q12, but remains conservative as "the good days in the past are long gone." Solar concepts such as Neo Solar and Gintech have received rush orders recently and are considering canceling Chinese New Year's holiday for some employees. Two companies believe solar cell prices may rebound at any time and solar industry will outperform in 2012. Steel market, according to American Institute for International Steel, will be optimistic in 2012, and China Steel believes prices may rebound in 2Q12. Tyre makers such as Cheng Shin and Kenda may face higher material cost in 2012, which may affect their profits in that period. Tourism industry. The Taiwan government is considering raising the daily limit for China tourists to visit Taiwan to 5,000 tourists from the current 4,000 tourists. In November, the number of international tourists visiting Taiwan was a record high of more than 600k tourists. TPK is planning to discuss raising its dividend payout ratio from 2% to 10% at its next interim shareholders' meeting on March 4, 2012, which may in turn attract high-yield stock investors. TPK 's chief technology officer said the company will not enter the in-cell technology that is rumored to be Apple (US)'s next step in touch-panel specification. Instead the company will offer TOL and OGS type solutions. TSMC 's 18-inch plant investment in the Taichung Science Park was granted an additional 50 hectares from the science park administration while the tech giant will expand total investment to NT$800bn and will be 20nm-capable as soon as 2015. TSRC is expected to increase its butadiene rubber price for 1Q12 as butadiene price increased 16.9% in a week and 78.7% in a month. TXC : Market speculates that the company has received Quartz component orders from APPLE (US) for its iPhone 5. The company refused on comment market speculation. Uni-President announced it will sell holdings of its subsidiary Cargill China (CH) in 1Q12. Market speculates that this transaction may benefit Uni-President by NT$534mn, or EPS of NT$0.12 in 1Q12. Wistron is rumored to have acquired Lenovo (CN)'s smart TV orders, winning over rival Comapl , and may begin shipments in 1Q12. (Comm Tms) Yuanta FHC net earned NT$13.6bn in the first 11 months of 2011, for EPS of NT$1.50. INDEX TW50 TOP GAINERS LARGAN PRECISION CHINATRUST FIN COMPAL ELECTRON MOM% 17.31 14.20 13.11 TOP LOSERS YULON MOTOR AU OPTRONICS HUA NAN FINAN MOM% -9.72 -7.47 -4.66

SINGAPORE
The Singapore market dropped 2% in December, down to 2646.35 and meaning 2011 saw the market lose 17.04%, in line with the benchmark. While loans growth continued to surge YoY in Oct, we are seeing signs of moderation on a MoM basis. Loans growth could continue to moderate in the coming months in view of volatile markets. System loan growth maintained its robust YoY growth but marked 1.8% fall QoQ, largest MoM drop since Dec08. Nov PMI -0.8pt to 48.7ppt last month, below consensus of 49.5. Weaker consumer sentiment was mitigated by stronger export orders which rebounded to 47.3 (still contractionary) ahead of the holiday sales. Global PMI readings herald a further slowdown in global manufacturing. We view SG's headline manufacturing to remain in expansion though ex-bio manufacturing has already stalled. Higher inventories likely to limit future expansion in production.

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ORIENT FINANCE Singapore jumped 2 places to be the 6th most expensive city in Asia according to a global survey. On the back of a stronger SGD & 5.7% rise in average price of goods & services, Singapore ranked ahead of HK for the first time. Separately, Straits Times reported that syndicated lending in SG almost doubled to a record this yr driven by demand from property developers & surge in commodity trading. Loans surged 91% to US$38.3b this yr vs US$30.7b for whole of 2008. November property private sales +23% YoY driven by sales in the "Outside central region" launches. Demand remains resilient for mass market and weak for high end. While upgraders' demand remained strong, it was noted investment driven demand were still substantial & agents are in negotiations for potential ABSD rebates. Govt clamps down further on Singapore properties. Govt announced more property tax targeting foreigners and investment demand. This latest measure is harsher than Jan's as it impacts buyers' investment margins and affects developers' ability to price. The govt has introduced an additional buyers' stamp duty (ABSD) of 10% (13% stamp duty in total) to be imposed on foreigner and non-individual buyers of any residential property. In addition, PRs buying a second and subsequent property will pay extra stamp duty of 3% (6%), while Singaporeans buying their 3rd or subsequent residential property will also pay an extra stamp duty 3% (6%). These new measures will take effect on 8 Dec 2011. Singaporean first time buyers and buyers of HDB will not be affected by the new measure. Separately, the govt has also released the 1H2012 Govt Land Sale Programme which will potentially yield 14.1k new residential units, 218k sqm of GFA of office space and 4.8k hotel rooms. Foreigners make up 19% of tot private home sales in 2H2011 and ard 36% of new units sold YTD. A foreigner will now need to pay 13% more for a property while investors must be prepared to pay 6% more. Physical prices are now 16% above previous peak in 08. The luxury segment, typically favoured by foreigners and investors, is likely to be impacted most. Developers looking to purchase land going forward will also be subjected to 10% ABSD. Remissions of this 10% are allowed but only if developers develop and dispose of all the residential units in the new development within 5 years of the date of Contract or Agreement to purchase the site. Corporate News: Ascendas Reit issued 1455.28k new units to reit manager at $1.9547 being payment of 20% of base mgmt fee. Ascott Reit issues S$150m 4yr 3.8% fixed rate notes under its MTN programm. CapitaComm - Moody's assigned provisional (P)Baa2 rating to the S$2b MTN & Baa1 corporate family rating with stable outlook. CapitaComm Trust refinanced S$570m loan due Mar 2012. Capitacommercial Trust repurchased S$27m worth of CB due 2013 @ S$29.5m. Capitaland sold 71.6k sqm GFA land in China for RMB852m (vs valuations of RMB893m), booking a gain of disposal of RMB252m. CapitaMall Asia appointed Ascott to manage its serviced residences at Capitamall WuSheng. CapitaMalls Asia/ CapitaMall Trust/ Capland (CMA.sp/CT.sp/ CAPL.sp): commit $1.57bil in unitholder loans to develop Jurong Gateway site. Earlier has announced that construction of retail & office devt is expected to cost S$1.5bil. Chinese developers: Local authorities in Guangzhou & Shenzhen have joined Beijing & Shanghai in announcing home curbs into 2012. Another 36 out of 46 cities will annc decision by end of Dec. Chip Eng Seng awarded hotel development land parcel at Jln Bukit Merah for S$189m ($789psfppr). Chip Eng Seng emerged as top bidder for Alexandra Road hotel plot, putting in $189m or about S$780psf per plot ratio for the 99-yr leasehold hotel site. City Dev JV btw CIT.sp / Hong Leong & Hong Realty wins tender for the 9.95k sqm residential site at S$754psfppr, above consensus's S$600-660psf. Premium in tender participation as the 99yr leasehold land is one of the few city fringe sites to come into the mkt this yr. Comfort Delgro 4 more taxi companies to increase fares after CD.sp initiated the move. Move seen as a prelude to raising taxi rental prices to mitigate costs of soaring COE. Comfort Delgro revised its fare structure effective Dec 12, 2011. New fare structure will include a 10% reduction in the peak hour surcharge coupled with an extension in the peak periods to include weekends and public holidays. Call booking charges will also be reduced. CSE Global Stock tumbled 12% within a day after Amundi announced they pared their stake.

