china market access primer · 2018-07-19 · for professional investors only. not for further...

For Professional Investors only.

Not for further distribution.

Non contractual document.

July 2018

China Market Access Primer

This publication is intended for Professional Clients and intermediaries’ internal use only and should not be distributed to or relied upon by

Retail Clients. The information contained in this publication is not intended as investment advice or recommendation. Non contractual

document. This commentary provides a high level overview of the recent economic environment, and is for information purposes only. It is a

marketing communication and does not constitute investment advice or a recommendation to any reader of this content to buy or sell

investments nor should it be regarded as investment research. It has not been prepared in accordance with legal requirements designed to

promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. The

performance figures displayed in the document relate to the past and past performance should not be seen as an indication of future returns.

Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Global Asset Management

accepts no liability for any failure to meet such forecast, projection or target.

2




Table of Content

Chinese markets in the global context

Chinese equity market structure

Chinese bond market structure

Equity market liberalisation

Bond market liberalisation

How to access onshore Chinese markets?

Why HSBC Global Asset Management?

Appendix I: Market access channels

3

China has grown over the years to become the world’s second largest economy and is today contributing to 19% of

the world’s GDP growth. China is a key component to the global economy and the same can be said of its role in

the capital markets: Chinese onshore bonds outstanding total USD 11 trillion while Chinese onshore equities’

market capitalisation amounts to USD 8.5 trillion. This enormous onshore market has been gradually allowing

foreign investor access through various channels as the Chinese government takes steady steps to liberalise its

economy and improve its financial system. Global index providers for both bonds and equities are now beginning to

add Chinese onshore securities into their indices, thus prompting global investors to rethink asset allocation

strategies.

Chinese markets in the global context

…but account for 5% of MSCI AC World IndexChinese equities represent about 15% of the

global equity market

Market capitalisation in USD trillion

1: From bottom to top: US = NYSE + NASDAQ; China = SSE + SZE + HKEx;

India = BSE + NSE

Source: World Federation of Exchanges, data as of June 2018 Source: MSCI, Bloomberg, data as of June 2018

Chinese bonds represent 10% of the global

bond market

…but account for less than 1% of

BBG Barclays Global Aggregate (BGA) Index

0%

50%

100%

150%

200%

250%

300%

0

5

10

15

20

25

30

35

40

US

Japan

Chin

a

UK

Fra

nce

Ge

rmany

Ita

ly

Canada

Bra

zil

Austr

alia

Spain

Kore

a

Total bond outstanding, USDtn Total bond O/S as % GDP

Source: BIS, IMF, latest data as of June 2018 Source: Barclays Point, data as of June 2018

0.7%

99.3%

China rest of the world

5.03% 0.04%

94.93%

China China-A rest of the world

Bonds outstanding

in USD trillion




0

5

10

15

20

25

30

35

US

*

Chin

a*

Jap

an

India

*

UK

Eu

ronext

Canada

Germ

any

Ko

rea

Sw

itzerlan

d

Sw

eden

Au

str

alia

1 1 1

Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such

forecasts, projections or targets. For illustrative purposes only.

Total bonds O/S

as % of GDP

4

0

50

100

150

Shanghai A Shenzhen A Hong Kong

Average* Median 90th percentile 10th percentile1

Chinese equity market structure

16.3% 14.3%

59.0%

83.7% 85.7%

41.0%


Institution Retail

17.9%44.7%

13%

25.9%

35.1%

19%

56.2%

20.2%

68%


Small Cap (<USD2bn) Mid Cap (USD2-10bn)

Large Cap (>USD10bn)

The onshore A-share market is largely owned by

retail investors, who often lack the necessary

market knowledge and are easily swayed by

sentiment. Therefore, A-shares tend to display

greater volatility than offshore H-shares

A greater proportion of large-cap companies gives

the Hong Kong market a more mature profile. In

comparison, there are a larger number of small

and mid-cap stocks in the A-share market, which

tend to be under-researched and often mispriced

Investor profile Company size

Sector breakdown Valuation dispersion

0%

50%

100%


Others Financials Info Tech Con. Disc. Health Care

The Hong Kong market is dominated by

financials, real estate and traditional industries,

whereas the A-share market, esp. Shenzhen,

offers more opportunities in new economy sectors

such as technology, healthcare and e-commerce

The A-share market has greater valuation

dispersion due to less mature investor profiles.

