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GF Securities Third Quarter Strategy Forum

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Recently, the chief economist and managing director of GF Securities, Dr. Minggao Shen and the GF Securities Equity Research Center (specializing in macro economics, coal, nonferrous metals, chemical, environmental, real estate, and banking sectors), participated in a strategic investment forum focusing on the future of asset management under a more intense regulatory environment. Dr. Shen analyzed recent bond trends from major industries and corporations while discussing future market developments and opportunities. The presentations were well received by those in attendance.   

Mr. Zhang, the general manager of GF Securities Equity Research Centre expressed that: "We hope that as a result from this meeting, our team can share our research findings with other asset management institutions, and that we will continue to be a reliable service provider of essential market information." During the strategic meeting, hundreds of professional institutional and portfolio managers engaged in thorough talks regarding market expectations for the second half of 2017, and the impacts of increased regulation.

Mr. Shen, the chief economist with GF Securities gave a speech entitled "China's Economic Rebound: Data and Logic." He emphasized that in terms of macroeconomic momentum, data is a good short-term indicator while logic is better for understanding mid to long-term activity. During the first half of the year we noticed some increased activity in terms of food price deflation, a correction with the M2 supply, diverging interest differentials between the US dollar and the RMB, and the devaluation of the HK dollar. There was a bounce back in the economies of Europe, America, Japan, Brazil, and other major economies. This helped cause a 15% year-on-year increase for Chinese exports, which is the biggest indicator that surpassed expectations during the first half of 2017. When it comes to mid to long-term, there is still not a lot of clarity, a tighter regulatory environment, with new sources of momentum yet to take shape and China has yet to enter a structural recovery stage

For the rest of 2017, Mr. Shen hopes to see slow but stable GDP growth, falling short-term interest rates, and a period of light investment. Mr. Shen feels that current H-share opportunities surpass that of A-shares and predicts a potential turn around for A-shares during the third quarter. Mid-term expectations is to see downward pressure on earnings and upward pressure on interest rates. These conditions are not favorable for a continued bull market and government control is strengthening, which should result in limited volatility during the short-term. Mr. Shen recommends a fundamentals and value based perspective focusing on industry leaders with sound valuations.   

Dr. Guo, the top macroeconomic analyst from GF Securities Equity Research Center, shared an insightful analysis of major asset classes in mainland China. His analysis maintained that the Chinese economy is currently being propelled by four major areas: manufacturing, exports, and consumption, with a significant increase in spending from third and fourth tier cities. He predicts 2017 will experience a Clement Juglar type cyclical recovery in exports and shipping. 2017 will see strong economic support from exports and manufacturing based investment. GDP will continue to experience steady growth from consumption and consumer resilience from the younger generation.    

Dr. Guo also emphasized that although the Chinese economy is experiencing some downward pressure, for example infrastructure, but with the assistance of fiscal expenditures June experienced a slight recovery that beat expectations. Real estate has also become an area of downward economic pressure. Finally, Mr. Guo said there was constant economic resettling from 2012 to 2015, with people holding on to pessimistic opinions about the economy; however, in terms of demographics, 2016-2020 will experience a period of overall population and labor growth. In terms of economic growth rate trends for 2016-2020, economic conditions will be relatively positive.