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This week…

• Outlook on the Hong Kong Market

• China's recovery dependant on the Copper price

• 3 factor's to watch for in China

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General Advice & Risk Warning

Please note that any advice given by Invast staff is deemed to be GENERAL advice, as the information or advice given

does not take into account your particular objectives, financial situation or needs.

Therefore at all times you should consider the appropriateness of the advice before you act further.

CFDs and Forex are leveraged products and carry a high level of risk and are not suitable for everyone. You can lose

more than your initial deposit so you should ensure CFD and Forex trading meets your investment objectives. We

recommend you seek independent advice. Strategies and charts used in this presentation are for example only. You are

reminded that past performance is not indicative of future performance.

Invast Financial Services is regulated by ASIC. It's important for you to read and consider the relevant Product

Disclosure Statement and Financial Services Guide which contains details of our fees and charges before you decide

whether or not to acquire any financial products. These documents are available at www.invast.com.au

Invast Financial Services Pty Ltd ABN: 48 162 400 035. Australian Financial Services Licence No.438 283

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This week we look at the following topics:

• Outlook on the Hong Kong Market

• China's recovery dependant on the Copper price

• 3 factor's to watch for in China

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Dear Readers,

Our analysis this year has so far touched on the 2015broader Outlook Guide and in February we focused onAustralian listed companies. The new push this year is onindividual stocks, powered by Invast’s new DMA platform.The benefit of this platform is that it provides direct marketaccess into several global exchanges.

Our focus in March will be to analyse these major exchanges,as represented by key indices. Indices are important tounderstand even if you trade underlying stocks. All of theindices that we touch on in March are traded throughInvast’s MT4 platform, which remains a powerful trading tooland part of the overall Invast toolbox for traders.

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In April we plan to focus on individual stocks across these indices and we will groupthese stocks into various trading baskets across four individual weeks. But before thatcan occur, we need to study and analyse to see where each index is currently trending.

Our analysis will be broken up as follows:

Week commencing 2 March 2015: Outlook for the German DAX30 Week commencing 9 March 2015: Outlook for the UK FTSE100 Week commencing 16 March 2015: Outlook for the US S&P500 Week commencing 23 March 2015: Outlook for the Australian ASX200 Week commencing 30 March 2015: Outlook for the Hong Kong HSI50 Week commencing 30 March 2015: Outlook for the Hong Kong HSI50

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We wrote last week about the Australian market and we expressed our view that theASX200 index is likely to remain in a narrow trading range between 5800-6000. Wespoke about the 6000 cap on the market extensively and we said that we really thinkthis upper limit is unlikely to be breached until there is a significant recovery incommodity prices. We saw that play out perfectly last week and we think this willcontinue to hold. One thing to watch though is the copper price. As we write thisweek’s report, we have witnessed a very significant rally in the copper price, albeitfrom very low levels. We aren’t sure if this is a short squeeze or the start of asignificant recovery in the copper price. If copper is forming a stable and crediblerecovery, the Australian and Asian markets like the HSI50 could see more upside,even if US markets start to moderate. This is very important.

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Image: Copper futures prices as quoted on Invast MT4 platform

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This week we look at the Hong Kong market, a beacon for the Asian region andsentiment generally. The Hong Kong market is known for its high levels of liquidity andwide exposure to Asian conglomerates. It is seen as a larger competitor to Singaporeand a lot more diverse in its actual Asian exposure than Australia, which is more of acommodities market.

The Hong Kong market has recently lagged the Chinese market recovery but itadmittedly did not fall as much over the past few years. We think the Hong Kongmarket is very similarly leveraged to the copper price movement cycle, like Australia,not in exact proportions but in generally index direction.

To provide some context as to the exposure of the actual index, we use the Hang SengETF issued by Hang Seng Investment, with market cap weighted constituents asfollows:

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Stock Name Stock Code

Exchange Listing Sector Weighting (as a % of the total net asset value of the Fund)

AIA Group 1299 HK Hong Kong Finance 7.08%

Bank of China 3988 HK Hong Kong Finance 4.20%

Bank of Communications

3328 HK Hong Kong Finance 0.68%

Bank of East Asia 23 HK Hong Kong Finance 0.50%

Belle International

1880 HK Hong Kong Commerce and Industry

0.49%

BOC Hong Kong 2388 HK Hong Kong Finance 1.22%

Cathay Pacific Airways

293 HK Hong Kong Commerce and Industry

0.25%

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Stock Name Stock Code

Exchange Listing Sector Weighting (as a % of the total net asset value of the Fund)

China Construction Bank

939 HK Hong Kong Finance 6.45%

China Life Insurance 2628 HK Hong Kong Finance 2.92%

China Mengniu Dairy 2319 HK Hong Kong Consumer Goods

0.58%

China Merchants Holdings

International

144 HK Hong Kong Commerce and Industry

0.45%

China Mobile 941 HK Hong Kong Commerce and Industry

7.51%

China Overseas Land and Investment

688 HK Hong Kong Properties 1.18%

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Stock Name Stock Code

Exchange Listing Sector Weighting (as a % of the total net asset value of the Fund)

China Petroleum and Chemical

386 HK Hong Kong Commerce and Industry

1.84%

China Resources Enterprise

291 HK Hong Kong Commerce and Industry

0.22%

China Resources Land

1109 HK Hong Kong Properties 0.58%

China Resources Power

836 HK Hong Kong Utilities 0.44%

China ShenhuaEnergy

1088 HK Hong Kong Commerce and Industry

0.78%

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The analysis above shows that the Hong Kong market is very similar to the Australianmarket in that banks and financial stocks are very heavily represented in the top 10components. The difference though is that the concentration is not as great as theASX200 index when it comes to the big four Australian banks.