Hence, stocks can sometimes trade significantly

higher or lower than their fair value

Trailing P/Ex current distribution

Market structure of onshore and offshore equity markets

Shenzhen A-shares (onshore)

~2,100 stocks (including SME &

ChiNext)

USD3.5trn market cap (41% free float)

~900 stocks available via Shenzhen-HK

Connect

1-year ADV: USD39bn

17.7x forward P/E

TTM dividend yield: 1.12%

Shanghai A-shares (onshore)

~1,400 stocks

USD5.0rn market cap (31% free float)

~570 stocks available via Shanghai-HK

Connect

1-year ADV: USD32bn

11.4x forward P/E

TTM dividend yield: 2.38% Hong Kong Stock Exchange (offshore)

~1,800 stocks (including H-shares)

USD4.4trn market cap (68% free float)

1-year ADV: USD11bn

11.4x forward P/E

TTM dividend yield: 3.76%

Source: HKEx, SSE, SZE, Bloomberg, HSBC Global Asset Management

Data as of June 2018. *ADV = average daily trading volume

1. removed top and bottom 1% outliers to calculate average

Source: HKEx, SSE, SZE, Bloomberg, HSBC Global Asset Management, data as of June 2018






5

Chinese bond market structure

Years to maturity profile Credit profile

Sector breakdown

Market structure of onshore and offshore bond markets

Gross issuance

Source: PBoC, ChinaBond, Markit, JPMorgan, Bloomberg, HSBC Jintrust, HSBC Global Asset Management, data as of June 2018

0%

20%

40%

60%

80%

100%

CNY CNH USD

<1Y 1-3Y 3-5Y 5-7Y >7Y

Chinese bond markets have relatively short

duration compared to US, Euro and EM. The

offshore CNH market has shorter duration as 20%

of the market is composed of non-rated certificate

of deposits (CDs). The offshore Chinese USD

market is more liquid for long dated bonds

Credit rating of Chinese onshore bonds show little

differentiation as they are rated only by local rating

agencies using a different rating scale. As

deleveraging continues and insolvent companies

start to fail, local rating agencies and investors will

reassess their perception of the bond market,

improving credit pricing in future

Government, local government and policy bank

bonds account for almost 70% of the onshore bond

market, while the rest are made up of issues from

local government financing vehicles and corporates

0%

20%

40%

60%

80%

100%

CNY CNH USD

AAA AA A BBB BB B C NR

0%

50%

100%

CNY CNH USD

Sovereign Quasi-Sov FinancialsReal Estate Utilities EnergyMaterials TMT Others

New CNH bond issuance dwindles as onshore

bond market becomes more accessible and as

liquidity is better in the USD market, but more

favourable tax treatment over onshore bonds and

attractive yield carry makes CNH bonds appealing

0.01.02.03.04.05.06.07.0

2011 2012 2013 2014 2015 2016 2017

CNY CNH USD

USDtrn




China USD bonds (offshore)

~3,200 issues

USD800bn outstanding

Yield: 5.12%1

Duration: 3.8 years1

China CNY bonds (onshore)

~32,500 issues

USD11trn outstanding

Yield: 4.37%1


Average bid-ask spread: 2-7bps

China CNH bonds (offshore)

~1,200 issues

USD77bn outstanding

Yield: 4.44%1


Average bid-ask spread: CGB 5-10bps;

Corps 15-25bpsNote:

