GS 高盛-中国股市8月策略报告：聚焦公司盈利

（35P）07.31 July 31, 2007

China: Portfolio Strategy China Stance-at-a-Glance

August 2007: Spotlight on earnings

Chinese stocks (H-shares) gained 8% in July, despite a sharp
month-end correction; we maintain our long-term bullish view
and believe potentially strong interim results could buttress
market performance near term. The A-share market sentiment
has turned upbeat amid favorable 1H profit guidance, but we
believe valuations are stretched; remain cautious short term.
Potentially strong earnings could provide downside support
The H-share market began July on a strong note, but surrendered 4% of
gains at the end of the month on the back of global credit contagion
concerns and profit taking. However, we reiterate our long-term positive
stance on Chinese stocks given their robust earnings prospects and view the
recent market correction as a healthy one. We expect market performance to
stabilize in August, underpinned by potentially strong interim earnings.
Domestic A-share market: Strong earnings; stretched valuations
Despite a broad-based market risk reduction, the A-share market showed
its resilience and ended July on a strong note. Although the interim
earnings/profits guidance has been favorable, we believe valuations are
expensive. We stay cautious on the A-share market near term.
Strategies: Managing earnings disappointment risks
We believe hedging downside earnings risks is important when market
uncertainty is high and valuations are at fair but not attractive levels. We
screen stocks with sound fundamentals and positive EPS revisions