The direction and performance is however very striking. For example, in 2014 the HangSeng index returned around 5% which is very similar to the performance of the ASX200index from February 2014 to January this year. We compiled nine years of indexreturns and have shown the performance of the Hang Seng throughout that period oftime.

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Hang Seng 2006 2007 2008 2009 2010 2011 2012 2013 2014

Percentage return 39.0% 43.4% -46.4% 56.4% 8.4% -17.5% 27.2% 6.4% 5.3%

The average performance throughout this period is around 13.6% per annum which ishigher than the return generated for the past two years. Keep in mind that this is asimple average return and not a compounded rate of return if you had invested 9 yearsago into the market. The volatility between 2006-2009 has somewhat come out of themarket, with the exception for 2012. Many investors though will not mind this at all.

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Image: HSI50 weekly price chart via Invast MT4 platform

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In terms of our outlook for 2015, we expect to see low volatility until the middle of theyear before some type of movement outside of the trading band. Which directiondepends on the following three factors:

1) The Chinese stock market rally a sign of a credible turnaround in the rate of growth2) Commodities like copper and oil recovering on the back of Asian regional demand3) The absorption of rising US interest rates on Asian economies which effectively havetheir currencies pegged against the US dollar.

Our conviction is really predicated on copper as the single largest and most statisticallysignificant of these factors. It’s just too early to tell if commodities like copper haveturnaround. We will know in around 4-6 weeks of price action. Until then, we thinkthat trading individual stock exposures is probably a better option for the Hong Kongmarket, particularly given Invast’s new DMA offering.

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One perfect example is China Life – 2628: HK. The stock is one of the mainconstituents and has returned a very solid 53.8% return over the past year. That is wellabove the index return of 5.3% last year. China Life was lagging for most of 2013 due tothe negative sentiment around the Chinese economy. But the bulls and long terminvestors got this story right. The basic underlying growth diver for China Life is theamount of insurance consumption per capita in China compared to other developedcountries like Australia and he UK. The stock is currently trading on a price to earningsratio of around 17.4x according to Bloomberg consensus estimates.

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This represents a business yield of around 5.7% on a very large, diversified, financialservices institution with enormous growth prospects as the Chinese insurance marketmatures. The stock multiple is at a premium to other Heng Seng stock exposures but itdoesn’t have some of the vulnerabilities that peers do. There are many other exampleswithin the index itself. We will touch on these only in our monthly webinar with detailsbelow.

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Before we finish off this week, we want to recap our thoughts on the 5 key indices which wetouched on through the month of March:

• UK100 – Tough slog for now but the recent recovery in energy prices might help offsetsome more hawkish comments from the Bank of England.• GER30 – Continues to post impressive gains and will continue to do so for as long as theECB keeps the door open to huge stimulus• Nikkei225 – The full impacts of Japan’s stimulus yet to be seen. WE didn’t cover it thismonth but we will in the coming months.• S&P500 – The gains have been made, looking for a correction as the market comes togrips with a rising US dollar and higher interest rates• ASX200 – Stuck in the 5800-6000 range for now until the copper price breaks out in ameaningful way.• HSI50 – Similar trading range to Australia, but individual names are starting to lookattractive.

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Outlook on major global indices – a correction coming?

Invast Insights chief editor and contributing author Peter Esho will summarise his outlook on the major globalindices in March. Esho will document his findings based on the performance of key stocks across these indicesand where he believes the big opportunities lie throughout this year. His presentation will focus on thefollowing 5 themes:

Outlook on the German DAX30Outlook on the UK FTSE100Outlook on the US S&P500Outlook on the Australian ASX200Outlook on the Hong Kong HSI50

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Esho is a regular contributor on CNBC, Bloomberg and host of ‘Your Money Your Call’.His webinar will cover both the fundamental and technical outlook on these keythemes and a basic introduction to Invast’s new DMA CFD product offering whichcomplements MT4 and other services. This webinar is expected to fill fast. Q&A will beopen straight after the presentation. Click here to register.

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Go to www.invast.com.au/insights to get a complimentary 4 week trial and receive the latest insights as they are published to our live clients.

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DisclaimerPlease note that you are receiving this report complimentary from Invast Financial Services Pty Ltd(AFSL 438 283). Invast staff members may from time to time purchase securities which areincluded in this or future reports. The authors of this report may or may not be holding a positionin the securities mentioned. Please note that the information contained in this report and Invast'swebsite is of a general nature only, and does not take into account your personal circumstances,financial situation or needs. You are strongly recommended to seek professional advice beforeopening an account with us.

General Disclaimer: This newsletter contains confidential information and is intended only for theperson who downloaded it. You should not disseminate, distribute or copy this newsletter. Invastdoes not accept liability for any errors or omissions in the contents of this newsletter which ariseas a result of downloading this newsletter. This newsletter is provided for informational purposesand should not be construed as a solicitation or offer to buy or sell any financial product. InvastFinancial Services Pty Ltd is regulated by ASIC (AFSL 438 283 | ABN 48 162 400 035).

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Risk Warning: It's important for you to read and consider the relevant Product DisclosureStatement, and any other relevant Invast Financial Services Pty Ltd documents before you decidewhether or not to acquire any financial products listed in this email. Our Financial Services Guidecontains details of our fees and charges. All these documents are available here on our website, oryou can call us on +612 8036 7555. CFDs and Foreign Exchange are leveraged products and carry ahigh level of risk and you can lose more than your initial deposit so you should ensure CFD andForeign Exchange trading meets your personal circumstances.

General Advice Warning: Being general advice, this newsletter does not take account of yourobjectives, financial situation or needs. Before acting on this general advice you should thereforeconsider the appropriateness of the advice having regard to your situation. We recommend youobtain financial, legal and taxation advice before making any financial investment decision.

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