Strongest peak season since 2011 on track. In the y-t-d, top 8 container portsthroughput grew 7.0% y-o-y vs 2.7% in 2016. In August, top 8 China Ports throughputslowed down to 5.1% due to higher base of last year in our view rather than underlyingweakness. Having said that, we caution on potential throughput growth slowdown in2H17 (vs 7% in 1H17) given a high base. Recall that port throughput grew at 4% y-o-yin 2H16 vs 1.4% in 1H16.    Global manufacturing PMI rose to a 75-month high driven by improvements innearly all regions: In particular, China Caixin Manufacturing PMI (which historicallyhas been sensitive to the export cycle) rose to 51.6, partly driven by strong new exportsorders which rose to a seven-year high. HSBC economists expect the sustained highexport orders readings could suggest a near-term rebound in exports (see Caixin ChinaManufacturing PMI (Aug 2017), 1 September 2017). Having said that, we caution onpotential throughput growth slowdown in 2H17 (vs 7% in 1H17) given a high base.    Recall that port throughput grew at 4% y-o-y in 2H16 vs 1.4% in 1H16.    Chinese port operators pursue series of acquisitions under Belt and RoadInitiative: CM Port and CS Ports have announced seven port acquisitions in the year todate amounting to close to HKD30bn of which four were overseas (South Asia, Europe& Latin America). In particular, CM Port could face potential equity dilution as itsleverage (2017e gross debt to operating CF to jump from 4.1x to 6.2x) is likely to morethan double with HKD22.6bn of acquisitions and HKD4.3bn of special dividend pay-out.    We prefer CS Ports (Buy) to CM Port (Hold) and HPHT (Reduce): CS Ports’s ROEcould rebound driven by the synergies with its container shipping parent, COSCOShipping (CSH, 1919 HK, HKD4.97, Buy), and its partners in the Ocean Alliance. WhileCM Port’s organic throughput growth has been stronger-than-expected at 9% in July yt-d vs 3% in 2016, we believe that its recent investments will likely to put pressure onnear-term return and pose risk of equity dilution. A dilution in ASP at HPHT would putceiling on its profit and dividend yield in the forecast period.

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