1. Reference indices: CNY – ChinaBond New Composite Index; USD – JACI China Index; CNH – Markit

iBoxx ALBI China Offshore Index

Source: ChinaBond, Markit, JPMorgan, Bloomberg, HSBC Global Research, HSBC Global Asset

Management, data as of June 2018



6

Equity market liberalisation

Source: BNP Paribas, data as of March 2018

0.8% on 3rd Sep

17%

31%

26%

IF=

5%

IF=

100%

0% 20% 40% 60% 80% 100%

China A China Korea Taiwan India ASEAN

Brazil S.Africa Russia Mexico Others

2.7%

26.3%30.1%

33.7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

China Taiwan Japan South Korea

0

20

40

60

80

100

120

11/14 5/15 11/15 5/16 11/16 5/17 11/17 5/18

USDbn cumulative

Source: Bloomberg, data as of June 2018

Southbound

USD106bn

Northbound

USD78bn

Impact of A-share inclusion into MSCI

Emerging Markets Index

Northbound flows have begun to catch up with

southbound flows

Investors are trimming underweights in

Chinese equities

Foreign ownership still significantly lags those

of other major markets

Source: CEIC, Citi Research, data as of May 2018Source: EPFR, CICC, data as of June 2018

The Shanghai-Hong Kong Stock Connect, which was launched in 2014, and the Shenzhen-Hong Kong Stock

Connect, which was launched in 2016, are effective, simple and straightforward channels for foreign investors to

access onshore Chinese equities and have also served as the key trigger to the decision by MSCI to add Chinese

A-shares into their indices. Access under the Stock Connect channels has also improved over time, as evidenced

by the significant expansion of the daily quota allowed. The introduction of Chinese Depository Receipts (CDRs) is

another step towards market liberalisation and one intended to encourage tech giants to seek onshore listing. As

market liberalisation continues to speed up, so would the representation of Chinese markets within global indices

and benchmark-tracking portfolios.

Foreign ownership as % total market cap

A-shares are now included in key MSCI indices that

are tracked by USD5.3 trillion of assets. China may

see about USD20 billion flow into the onshore

equity market upon 5% initial inclusion in

September 2018, and potentially hundreds of

billions of inflows upon full inclusion

Although China A-shares have come under

pressure in 1H18 amidst concerns over moderating

growth and heightened trade tensions, northbound

flows continued to be strong and hit historical highs

in May 2018

Foreign ownership of onshore equities has grown

by 70% y-o-y to USD190 billion, but is merely 2.7%

of the total tradable market. While it took around 7-

10 years for Korean and Taiwanese stocks to be

fully included into MSCI indices, the pace of

inclusion for A-shares will be driven by the pace of

liberalisation

Benchmark tracking investors have been adding to

Chinese equities aggressively since 2016. In the

longer term, increased flows and foreign ownership

could encourage other listed companies in China to

improve their corporate governance standards and

business models

China

To

HK

HK

To

China




-40

-30

-20

-10

0

10

20

11/14 5/15 11/15 5/16 11/16 5/17 12/17 6/18

EPFR ETF flows EPFR Active Funds

Fund flows USDbn since launch of SH-HK Stock Connect



7

Bond market liberalisation

0.0%

0.5%

1.0%

1.5%

2.0%

0

100

200

300

3/1

4

6/1

4

9/1

4

12/1

4

3/1

5

6/1

5

9/1

5

12/1

5

3/1

6

6/1

6

9/1

6

12/1

6

3/1

7

6/1

7

9/1

7

12/1

7

3/1

8

Foreign holding of onshore bondas % onshore bond market (RHS)