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ORIENT FINANCE CWT - BT reported citing unnamed rep that CWT is one of the bidders of MF Global's Singapore unit. Liquidator also acknowledged CWT is a bidder. CWT Ltd its wholly ownd subsidiary has acquired 3 companies as part of it ongoing global freight forwarding network expansion. DBS starts US$5b commercial paper program & will use proceeds to fund general business purpose. Dynamac secures fabrication orders worth S$115m from Modec, BAB.mk & SBM offshore. First Ship Lease inks a deal for 6-year term loan of US$479.6m with a syndicate of 8 lenders, secured against its current portfolio of 25 vessels. Global Log issue of S$500m worth of perpetual capital securities with 5.5% coupon to be listed on SGXst . Global Log to invest US$272.9m for a 50-50 JV with CIC to acquire 15 modern logistic failities in Japan frm LaSalle Investments.15 Properties with 770.9k sqm worth of GFA has 98.3% occupancy & 5.6yrs weighted avg lease expiry. GMG Global enters into 60% JV to buy rubber processing plant in Ivory coast for US$2.8m. Plant has capacity to process 20k metric tons of natural rubber. GMG Global JV in Cameroon which secured 2 land concessions (45ha of land) has been granted exclusive rights to develop the area & export any rubber/palm oil produced. Land concession valid for 50yrs & may be renewed for another 25yrs. GMG Global rights issue @ $0.091 was 1.23x subscribed & new shares to be listed on 23 Dec Hiap Seng Engg 87% owned subsidiary enters into strategic alliance with CNOOC to cooperate on compressor & processing skids packaging which will eventually lead to JV to jointly develop projects in O&G mkts. Hongkong Land would spend HK$560m (US$72m) to knock down commercial buidling The Forum to build a 7-floor office tower in its place. Keppel Corp secures US$809m contract frm Sete Brasil for new semisubmersible drilling rig. Mapletree Logistics priced JPY9b 10yr fixed rate note @ 2.71% Minzhong launched new industrial park with 3x times the current capacity along with maiden harvests frm 22.1k mu of new productive farmland. Grp expects park to achieve full utilisation within 3 yrs. Neptune Orient Lines reported a 14% fall in ave revenue per container in 4 weeks to Nov 18 due to lower rates in major trade lanes, tho' it carried 224,200 FED during that period, up 2%YoY. Neptune Orient Lines Tourism and travel operator TUI AG (TUI1.XE) is in renewed talks to sell its container ocean carrier business Hapag-Lloyd to competitor Neptune Orient Lines Ltd. (NO3.SG), German daily newspaper Die Welt reports in its Saturday edition, without citing its sources. NOL - APL, Hyundai Merchant Marine, Mitsui OSK, Hapag Lloyd, Nippon Yusen Kaisha & OOCL to form an alliance to create one of the largest vessel networks in Far East to Europe trade lane. Noble: Yanzhou Coal makes A$10.16 bid/shr, valuing GCL.au at A$2.1b, higher than the previously rumoured A$2b. Move is at 45% premium to GCL.au's last traded price but comes in form of A$3.20 cash + stake in the enlarged entity of backdoor listed Yanzhou coal valued at A$6.96. Shareholders will also get another A$3/shr if enlarged share price falls below A$6.96 within 18mths of completion. OCBC Bank appoints Tan Siew Peng as its new CFO and executive VP an dhe has took on his new role on Dec 1. Olam invests US$49.2m in a greefield fully integrated mechanised and irrigated rice farming & rice milling facility in Nigeria. Olam to acquire 75.2% stake in Macao commodities trading for EUR15m with option to acq balance in 5yrs time. Otto Marine sold one 40-meters AHT to its JV Co. and also breaks into the India mkt. Petra appoints ex-FNN.sp CEO of F&B Mr Koh Poh Tiong as an Independent director. Sakari Resources Temporary bridge at Mahakam River has been reopened on a limited basis for coal barges & river traffic with potential future closures for removal of debris & demolition of remaining bridge structure. SATS confirmed newswire reports from China that the company is in advanced negotiations with China Southern Airlines, China Eastern Airlines & Capital Airports Hldgs for a JV for Airport inflight kitchen Sembmarine Jurong shipyard received US$291.6m contract frm Prosafe to build an accomdation semisub rig. Sembmarine secures US$140m conversion contract to vonccert ROPAX vessel into DP2 accomodation & repair vessel frm Equinox offshore.

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ORIENT FINANCE SGX expands ADR range, adding 15 new names to the board. Separately, China Sky's appointed lawyers are demanding an apology frm SGX deputy chief regulatory officer failure which may lead to defamation suit which SGX announced intentions to defend. Sim Lian awarded joint tender for land parcel at Jelebu road for integrated commercial, residential development with Bukit Panjang bus interchange. 18.95sqm land with 56.864k sqm GFA Singapore Airlines Nov Operating statistics saw load factor falling 1% YoY to 1334m tonne/km. Weaker passengers carried on SIA were partly mitigated by better passenger load on silkair. Singtel divested entire 40% stake in Teletech park to Ascendas land for S$15m, bookng gain on disposal of S$4m. SMRT 2nd breakdown in train service in 2 days in the worst peak hour breakdown in history. 40m of damaged power rail affected thousands of commuters during rush-hour traffic on the back of an offpeak breakdown on the new circle line the day before. ST Engg to invest US$33.3m for a 50.1% stake in EcoServices with Pratt & Whitney retaining the remaining 49.9%. EcoServices will provide their engine wash svs to STE's customers ard the world. Stats Chippac affirmed previous outlook for 4Q11 of single digit decrease in 4Q revenue. Flood water level in Thailand is receding & company is in the process of assessing damage but is unable to confirm when full ops will resume. STX OSV secured building contact for a forage carrier for Eidvaag AS worth NOK200m. Tiong Seng secures S$151m construction contract for prime residential project "The Luxurie" frm KPLD.sp. TUI had discussed a sale of Hapag-Lloyd to Neptune Orient Lines--which is owned by Singapore statefund Temasek--in 2008. At the time, both companies couldn't agree on a price tag for the business. Die Welt reports that the present talks between TUI and Neptune Orient Lines are expected to continue for weeks. A concrete offer for TUI's stake in Hapag-Lloyd shouldn't be expected before spring 2012, the report adds. (dow jones) In the meantime, NOL responds that it does not comment on mkt speculation in email Separately, NOL lifted a trading halt after denying reports it planned to bid on German competitor Hapag-Lloyd AG. United E&C unit has secured a S$94m contract by Spore Workforce Devt Agency. Project period is for 20mths and expected to be completed by Aug 2013. Separately, its subsidiary Greatearth Construction has also secured the S$89m Design & Build main contract to build Pasir Ris EC. UOL / SL sold over 100 units out of its preview launched 190 units in its 577-unit Archipelago condo with 20% of them being foreign buyers. ASP of S$1000psf for the 99yr project at 30% discount to CAPL's Bedok residences as CAPL's site is connected to the MRT station in a mixed development. UOL stk price +4.8% yesterday, running ahead of its announcement that the company is buying 137.5k sf freehold property at St patrick garden for S$172m. Wilmar acquired remaining 1.61% in Wilmar China for HK$1.93b after failed plans for HKSE listing. Acquisition price inline with price Kuok grp paid in 2009. Yingli secures RMB700m 4yr syndicated loan frm Stanchart & OCBC for development of Ying Li Intl Plaza project. INDEX FSSTI TOP GAINERS NEPTUNE ORIENT JARDINE CYCLE SEMBCORP MARINE MOM% 8.70 5.34 3.52 TOP LOSERS CAPITALAND CAPITAMALLS CITY DEVPMTS MOM% -12.30 -11.02 -8.25

THAILAND
SET index rallied 2.95% to 1,024.73 amid continuing Europe crisis and weak U.S. economic indicator, however it rose only 1% year to date. Stocks benefited from buying interest by proprietary trading and foreign investors around Bt7bn and Bt4bn respectively in December. In addition, local mutual funds are likely to support the market especially big to medium cap stocks during the next week. Despite receding flood in many areas but government didnt recently offer any clues plans yet to protect flood in the long term and 16/28

