The China Bond Fund aims to get the highest total return possible. The Fund invests at least 70% of its total assets in fixed income transferable securities denominated in Renminbi or other non-Chinese domestic currencies issued by entities that conduct the majority of their business in the PRC through recognized mechanisms such as the Chinese Interbank Bond Market, the on-exchange bond market, the quota system, and/or onshore or offshore issuances, as well as any future developed channels. The Fund is an RQFII Access Fund and a CIBM Fund, and it may invest in the PRC via RQFII Quota and in the CIBM via the Foreign Access Regime, Bond Connect, and/or other ways as permitted by applicable rules from time to time.
The Fund may invest in debt instruments that are exposed to a rating downgrade, either real or imagined. An increase in interest rates may have a negative impact on the Fund’s bond holdings. The Fund may invest in non-investment grade and unrated bonds, which are more likely to default, have higher volatility, and have lower liquidity. The Fund invests in government or government-backed bonds, which may be subject to political, economic, default, or other risks. The Fund may invest in Chinese local government finance vehicles’ urban investment bonds ( “LGFVs”) that are susceptible to the LGFVs’ default risk.
The Fund is subject to the Renminbi Qualified Foreign Institutional Investor (RQFII) limits and requirements “Due to quota limitations and regulatory uncertainty, RQFII”) investments may have a negative impact on the fund’s value. The Fund is exposed to the risks of investing in China’s interbank bond market.
The Fund’s holdings are primarily in the People’s Republic of China (PRC). This could lead to higher volatility than more broadly based investments. Political, fiscal, economic, social, and foreign exchange risks may be associated with the Fund’s investments in emerging markets.
Tax risks, currency risks, securities lending counterparty risks, foreign investment limitations risks, currency control/conversion risks, and currency hedging risks all affect the Fund.
At the discretion of the Board of Directors, Class 6 Shares pay dividends gross of expenditures and/or from capital. Paying dividends before expenses may result in more income available for distribution; however, these shares may effectively pay dividends from capital, which could result in a partial return or withdrawal of an investor’s initial investment or capital gains. On the ex-dividend date, all issued dividends result in an immediate fall in the NAV price of the share class.
Derivatives may be used by the Fund for hedging and investment reasons. However, it will not be widely used for investment objectives. The Fund’s use of derivatives may result in losses.
The Fund’s value is volatile, and it can drop dramatically in a short period of time. It’s possible that you’ll lose a portion of your money.
Investors should not base their investing decisions solely on the contents of this booklet. For more information, including risk concerns, investors should consult the Product Highlights Sheet (for Singapore).
3As of the end of April 2020, Morningstar. Morningstar categorizes Hong Kong Securities and Futures Commission (SFC) licensed funds in Asia Bonds as a peer group. Authorization by the SFC does not imply official endorsement. 11 November 2011 was the first day of operation.
Is it possible to purchase Chinese government bonds?
The scheme was partially launched in January, allowing foreign investors to purchase Chinese bonds; however, southbound trade for mainland investors to purchase offshore bonds has yet to start.
Are Chinese government bonds safe?
‘Higher Quality Growth’ is a phrase used to describe growth that is of higher quality. As the world’s second-largest bond market, Chinese debt serves as a “alternative safe haven” for Tracy Chen, a Philadelphia-based portfolio manager at Brandywine Global who purchased Chinese debt for the first time in 2020.
Is it wise to put money into Chinese bonds?
China’s bond market has grown to become the world’s second largest1 thanks primarily to domestic investors. As Chinese assets are more represented in prominent global benchmarks for stocks and bonds, the next stage of their development should see more diverse ownership and a greater alignment with international standards.
Income-seeking investors should examine China bonds to provide potential diversification benefits and increased robustness to a global portfolio in this low-for-longer interest rate environment. China bonds, on the other hand, have smaller correlations to global risk assets and offer greater yields with reduced volatility. This is particularly critical during periods of high market volatility.
Are foreigners allowed to purchase Chinese bonds?
Through the dollar-denominated Qualified Foreign Institutional Investor (QFII) and its yuan-denominated twin, RQFII, foreign institutional investors can gain access to China’s two main bond markets, the exchange bond and interbank markets.
In June, China abolished quotas for QFII and RQFII, allowing qualified foreign institutions to invest in Chinese stocks and bonds without restriction.
Through China Interbank Market (CIBM) Direct, some institutional investors, such as foreign central banks and monetary authorities, as well as sovereign wealth funds, can register for direct access to the interbank market.
What if China stops purchasing US debt?
If China (or any other country with a trade surplus with the United States) stops buying Treasurys or even starts selling its US FX reserves, its trade surplus would turn into a trade deficit, which no export-oriented economy wants since it will be worse off.
What is the size of China’s bond market?
The Chinese economy is a behemoth, and its bond market is a rising powerhouse. The Chinese bond market was the world’s second-largest by the end of 2020. Chinese bonds were worth approximately $19 trillion in total, accounting for 15% of the global bond market.
Who is eligible to purchase China A shares?
Due to China’s prohibitions on international investment, China A-shares were previously solely available to mainland residents. The Qualified Overseas Institutional Investor (QFII) mechanism has allowed certain foreign institutions to purchase these shares since 2003.
What makes China bonds attractive?
Due to its low correlation with other fixed income markets, Chinese bonds are a good diversifier for global fixed income investors. Because of the market’s strong local investor base and low percentage of international investors, domestic investors’ expectations and demand are a greater bond market driver.