Source: HSBC Global Research, data as of March 2018

940

960

980

1,000

1,020

1,040

1,060

1/1

7

2/1

7

3/1

7

4/1

7

5/1

7

6/1

7

7/1

7

8/1

7

9/1

7

10/1

7

11/1

7

12/1

7

1/1

8

2/1

8

3/1

8

4/1

8

5/1

8

0.60%

6.10% by Nov 2020

0% 20% 40% 60% 80% 100%

Be

fore

Aft

er

China US Eurozone Japan

UK Canada Supra-national Australia

Korea Others

51100

138

211

308

407

617

0

100

200

300

400

500

600

700

2011 2012 2013 2014 2015 2016 2017

Source: PBoC, annual data as of June 2018

Source: BIS, PBoC, Bloomberg, data as of June 2018Source: Bloomberg, data as of June 2018

Onshore bonds will be included in the BGA index for the first time thanks to the launch of Bond Connect in 2017,

which further opened up onshore bond markets to foreign investors. Unlike other channels available to access

onshore bonds, Bond Connect does not require a domestic account and custody, and its offshore infrastructure

enables foreign investors to trade onshore bonds following international practices. This, along with newly available

onshore FX hedging and a more liberalised currency, allows foreign investors to manage position and risk at lower

cost and higher efficiency. As onshore bonds gain increasing weight in key indices, it is very difficult for foreign

investors to do nothing (i.e. natural underweight) as China is one of the largest bond markets that offer attractive

yields and growth.

CNH deposits on the rise

Loosening of access routes to the onshore market

will increase demand for CNH and lead to more

CNH deposits, which in turn also benefits liquidity of

the CNH bond market. However, strength in USD is

a factor to watch out for

There is large potential for foreign

participation in China’s bond market

To many foreign investors, onshore Chinese bonds

offer good yield carry with relatively short duration.

With low foreign ownership and less correlated

monetary policy compared to other major markets,

these bonds provide good diversification to foreign

portfolios

Impact of onshore bond inclusion into BBG

Barclays Global Aggregate index

Number of foreign institutions with access to

onshore bond market

Significant ease of access and anticipation for

further index inclusion, which may bring in a total of

USD250bn-USD350bn flows to the onshore bond

market, have led to unprecedented rise in number

of registered institutional investors since 2017

Starting in April 2019, the inclusion will take place

over 20 months with 5% scaling factor and will fully

include onshore government and policy banks

issues by November 2020, bringing in USD140bn

to the market






CNH deposits billionForeign holdings of onshore bonds

(USD billion)

% of onshore

bond market

8




Accessing China through our investment capabilities

Source: HSBC Global Asset Management as at 30 June 2018. For illustrative purpose only.

Please refer to appendix for more information on each access channel

*The launch date of the exchange traded fund is 27 July 2018

**The index tracks the progressive partial inclusion of A shares in the MSCI Emerging Markets Index overtime

QFII/RQFII (equity and bond)

+ Broader range of products available

+ Primary market participation (e.g. IPO)

- Licensing from CSRC; quota approval from SAFE; account opening with onshore custodian

- Pre-funding required

- Cannot be borrowed or transferred. Clients must apply themselves

Stock Connect (equity)

+ Not subject to individual quota

+ Easier registration process

+ Delivery versus payment available

- Less coverage than QFII/RQFII

- No primary market activity

Bond Connect (bond)

+ Simplest access without onshore custodian and account opening without quota

+ Use of international practices and offshore infrastructure

+ No pre-funding requirement

- Lack of trading platform option

- Limited hedging tools

CIBM Direct (bond)

+ Easy access to interbank bond market without quota

+ Hedging tools available

- Onshore account opening and regulatory filing

- Pre-funding required

Segregated mandate considerations

The market access options, and their pros and cons are detailed below:

We offer clients fulfillment options via our fund range or, if preferred, a segregated mandate, encompassing

Chinese equities, fixed income, multi-asset and passive investing.