ORIENT FINANCE restore investors confidence, most listed companies which effected by the floods this year may return their normal operation by January 2012 according to the Thai Listed Companies Association survey. We are quite optimistic on Thai economic growth next year (like V-shape rebound) due to restoration, resumption industrial activities, more government spending and low based comparison this year. Bank and entertainment made two of the stronger moves. The sector settled with a 8.3% and 8.2% gain respectively. TMB (Bt1.66) provided biggest gains of 23% as news to sell its stakes to potential buyers, followed by BAY (Bt22.4) for +13.7% and SCB (Bt117.0) for 7.8% due to expected strongest loan growth in the sector and earnings growth outlook, while KTB (Bt15.1) gained 3.4%. BEC (Bt44, +12.8%) led the sector in entertainment because it may be benefiting from possible raising in ad rates and change in management among its competitors MCOT (Ch. 9), and private-owned BBTV (Ch. 7, unlisted). Property sector offered 5.4% gains, SIRI unchanged from last month to close at Bt1.22. Insurance sector did the worst performers this month as possible higher claim expenses after flood. Among its more widely watched gained sectors, energy (+6.7%) included in the advance sectors, ESSO (Bt11.4, +29.5%) in response to news that another oil company will buy shares in ESSO. On economic front, Bank of Thailand decided cut policy rate 25 bps to 3.25% in its final meeting this year, we expect more room to cut next year as global condition worsen. Novembers inflation remained high to rise 4.19% YoY while it increased 3.83% for the first 11M11. Our economist believes that average headline inflation will be around 3.8% this year and 3.2% in 2012 due to a decline in input costs and oil prices from weaker global economy. Exports in November recorded with negative growth for the first time since 2009 mainly from flood i.e. -12.4% YoY. Regarding post-floods situation, every economist agrees that Thailand GDP growth will be negative in 4$11but it will pick up next year. On political front, Foreign minister reissued Thai ordinary passport to former prime minister Thaksin Shinawatra, however, he isnt promptly coming back to Thailand yet. With post-flood rehabilitation, the cabinet initially agreed to spend Bt20.1bn while damages estimated around Bt1.4trillion in 2.6mn household and 7 industrial estates. On the positive side, Transparency International reported that Thailands corruption decrease slightly this year ranking 80th among 183 countries comparing to last year at 78th and 10th among 26 Asian countries. Corporate News Airports of Thailand is to speed up the second phase expansion of Suvarnabhumi Airport to 2016, one year ahead of its scheduled completion in 2017. The Bt62.5bn investment is being planned for the second phase, according to Transport Minister Sukampol Suwannathat. Bangkok Bank proposed opening four more branches in Malaysia by 2016. The bank currently has five branches in Malaysia. Bangkok Dusit Medical Services is unlikely to see any expansion and acquisition plans over the next couple of years, as the group prefers to focus on business consolidation with the Phyathai Hospital and Paolo Memorial Hospital chains it acquired last December. Banks: Commercial banks are unlikely to reduce their interest rates despite the recent policy rate cut by the Bank of Thailand. Ch Karnchang was awarded the concession to construct a 1,260MW power plant. Ninety five % of the power will be supplied to Thailand. Lower Mekong countries had delayed the decision on whether Laos should proceed with its hydropower plant construction in Xayaburi, pending for a further study with Japanese technical assistance. Charoen Pokphand Group Ltd. signed a US$172m loan due 2018 and will use the proceeds to refinance debt, according to data compiled by Bloomberg. Siam Commercial Bank arranged the funding, aided by three other Thai banks, the data show. Shanghai Lotus Supermarket Chain Store Ltd. was the unit which borrowed the funds, the data show. Hana Microelectronics - one of the country's largest producers of semiconductors, expects its floodravaged factory in Ayutthaya to return to normal operation in February. Hemaraj Land and Development has postponed its Bt600m condominium project by the Chao Phraya River due partly to flood concerns but will proceed with the expansion of two industrial estates on confidence in the investment outlook over the next five years. Kasikornbank expects mortgages next year to show the lowest growth in 10 years, as the floods will weigh on applications for home loans throughout the first half of 2012. The mortgage industry this year is expected to be up by 7-7.5 %, short of the target of 8-8.5 %. This year KBank's home loans rose by 13 %, or Bt55bn, bringing its outstanding loans to Bt188bn. Kasikornbank, the largest lender to small and

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ORIENT FINANCE medium-sized enterprises, plans to focus next year on flood-ravaged small and micro businesses. Loans to small and micro operators are projected to grow by 15 % and to medium-sized enterprises by 9 % next year, so the shares in the SME loan portfolio of medium-sized and small/micro enterprises will change slightly to 59:41 from 60:40. KBank plans to boost fee income in 2012 by 22 % to Bt8.62bn. Major supermarket chains - Big C, Tops and Makro - are starting to resume operations back in their permanent sites in Ayutthaya's Wang Noi district as receding floods enable businesses to move back to their operating bases. Minor International has purchased the remaining 30% stake in Singapore's Thai Express Concepts Pte for S$16.8m (Bt406m), giving it full ownership in the Thai-food restaurant chain. PTT Pcl, Thailand's biggest company, plans to sell Bt20bn of bonds in January, the company said yesterday in a statement. PTT Plc and Electricity Generating - Concerns are mounting that the US$3.7bn Xayaburi Dam cannot proceed after the four-member Mekong River Commission delayed the project pending further environmental study. More than 90% of the electricity from Xayaburi, with its capacity of 1,285 megawatts, would supply Thailand. The project is scheduled for commercial operation in early 2019. CK owns a 57.5% stake in Xayaburi, with PTT Plc and Electricity Generating holding 25% and 12.5%. Ratchaburi Electricity Generating Hldgs has entered into an agreement to buy a 20-per-cent stake in the Bt6.1bn Huaybong 2 wind-farm project developed by KR 2 in Nakhon Ratchasima. Robinson Department Store plans to double its branches and sales over the next five years after expanding slowly over the past several years. Sansiri - Developer intends to make changes in design to help cope with floods, although this might push up costs. New city plans and zoning will have to change after floods hit residential locations more than floodways, Sansiri President Srettha Thavisin said in an interview on Monday. Shin Corp major shareholder Cedar Holdings, an affiliate of Temasek Holdings, is likely to sell more of its Shin shares to help boost the number of tradable shares in the market. Shin shareholders yesterday approved a plan to sell a 2.05 % stake in mobile affiliate Advanced Info Service to Singapore Telecommunications, which is 55 % owned by Temasek. Siam Cement Group expects next year's consolidated sales will top Bt400bn, driven by surging demand, especially for cement and other construction materials to rebuild residences and infrastructure. Siam Commercial Bank predicts that mutual funds and insurance will become popular savings avenues for retail investors in 2012 as deposit products become less attractive because of lower interest rates. Thai Airways International expects a revenue loss of Bt3bn this quarter due to the floods. The inundation pulled THAI's cabin factor down to 65.8 % in October from 74 % in the same month last year. Thai Airways will next year put greater emphasis on Asia, in its bid to grow revenue amid negative factors that include persistently high fuel prices, fierce competition in Europe, and more frequent natural disasters. Thai Union Frozen Products, a leading maker and exporter of canned and frozen seafood products, has forged a strategic alliance with Pakfood, a move to shore up TUF's shrimp and ready-to-eat food business. Thailand's largest commercial bank, Bangkok Bank is confident its business in China will continue to grow and it will remain its main base of expansion. TMB Bank believes it has carved out a strong niche in the market even though it is being courted by foreign investors. Recently Malaysia-based CIMB Bank was reported as planning to take over the seventh-largest commercial bank, as the Finance Ministry wants to unload its entire 26-per-cent holding in TMB. This year, its loans grew by 15 % against 9 % for the overall industry. International Finance Corporation, an investment arm of the World Bank, is interested in buying a stake in TMB Bank. Areepong Bhoocha-oom, the finance permanent secretary, said IFC has made inquiries about purchasing the 26.11% share of TMB held by the state. Total Access Communication has filed a lawsuit at the Central Administrative Court seeking termination of the national broadcasting and telecom watchdog's regulations aimed at preventing foreign dominance of Thai telecom operators. While DTAC has Telenor as its foreign strategic partner, market leader Advanced Info Service has Singapore Telecom. True Corp is the only telecom operator without a foreign strategic partner.