Key

strategies Chinese equity RMB fixed income China multi-asset Passive China-A*

Key

propositions

High-conviction and

diversified portfolio

focusing on stocks

with below average

valuation for a given

level of profitability

Focusing actively on

term structure,

duration, sector

allocation, product

selection and credit

rating

Mixed asset with

income tilt. Flexible

allocation across

onshore/ offshore

equities and bonds

within a risk budget

Passive ETF tracking

the progressive

inclusion of China-A

shares into the MSCI

EM index

Investment

universe

H-shares

Red chips

A- and B-shares

Onshore RMB and

offshore RMB/non-

RMB denominated

fixed income/debt

securities

A/B/H-shares, red

chips and ADRs

Onshore/offshore

fixed income in RMB

and other currencies

Stocks included in the

MSCI A-share

Inclusion Index**

9




Why HSBC Global Asset Management?

1. Asia-Pacific includes employees and assets of Hang Seng Bank, in which HSBC has a majority holding.

Source: HSBC Global Asset Management as at 31 March 2018. Any differences are due to rounding.

A network of opportunities

Strong track

record managing

Chinese assets

since 1992

Significant local

resources and

presence in China

A robust

investment

process built on

solid proprietary

research

A well resourced,

stable and award

winning team

Investing in China’s onshore capital markets requires not only high quality research, but also knowledge of the

different accounting practices and other uncommon rules. Investors also need to understand the different access

channels available and the suitability of these channels to their investment objectives. HSBC Global Asset

Management is a pioneer in Chinese investments, with deep experience in investing in both offshore and onshore

Chinese securities.

10




Appendix I: Accessing onshore equity and bond markets

QFII Scheme RQFII Scheme

Launch 2002 2011

Approved/available quota1 USD99bn/ USD51bn RMB616bn/ RMB1,324bn

Available instruments

Exchange traded securities (including IPOs), equity index futures and funds

Fixed income products traded in inter-bank bond market (CIBM)

Other instruments approved by CSRC and FX derivatives (for hedging purpose)

Eligibility Approved institutional investors Approved institutional investors

No. of approved investors 308 221

Currency Onshore RMB Offshore RMB

Price limits +/- 10% (and 5% for stocks under special treatment)

Foreign ownership limits Individual investor: 10% of a company’s total issued shares

Aggregate: 30% of a company’s total issued shares

Settlement cycle Stocks on T; cash on T+1 (fail trade not allowed)

Lock-up period No

Repatriation limit No. Daily limit for open-end funds

Tax treatment

10% withholding tax on coupon and dividend. Exempt for government bonds

Capital gains tax only temporarily waived for QFII and RQFII from 17 Nov 2014

No value added tax (VAT) for deposit interest, dividend and trading income

Capital gain is temporarily exempt from VAT

Coupon income from non-government bonds is subject to 6% VAT

Market entry timeframe

(indicative only) and process

5-7 months time for full China access

CSRC: application for QFII/RQFII license

SAFE: quota filing (within basic quota), or approval (exceeding basic quota)

PBOC Shanghai: filing within SAFE quota for CIBM investment

Advantages over other

channels

Participation in primary market, including IPO, rights and warrants issuance

Broader access to instruments such as investment funds

Invest in stocks that are not included in Stock Connect

Note:

1. Available quota = Total quota (QFII = USD150bn; RQFII = RMB1,940bn) – Approved quota

Source: HSBC Securities Services, HSBC Global Asset Management, data as of June 2018

Qualified Foreign Institutional Investors (QFII) and

Renminbi Qualified Foreign Institutional Investors (RQFII) schemes

QFII and RQFII schemes are the earliest routes created for foreign investors to access the onshore markets.

However, foreign ownership of the onshore markets has not seen explosive growth in part due to complex

application process, capital control and lack of currency hedging tools. As part of its effort to open up Chinese

capital markets in the recent years, the government has not only further increased the approved quota, but also

starting in June 2018, removed the 3-month lock-up period and 20% monthly repatriation limit and allowed onshore

FX hedging.