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ORIENT FINANCE INDEX SET50 TOP GAINERS ESSO THAILAND ROBINSON DEPT TMB BANK MOM% 22.73 18.06 17.04 TOP LOSERS BANGKOK LIFE ASS PTT GLOBAL THAI OIL MOM% -8.42 -6.87 -4.49

MALAYSIA
The KLCI had a good run in Dec thanks to window dressing activities. Investors were also seen buying ahead of the January effect. Penny stocks and call warrants hogged the limelight and investors speculated heavily on Proton being taken over by DRB-Hicom. For the month, the KLCI surged 58.6pts or 4.0% to 1,530.7pts. The broader market outperformed the KLCI as the FBM Emas rose 4.2% to 10,489.1pts.On the macro side, November Foreign remained firm, $134.8bn, flat from October. Industrial Production in October surprised on the positive, +2.8% YoY (+1.6% expected; +3% in Sept) and revised up from +2.5% at the last estimate, however Manufacturing sales grew just 11% in October from 16% in September. Octobers trade surplus reached 13bn ringgit, much more than the 9bn ringgit expected (9.6bn September) thanks to explosive exports which reached +16% YoY from +7% expected. Imports however were in line at +4.6%. Unemployment rate remained at 3.1% in 3Q11, while November CPi decreased slightly to 3.3% from October. Corporate News: AMMB Holdings Berhad's 51%-owned general insurance subsidiary AmG Insurance Berhad, has on 19 Dec 2011 submitted an application to Bank Negara Malaysia for the approval of the Minister of Finance to enter into an agreement with Kurnia Asia Berhad for the possible acquisition by AmG of KAB's 100% equity interest in Kurnia Insurans (Malaysia) Berhad. Axiata Group - 3Q11 core net profit of RM682m was up 0.3% YoY and up 10% QoQ. This was driven by Celcom and Robi. Celcom;s net profit was bolstered by lower than expected depreciation. Revenue was driven by strong growth of wireless broadband users and higher mobile ARPUs. Berjaya Corporation is going ahead with plans to privatize its 56.3%-owned Hong Kong-listed unit Cosway Corporation. Boustead Holdings is currently not considering any proposal to privatize its subsidiary, Boustead Heavy Industries Corp. Separately, it has committed to a capital expenditure of RM1.4bn next year, more than double the RM500m it spent this year. Bumi Armada's subsidiary, Armada TGT Ltd, has signed 7-year loan agreements worth US$341.1m (RM1.08bn) with seven banks to finance the deployment of its FPSO vessel Armada TGT 1 in Vietnam. CIMB Group Holdings Bhd is not looking to buy Thailand's Phatra Securities, sources said, culling rumours of its purported interest. CIMB Group is considering venturing into Sri Lanka, specifically the stockbroking and commercial banking segments, said CEO Datuk Seri Nazir Razak. Dialog Group has fixed its 1-for-5 rights issue at an issue price of RM1.20. DRB-Hicom's unit Rebak Island Marina is involved in a RM76m land status swap deal with Northern Gateway Free Zone (NGFZ) as part of its plans to embark on boutique luxury projects in Langkawi to attract foreign high net worth individuals as buyers. Ekovest Bhd is expected to be the prime beneficiary of the RM2.2bn River of Life (RoL) project, given that the company has a 60% stake in the joint-venture company with Malaysian Resources Corp Bhd (MRCB) which was recently appointed the project delivery partner (PDP) by the Government. Gamuda - 1Q12 net profit of RM132m was up 50% YoY. This was due to better margins for both construction and property. Construction pretax margin expanded to 11.2% from 5% in 1Q11. Growth of the property division was anchored by its local projects which booked 1Q12 sales of RM450m, up 29% YoY. Property margins surged to 24.2% in 1Q12. Hap Seng Consolidated is disposing 2.16 acres of land with a cinema complex in Kota Kinabalu to Akal Megah for RM85m cash.

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ORIENT FINANCE IJM Corp - 1H12 net profit of RM189.8m was down 5.5% YoY. 1H12 revenue of RM2.13bn was up 20.3% YoY, driven by 47% surge in construction topline. Industries and infrastructure sustained the 2324% revenue growth seen in 1Q12 but plantation picked up pace with 25% growth underpinned by buoyant CPO prices. Results were hit by RM27m forex translation loss from its Indian highways, which dented grp pretax margin in 1H11. This pushed pretax profits for the infrastructure division down 66% YoY, leading to a 25% plunge in infrastructure margins to 6%. Kencana Petroleum has secured a RM1bn contract from US-based Bechtel International Inc for the fabrication and assembly of structures and components for a LNG processing facility at Australia's Wheatstone Project. Kuala Lumpur Kepong's 19% owned Yule Catto, which controls 40% of the world's nitrile latex supply, is spending RM110m to expand its factory in Pasir Gudang, Johor. Malaysia Airports Holdings: The new low-cost carrier terminal, expected to be operational by April 2013, will cost Malaysia Airports Holdings (MAHB) between RM3.6bn and RM3.9bn, and it will come with aerobridges. Malaysian Bulk Carriers's wholly-owned subsidiary, Lightwell Shipping, has secured a RM159m banking facility from Hongkong and Shanghai Banking Corp, Singapore branch. Malaysian Resources Corp-3QFY11 Results - 3QFY11 net profit of RM10.7m was up 191% YoY. 9M11 net profit of RM51.3m was up 99.3% YoY. 9M11 revenue rose 17% YoY, driven by a 113% jump in property revenue, which includes a RM32m strata sale for Q sentral in 2Q11. Masterskill: A controlling block of shares from existing major shareholders in Masterskill Education may be up for sale with at least two parties said to be interested. Muhibbah Engineering's 50:50 JV with Monadelphous Group won a RM1.2bn contract for the construction of an approach jetty (1.8km) and ship berth for Wiggins Island Coal Export Terminal (WICET) in Gladstone, Queensland, Australia. Petronas posted a 53.8% YoY jump in net profit to RM18.3bn for 2QFY11 due to higher prices across its product range. However, the impact of the better prices was partially offset by the stronger RM against the US dollar. PLUS Expressways announced that the stock will be suspended from 8 Dec 2011 until delisting. PNB may be paying out lucrative bonuses and stock options to SP Setia's top management staff in order to persuade them to stay on with the company following an offer by PNB to increase its stake in the property developer. Proton Holdings - 1H12 net profit of RM20.1m was down 87% YoY. Proton's EBIT plunged 70% in 1H12 as Group Lotus' operating loss almost tripled to RM130m from RM50m in 1HFY11 as a result of higher restructuring and marketing costs. 1H results were further skewed by a higher effective tax rate of 58% vs 19% in 1HFY11. This was due to absence of tax credits from subsidiaries' losses. SapuraCrest's shareholders have given the go-ahead for its merger with Kencana with 99.5% in favour of the deal. Sime Darby Bhd - 1QFY12 Results - Good start to the year as all divisions other than energy and utilities turned in stronger earnings YoY in 1Q12. Hence the group postetd a 64% jump in net profit to RM1.07bn. SP Setia - 4QFY11 Results - FY11 core net profit of RM298m was up 44% YoY while reported net profit was up 30% to RM328m. The improved performance came mainly from higher contributions from its Klang Valley and Johor projects. Sunway, via Sunway City, entered into a lease purchase agreement to form a JV company which will acquire and develop a 691-acre land in Medini, Iskandar. Tenaga is ready to import gas at market price to meet the shortfall of supply, once Petronas new regassification terminal in Malacca comes online by August 2012, even though the price will be much higher than the subsidised price of RM13.70 per mmbtu. UEM Land Holdings Bhd aims to sell RM3bn worth of properties next year, an increase of 40% from this year, says MD Datuk Wan Abdullah Wan Ibrahim. UMW Holdings has confirmed that it had not submitted any bid to Khazanah Nasional to acquire its 42.7% stake in Proton Holdings.

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ORIENT FINANCE

INDEX FBMKLCI

TOP GAINERS PETRONAS GAS TELEKOM MALAYSIA DIGI.COM

MOM% 15.15 14.81 10.23

TOP LOSERS YTL POWER GENTING MALAYSIA MAXIS

MOM% -3.26 -2.05 -0.36

INDONESIA
JCI saw a positive gain in December (+2.88%), and leaving the market +3.20% for 2011, meabing it outperformed the benchmark comfortably in 2011. Indonesias economy continues to perform strongly and remains relatively well-positioned to weather external shocks, the World Bank said in its latest economic report. Indonesia recorded a trade surplus with China for the first time since the implementation of a free trade agreement (FTA) despite signs of slowing export growth to the countrys major buyers, the Central Statistic Agency says. November CPi abated somewhat to 4.5% from 4.42% in October, as did core inflation: 4.36% from 4.43% in October. Trade surplus disappointed as exports grew 17%, much lower than the +23% expected, when imports were in line: +29%. Consumer confidence in November undershot expectations too, 114 from 116 in October. Novembers Foreign reserves decreased by $2bn to $111bn MoM. Bank Indonesia kept rates unchanged at 6%. Following an upgrade of the nations sovereign debt to investment grade last week, Fitch announced it had upgraded the Long Term Foreign Currency ratings of 8 Indo banks: they are BMRI, BBRI, BBNI, BBCA, BNII, CIMB, NISP and Indoexim (non-listed). Also at the same time it upgraded credit ratings for 5 state run giants as well, which are: TLKM, PGAS, Telkomsel, Pertamina and PLN (state owned electricity firm) Autos: Indicative car and motorcycle wholesales for Nov were soft, 10-20% weaker MoM, at 67k (cumulative 813k units) and 641k (cumulative 7.6m units) units respectively, due to Thai floods. The government has agreed to increase the energy subsidy budget by Rp63.7tr (US$7bn) for fuel and electricity because consumption has surpassed the state budget allocation. The end of the month saw the Land Acquisition Bill finally passed, which will allow the government to accelerate road, rail and airport projects, helping the President to boost growth through a construction spending budget of 73tn rupiah (US$8bn), in the next 4 years. The government estimates the national fuel subsidy spending will reach Rp172.5tr, exceeding earlier projection of Rp129.7tr by Rp42.8tr. Pri Agung Rakhmanto, Director of Eksekutif Refor-Miner Institute, estimates the ICP to stand at US$110 per barrel this year, compared to US$95 per barrel under the State Budget of 2011 projection. Corporate News: Alam Sutera: local paper mentioned the company will triple its capex to Rp3tr (US$333m) in 2012, tapping into the potential continuation of the property market boom next year. Bank Central Asia forecasts lending growth to slow next year, which would reflect a slowdown in the country's economic expansion. Lending growth is expected to grow at 21% in 2012, compared with an estimated 27% increase this year. Bank Central Asia is seeking to buy more shares in Central Sejahtera Insurance and make it a wholly owned company next year. " Borneo Lumbung announced that it will postpone the planned EGM (originally scheduled on Dec. 15). The new date is yet to be announced. The EGM was called to obtain shareholders' approval for the company's acquisition of Bumi Plc stake. Bukit Asam - The state owned coal comp plans to set aside more than Rp2tr (US$220m) to repurchase stock in the next 18 month period, which translates to around 115mn shares. Bukit Asam: company just won a contract to build a coal fired power plant worth usd 1.6bn in South Sumatera. The project would be jointly built with its JV partner China Huadian Corp, in which PTBA will then supply 5.4mn tons of coal to this new plant scheduled to start operations in 2016. 21/28

ORIENT FINANCE Bumi Serpong Damai - Duta Pertiwi takes over about 70% of stake in Kota Wisata, previously a joint venture development, from the remainder of shareholder; making the company a 100% shareholder of the asset. Energi Mega : the company, through its subsidiary EMP International, will buy a 36.7% stake in the Offshore North West Java (ONWJ) oil and gas block from China's CNOOC for usd212m. Erajaya, the largest distributor and retailer of mobile phone in Indonesia will start its debut . Priced at IDR 1000, 7.7x 2012E PE. Mandiri Sekuritas, Bahana Securities and Danareksa Sekuritas, who handled the Garuda Indonesia IPO, plan to sell the shares of Garuda Indonesia in private placement simultaneously in the first quarter of 2012. (Bisnis Indonesia) Media: In a testimony to its robust economy, Indonesia led advertising spending in terms of size and growth in the 3Q11 in Southeast Asia, according to survey of AC Nielsen. PT Bakrie and Brothers booked IDR 9.9tn revenue up in the first nine months of 2011, up from IDR 9.2tn last year, while operating profit down to IDR 255bn from IDR 744bn last year. Semen Gresik will issue bonds up to IDR 3tn next year as the company plans to pay 60% of it's allocated capex next year of IDR 5.5tn with money from bonds issuance Surya Semesta plans to distribute a total dividend of IDR 9.5 a share this year. The company has given away IDR 4.5 a share interim dividend this year and will distribute IDR 5 a share for final dividend. INDEX LQ 45 TOP GAINERS SEMEN GRESIK ENERGI MEGA PERS HOLCIM MOM% 23.78 19.46 15.08 TOP LOSERS ADARO ENERGY BANK DANAMON CHAROEN POK INDO MOM% -7.33 -6.82 -6.52

PHILIPPINES
The PSE index +3.82% in December, and 4.07% YoY meaning the PSE was one of just a handful of Asian markets to post positive YoY figures. As of October, export growth improved to a contraction of 14% to $4.088bn from a contraction of 27%, or $3.897bn in September. The ratio of the Philippines debt-to-GDP in 9M2011 continued to decline to 51.09% compared to last years 52.4%, which is expected to boost prospects for a credit rating upgrade for the country. The country's debt increased by 4.43% to P4.87tn as of end-September, from P4.664tn during the same period last year. Inflation eased to 4.7% in November, well within the projected 4.5% to 5.4% for the month.This is lower than the previous month's 5.3% but is much higher than last year's 3.7%. OECD also sees 2016 GDP to hit 5.1%, which translates to an average growth of 4.9% between 2012 and 2016 and is lower than the growth of 5.7% in 2003 to 2007. The central bank believes that the peso is the least volatile currency in Asia amid the heightened risk aversion brought about by unstable global economy. The central bank may consider cutting key policy rates in 2012 due to growth-dampening factors from abroad. The Bangko Sentral ng Pilipinas has kept its policy rates steady since the second half of the year, which stand at 4.5% for overnight borrowing and 6.5% for overnight lending. Bank lending accelerated in October, rising 22.2% to P2.66tn for the month from 21.7% or P2.64tn in September. Philippine budget deficit in November was reported at P22bn. This brings 11M2011 budget deficit to just P96.25bn and is 64% lower than the deficit of P267.328bn recorded in the same period last year. Budget deficit this year was initially programmed at P300bn. Philippine exports in October declined by 14.6% to $4.09bn, which added to concerns that economic growth may miss the government's target this year. Electronics shipments, which account for a significant portion in exports, contracted 36.5% from a year earlier. Exports in January to October were down 4.3% from a year ago. Jobless rate in the Philippines hit 6.4% in October, its lowest level in four years. Unemployment rate has been on a downward trend since January, when it was at 7.4%.

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ORIENT FINANCE

Corporate News: Ayala group diversifies into the toll road business after bagging the P1.96bn Daang Hari-South Luzon Expressway connection road project, the first infrastructure building project under the public-private partnership (PPP) framework. Ayala Corp. received approval from its board for the distribution of cash dividends worth P2.00 apiece on Jan. 24 for its common shares, payable to shareholders on record as of Dec. 28. On the other hand, quarterly cash dividends for preferred A shares, with an 8.88% dividend rate per annum, will be payable to shareholders on Feb. 25, May 25, Aug. 25, and Nov. 25. Aboitiz Power Corp. said its affiliates Therma Luzon Inc. and AP Renewables Inc. have secured oneyear extension to supply deals with Meralco. The two companies have benefited from the extension of Meralco's transition supply contract with state utility National Power Corp. until Dec. 26, 2012. Banco de Oro Unibank is about to meet its 2011 profit target of P10.5bn but anticipates a more challenging operating environment next year due to global economic uncertainties. The banks net profit guidance of P10.5bn was set 19% higher than the level a year ago. As of 9M2011, the Sy-led banking firm booked P7.6bn in net profit, a 19% increase year on year, backed by higher loan volume, fee-based earnings and treasury gains. Cebu Pacific will be putting up a $50mn aviation academy in Clark, Pampanga after signing a joint venture deal with Canada-based CAE, Inc. The joint venture will initially focus on training pilots to operate Airbus A319/320/321 series. Digital Telecommunications Philippines Inc. will increase its authorized capital stock to P25bn from the current P9bn. Energy Development Corp. retained its issuer credit rating of PRS Aaa from the Philippine Rating Services Corp. (PhilRatings) for its P12bn bonds. EDC issued the P12bn fixed rate bonds in 2009 to refinance its maturing debt. The bonds were issued in two tranches, with P8.5bn due in June 2015 and P3.5bn due in December 2016. First Gen Corp. has received approval from its board to issue as much as P4 per share in cash dividends to its preferred shareholders. Filinvest Land plans to expand its BPO office portfolio by 43% to 258,000 sqm in the next two years to sustain the demand from BPO firms. Globe Telecom, Inc. has obtained a seven-year P5bn loan facility to fund its capital expenditures next year. Globe Telecom, Inc. has made a partnership deal with Americatel Corp. to launch Zero Unlimited Philippines, the first wireless plan with unlimited domestic (within the US) and international calling to the Philippines. International Container Terminal Services Inc. has received approval on the $21mn budget for its expansion plans next year. The company said the budget will be for working capital for domestic expansion projects as well as for investment in foreign ports in 2012, and will come from the company's retained earnings. Jollibee Foods Corp. has laid out $60mn for its Asian expansion by firming up a deal to buy 50% of Super Foods Group that operates a chain of Highlands Coffee, Hard Rock Cafe and Pho24 restaurants across the region. Metropolitan Bank & Trust Co. (Metrobank) expects its remittance business to grow by over 20% to more than $3bn this year. Megaworld Corp. is named as the Philippines largest builder of residential condominium in terms of units completed in 2010 and those in the pipeline for the next five years according to property consultant Colliers International, this represents the leading market share of 18 % of the market. Manila Electric Co. welcomed the government's decision to extend its transition supply contract with state-owned National Power Corp. that guarantees stable power rates. Manila Electric Co. (Meralco) will acquire power lines and substations previously owned by the National Transmission Corp. Manila Water Corp. will increase water rates effective Jan. 1, 2012 following approval from the MWSS board of trustees last Dec. 15. Manila Water Co. Inc. has finalized a deal for the full ownership of Clark Water Corp., the water concessionaire of the Clark Freeport Economic Zone, through a share and purchase agreement. Philippine Long Distance Telephone Co. announced the consolidation of its business process outsourcing (BPO) units under SPI Global Holdings Inc. as ePLDT handles the companys customer relationship management business. 23/28

ORIENT FINANCE Puregold on track to hit net profit target of P1.5B. Puregold Price Club Inc. expects to hit its targeted net profit of at least P1.5bn this year, which is more than twice the net profit reported last year. Philex Mining Corp. reported a 1.2% decline to P1.403bn in the value of its metal output from its Padcal mine in Benguet for November compared to the P1.420bn of the same period last year. The company said that it produced 11,994 ounces of gold valued at P903mn last month compared to the 14,055 ounces worth P858mn last year. Robinsons Land Corp. has also expressed interest in the 300-hectare property currently occupied by the Mactan-Cebu International Airport, joining rivals SM Prime Holdings Corp. and Ayala Land Inc. SM Investments Corp. hinted at its waning interest in developing the 120-hectare, state-owned Food Terminal, property in Taguig City, saying it had enough projects nearby. SMC Global Power Holdings Corp., the power unit of San Miguel Corp., could progress with its initial public offering (IPO) next year should volatile market conditions abroad start to ease. The company had already received approval of the Securities and Exchange Commission to proceed with its P36.9bn offer. The company plans to sell 290mn to 385mn common shares as part of its base offer, which will be priced at a maximum price of P71 each to raise up to P27.34bn. Proceeds from the IPO shall be used to finance P90.4bn worth of new power projects in Cavite, Leyte, Bulacan and Davao through 2016. San Miguel Corp. is also issuing 765,451 shares after several bondholders agreed to convert their exchangeable debt into equity at P113.24 per share. SM Development Corp. eyes P3bn in sales this month after lowering prices of some of its condominium units by as much as 40%. SM Prime Holdings, Inc. is in talks with several banks to secure a P5bn loan with a likely maturity of five to ten years, with an option to increase the issue to P7bn, to partly fund its P21bn capital expenditure next year. INDEX PCOMP TOP GAINERS BELLE CORP GLOBE TELECOM SM INVESTMENTS MOM% 23.60 20.15 12.45 TOP LOSERS PHILEX MINING CEBU AIR MEGAWORLD MOM% -9.94 -7.43 -5.56

INDIA
The Indian stock market finished down 4.13% in December, and indeed -24.63% YoY, meaning the Indian market underperformed the benchmark, seeing one of the biggest yearly losses in the region. The first half of the December was dominated by Govts see-sawing approach towards the retail FDI issue (needless to say, eventually, the reform had to be withdrawn). The Govts own mid-year review toned the GDP expectation down to 7.5% from 8%+ earlier. Rupee continued its slide until RBI had to finally move away from its stance of non-intervention to end closer to 52 levels (vs. USD) rupee still ended up being the worst performer in Asia. The Indian market is right on the verge of losing its membership to the elite group of countries with USD1tn market capitalization courtesy - the unrelenting weakness of the rupee and the slide on the bourses. India could soon exit the group of 12 countries that boast of 13-figure market value in dollar terms owing to the weakening rupee and falling equity markets. As the month progressed the silver lining to the gloomy clouds came in the form of sharp drop in food inflation from over 9% (YoY) to 1.81% (YoY) as last reported & this is sure to provide the RBI with some breathing space. Inflation: WPI inflation for November at 9.11% YoY was slightly above the market expectations of 9%, however it was a sharp decline from the 9.73% reported in October. WPI for September was revised upwards to 10% from 9.72% previously, marking the first inflation print in double digits since Jun-10. Decline in primary articles, in both food and non-food prices in November pulled the headline inflation lower. Food inflation eased to 8.54% YoY in November from 11.60% YoY in the previous month, on the back of a 1.99% MoM decline in food prices. Manufacturing inflation stood at 7.66% vs. 7.69% last month. The global crude oil prices rose by nearly 20.0% in November 2011 but the impact was much larger due to currency depreciation. Fuel inflation rose to 15.48%, a 3-year high from 14.79% in the previous month.

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ORIENT FINANCE Core sector growth: Output growth in eight infrastructure industries accelerated in November after nearstagnation in the previous month, raising hopes of a robust recovery in industrial growth from its 28-month low in October. The output of the core sector, which in India includes industrial inputs such as petroleum, coal, electricity and steel expanded over 4.5-5 % in November. Corporate News: Coal India board of directors has approved a proposal for the mining firm to acquire stakes in unlisted overseas firms, provided the "offers were valid". DLF, the country's largest real estate company, is set to sell its hotel subsidiary to Kolkata based Square Four Housing & Infrastructure for INR5.5bn, its third divestment in the last three months as it disposes noncore assets to pare its INR225bn debt. Gail has signed a 20-year deal with Sabine Pass Liquefaction to import liquefied natural gas from the US from 2017 to secure long-term supplies at prices linked to the US benchmark. GATI: Raised USD22.18m through a fresh issue of FCCBs to refinance the existing FCCBs of USD22m that were due for redemption on December 6, 2011. Godrej Properties: Has entered into a joint venture with Mosiac Landmarks LLP to develop a group housing project at Undri in Pune spread over 8.64 acres, which would offer around five lakh sq ft of saleable area and is proposed to be developed as a modern group housing residential development. Havells India: Has entered into a 50:50 joint venture with Shanghai Yaming Lighting Co of China to focus on launching energy efficient lighting solutions and lighting fixtures. Jet Airways is in talks with leasing companies for acquiring more than 10 Airbus A320s through a sale and lease back option for a renewed budget airline strategy. Kingfisher, Air India: The government has de-freezed the bank accounts of both Kingfisher Airlines and Air India after both made part payment of their service tax dues of INR90m and INR80m for the month of November. L&T: Company has signs USD189mn contract with Abu Dhabi's GASCO for engineering, procurement, construction and commissioning of the new Habshan-Ruwais- Shuweihat gas pipeline. L&T: Engineering major's construction division has bagged contracts worth INR21.6bn in the infrastructure segment from GMR infrastructure. L&T: has bagged new orders worth INR10bn across various segments in the third quarter of FY12. Lanco Infratech: Is in talks with PE firms to raise USD600m because the macro issues affecting India are temporary and PE investors will understand that much better than short term investors. The fund raising will happen over the next six months by June 2012. Nestle announced the rebranding of its existing milk and yoghurt products as 'Nestle a+' in India as it looks to ride on the quality plank to drive sales in the country. NTPC: Is going to set up its biggest solar (green) power station of 50 megawatts next year at an estimated cost of around INR700bn in the electricity-starved state of Madhya Pradesh. NTPC: Power ministry has asked the steel ministry to permit NTPC to exit International Coal Ventures Pvt Ltd, the JV formed for the acquisition of coal properties abroad, as the company is finding it economically unviable to go ahead with the proposal. ONGC: Company will buy 10% stake of Cairn India in a gas-discovery block that sits next to Reliance Industries' prolific KG-D6 area in the Bay of Bengal. Orchid Chemicals: Has received sanction of USD100m by way of External Commercial Borrowings from a consortium of Indian banks to redeem its outstanding Foreign Currency Convertible Bonds. Power Grid Corp: has signed a preliminary contract with Rashtriya Ispat Nigam Ltd to float a joint venture for manufacturing transmission line towers and tower parts. Railways: Announced over 10% growth in earnings to INR661.3bn between April and November this fiscal, thanks to robust show both in the goods and passenger segments. Reliance will not make fresh investments needed to revive sagging output from the D6 block until legal issues are resolved. Reliance Industries, is scouting for oil investments in the Americas as it looks to increase the stake of crude production it owns to feed its Jamnagar refinery. Reliance Infrastructure has proposed to infuse a fresh equity of INR5bn in distribution subsidiary BSES to help it raise funds to pay dues of INR30bn.

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ORIENT FINANCE RIL has invested in Terra Power LLC, a nuclear design and engineering company partly funded by Microsoft Corp. RIL: has sought Oil Secretary GC Chaturvedi's help to get stalled approvals for development of additional gas fields and price approval for sale of gas produced from coal seams (CBM). SAIL: State-run Steel Authority of India (SAIL) and Japanese Kobe Steel will sign an agreement for setting up 0.5 mtpa plant in West Bengal in the presence of Prime Ministers of both the countries. Tata Motors: will increase output of light commercial trucks from its Pantnagar plant in north India by up to 90,000 vehicles per year from early 2012 as per president of the automaker's commercial vehicles unit. Tata Motors has piped giants like Reliance Industries and Infosys to become India's top-ranked company for research and development (R&D), as per a list compiled by the European Commission. Teva Pharmaceutical Industries Ltd (TEVA.O) said U.S. regulators granted tentative approval to its generic form of Pfizer Inc's (PFE.N) Lipitor cholesterol fighter and it plans to introduce it in May. United Spirits: Has finally decided on FCCBs to raise as much as USD225m. The plan is to raise up to USD175m, plus an over-allotment option of USD50m. INDEX SENSEX WIPRO TATA CONSULT TOP GAINERS INFOSYS MOM% 6.04 5.46 4.33 TOP LOSERS LARSEN & TOUBRO JAIPRAKASH ASS BHARAT HEAVY ELE MOM% -21.57 -15.62 -15.31

PAKISTAN
Loosening Strained US-Pakistan relations coupled with State Bank of Pakistans (SBP) decision to keep interest rates on hold kept the market activity under check throughout the month. Additionally, reported standoff between the government and the Pakistani army over the memo-gate issue further weakened the investor sentiment. The KSE-100 Index lost to close at 11412.26 level (down 1.05%MoM) while average volumes dipped 8.7%MoM to a dismal 41mn shares. Global trend of shedding equities by foreigners was also witnessed in Pakistan as they offloaded shares worth US$24mn. The killing of Pakistani soldiers by NATO airstrikes led to stern reactions from both the countries. Pakistan closed the Nato supply routes and also got US to vacate the Shamsi base. On the other hand, US threatened to block financial aid to Pakistan. Furthermore, Pakistan army has rejected US version on the tragic event that mistakes were made on both sides, and has maintained that its troops did nothing wrong and the attack was a deliberate act of aggression. Consequently, the two countries have reached a diplomatic deadlock. On the back of uncertainties on the macro front, SBP decided to hold the discount rate at 12%. These uncertainties were highlighted in its annual report as well. SBP believes that the economy will grow between 3-4% in FY12 against the growth target of 4.2% announced by the government in the budget. SBP has projected the fiscal deficit to hover in the range of 5.5 to 6.5% of GDP. Another major concern is the Current account deficit (CAD) which in 5M was reported at US$2.1bn versus US$589mn in the same period last year. All major sectors lagged behind the market with the exception of automobiles and oil & gas sector gaining 3% and 1% respectively. Within oil & gas, APL and OGDC outperformed the market by 4% and 2% on expectation of healthy half year result. On the other hand, rumours of the GST being scrapped on tractors, helped AGTL gain 13% over the market while INDU, on the back of hike in car prices, outperformed the market by 7%. Chemical sector underperformed the market by 6% FATIMA and DAWH both posted decent returns of 2% and 4% respectively, mainly on account of hike in urea prices and lower gas curtailment issues. Sector specific numbers released during the month are as follows: Auto sales for the month stood at 11,926 units; up marginally by 1%YoY. Pak Suzuki (PSMC) registered an impressive growth of 15%YoY on the back of Yellow Cab scheme offered by the Punjab government while Indus Motor (INDU) and Honda Cars (HCAR) sales declined by 17%YoY each. We attribute increase in prices by the manufacturers for the decline in their sales. On a MoM basis, auto sales have fallen by 21%. The decline was largely anticipated owing to 1) consumers delaying their purchases to take advantage of next years registration and 2) lesser working days in the month due to Eid holidays. Cumulative sales in 5MFY12 auto sales rose by 20%YoY.

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ORIENT FINANCE According to the provisional oil sales number for November 2011, oil consumption in the country increased by 11%YoY. High Speed Diesel (HSD) volumes recorded an impressive growth of 13%YoY mainly on account of low base of last year. The rise in sale of MOGAS is owing to increased gas load-shedding in the country. Furnace Oil (FO) consumption too jumped by 11%YoY. Cumulative 5MFY12 oil consumption reached 8.4mn tons up 5%YoY. Corporate News: AICL outperformed the market by 5% over better than expected full year result with a good payout. Attock Petroleum continues to outperform the industry. The company recorded a growth of 59%YoY in November 2011. Banking sector: As per the data released by the SBP (December 23, 2011), aggregate deposits of the banking sector during 2011 grew by an impressive 10%. Credit offtake, on the other hand remained subdued and was down 2% during the same period. Chemical sector, underperformed the KSE as FFC depicted its one of the worst performance and and somewhat eroded its previous gains owing to urea price hikes. Now with the start of the winter season, gas situation in the country has further worsened affecting the industrial output of the fertilizer sector along with the export oriented sectors like textile. It is for this reason that even with the installed capacity of urea which is sufficient to fulfill the local demand, Pakistan still imports urea. Lucky Cement has qualified for the Clean Development Mechanism (CDM) under the Kyoto Protocol of United Nations due to its waste heat recovery project. Since this project is environment friendly, the company has earned Certified Emission Reduction (CER) credits. These CERs can be traded and sold by developing nations to finance their industrial projects. Pakistan State Oil posted an impressive growth of 15%YoY Textile Industry: has endured a very mixed year, ranging from a sharp fall in cotton prices from its all time peak levels to energy crisis. Cotton prices peaked in March 2011 resulting in windfall gains for the textile chain during 1H2011. However, since then prices have tumbled to Rs5,400 per maund (down 58% from its peak) due to growth in cotton output. In addition, gas shortage in the country especially during the ongoing winter season has put more burden on the sector. Hence, the textile sector has so far underperformed the local bourse by a massive 19%. INDEX KSE-100 TOP GAINERS MEDIA TIMES SIEMENS PAK NIB BANK MOM% 68.47 45.72 32.31 TOP LOSERS JAHANGIR PAK TELEPHONE ENGRO CORP MOM% -31.90 -29.68 -28.29

AUSTRALIA
The Australian market barely changed during large parts of December, but finally ended down 1.53% to finish at 4056.60, as the investors absorbed news on massive new resource project developments and takeover action in the coal sector. The market also won support from a weaker Australian dollar which came after the Reserve Bank cut interest rates by 0.25%, taking official overnight cash rates to 4.25%. This is the second consecutive cut in official cash rates this cycle. Mining stocks were setback by softer base metal and precious metal prices. Retail stocks were the worst hit in the market as Australian consumers remain cautious about global economic events. Corporate News: Aquila Apache Energy agreed to buy a 65 % stake in ammonia manufacturer Burrup Fertilisers from Australia and New Zealand Banking Group (ANZ) for $560mn. However, Norwegian chemical company Yara, which already holds 35 % of Burrup, has a pre-emptive right to acquire the remainder of the company. Aquila Resources announced it had received conditional approval from the Federal Government for its proposed $5.8bn West Pilbara iron ore project in Western Australia. The miner has still to receive final

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ORIENT FINANCE approvals from federal and state environment departments, which Aquila expects to receive in the second quarter of 2012. BHP Billiton and Rio Tinto have indicated to their suppliers in China that they will look to increase their purchasing of mining equipment and other supplies. Global sourcing chief for BHP Dirk Van de Putte told a Shanghai suppliers conference that BHP would be looking to double its purchasing rate to $6bn within five years. Media reports in China also suggest Rio Tinto will up its budget by 50 % next year. Billabong suffered the biggest one-day fall since its float in 2000 after a surprise earnings downgrade due to global consumer caution in Europe and poor weather in Australia. Cochlear. The company's has identified the problem with the Nucleus 5 product, but the bionic ear manufacturer was unable to reveal when the product may be back on the market. Devine announced that it expected its full-year pre-tax profit to be 31 % lower as a result of a weakening in the property market. The developer said most Australian property markets had continued to soften, which was hampering Devine from establishing new ventures. Fairfax Media - two of the printing presses at its Sydney printing centre are being decommissioned and sent to the companys New Zealand division. Indophil Resources has raised $97.7mn to fund its share of the $5.9bn Tampakan copper-gold joint venture in the Philippines, in which diversified miner Xstrata is a partner. The venture has a resource base of 16.2mn ounces of gold and 13.9mn tonnes of copper, making the site one of the worlds largest undeveloped copper deposits. Newcrest Mining has downgraded its 2011-12 production guidance as rain affects its operations in Papua New Guinea and New South Wales. Nufarm has bought US sunflower seed producer Seeds 2000 for $55.2mn. Nufarm is moving to reduce its reliance on weed and pest control chemicals, which face growing competition from producers in countries such as China. Oil Search said its liquefied natural gas (LNG) joint venture with ExxonMobil in Papua New Guinea (PNG) faces a $700mn cost increase due to the high Australian dollar. Orica is set to compete with diversified conglomerate Wesfarmers in the supply of explosives to Western Australias booming mining industry. With plans to build a $700mn ammonium nitrate plant with United States energy company Apache, the mining services company is looking to end Wesfarmers dominance of the ammonium nitrate industry and lock in supply contracts with the major miners. Origin Energy announced it had reached a non-binding heads of agreement to sell Chinese oil firm Sinopec 3.3mn tonnes of liquefied natural gas (LNG) annually for 20 years from 2016. Qantas Airways has reached an agreement with its engineers a year after its enterprise agreement expired. Qantas has agreed to pay a 3 % rise over the next three years, ending a long stand-off. Wesfarmers approved plans to expand ammonium nitrate production at the conglomerates CSBP division in Western Australia. The $550mn expansion will boost production of the explosives ingredient by 260,000 tonnes a year to 780,000 tonnes a year. Woodside Petroleum. The company has decided to delay the go-ahead for the US$40bn James Price Point gas hub by a year. Woolworths and its joint venture partner United States-based Lowes opened their sixth Masters home improvement store, the first for New South Wales, at Gregory Hills in Sydney. INDEX AS51 TOP GAINERS HASTINGS DIV UTI ENERGY WORLD COR GLOUCESTER MOM% 19.19 12.30 11.83 JB HI-FI LINC ENERGY TOP LOSERS BILLABONG MOM% -51.90 -27.40 -24.66

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