11




Appendix I: Accessing onshore equity market

Shanghai-Hong Kong (Northbound) Shenzhen-Hong Kong (Northbound)

Launch 2014 2016

Daily quota1

(no aggregate quota) RMB52 billion RMB42 billion

Available instruments

All constituent stocks on SSE 180 Index and SSE 380 Index

All constituent stocks on SZSE Component Index, SZSE Small/Mid Cap Innovation Index

with market cap > RMB6bn

Stocks with A/H dual-listing

Eligibility for northbound All investors, except ChiNext is open to institutional investors only

No. of stocks available ~570 ~900

Currency Offshore RMB

Settlement cycle Stock on T and cash on T+1 (fail trade allowed)

Lock-up period No. Unless 1) the securities cease to be constituent stock of relevant indices; 2) placed

under risk alert, or delisted from SEHK

Repatriation limit No

Trading No block trade, day trading and naked short selling

Subject to conditions, margin trading and covered short selling are allowed

Latest developments Quadruple expansion of daily quota

Potential changes in future

Shanghai-London Stock Connect in 2H18

ETF Connect for southbound investors in 2H18

Primary/IPO Connect, TBC



Note:

1. Daily Quota Balance = Daily Quota – Buy + Sell + Adjustment

Source: HKEx, HSBC Securities Services, HSBC Global Asset Management, data as of June 2018

Main

lan

d In

vesto

rs

SSE

SZSE

SSE Members

SZSE

Members

SSE

Subsidiary

(HK)

SZSE

Subsidiary

(HK)

SEHK Participants

SEHK

HK

In

vesto

rs

Northbound Southbound

SEHK

Subsidiary

(Shanghai)

SEHK

Subsidiary

(Shenzhen)

Hong Kong Mainland

Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programmes

Stock Connect trade flow illustration

12




Appendix I: Accessing onshore bond market

CIBM Direct Bond Connect (Northbound)

Launch 2016 2017

Quota No. Pre-file amount to invest No. Also no pre-filing with PBoC

Available instruments Interbank market cash bonds, repo and

FX, interest rate and bond derivatives

Interbank market cash bonds and FX

derivatives

Eligibility

Sovereign entities, financial institutions

and their products, and other eligible

mid/long term investors

All institutional and retail investors

No. of approved investors 1,010 foreign investors and products 356

Currency Offshore RMB or other currencies

Settlement cycle T+0, T+1 or T+2 (fail trade allowed)

Lock-up period No

Repatriation limit No

Market entry timeframe

(indicative only) and process

6-11weeks for non-sovereign entities

7-15weeks for sovereign entities

Assessment by settlement agent

Registration with PBoC

Account opening with intermediaries

Abide to international laws and trading

practices

Use of offshore infrastructure from Hong

Kong to access onshore bonds

No onshore filing and account opening

with onshore custodian

Potential changes in future ISIN codes to be assigned to all bonds

Launch of trade allocation from mid-July

Full realisation of the delivery versus

payment settlement system

Access to repo and derivatives markets

Discounts of up to 50 per cent in Bond

Connect transaction fee



Source: HKEx, BCCL, HSBC Securities Services, HSBC Global Asset Management, data as of June 2018

GLOBAL MARKET HONG KONG MAINLAND CHINA

Global

custodians

Global Access

Platforms

International

Investors

HKEXCFETS

CFETS Bond

Training

System

CCDC + Shanghai

Clearing House

HKMA-

CMU

Members

HKMA-

CMU

Mainland

Dealers

Settlement

Trading

Existing

interface Trading Link

Nominee structure

Settlement Link

BCCL

Existing

interface

China Interbank Bond Market (CIBM) Direct and Bond Connect

Bond Connect trade flow illustration

13

The value of investments and any income from them can go down as well as up and investors may not get

back the amount originally invested.

• Exchange rate risk: Investing in assets denominated in a currency other than that of the investor’s own currency

perspective exposes the value of the investment to exchange rate fluctuations

• Liquidity risk: Liquidity is a measure of how easily an investment can be converted to cash without a loss of

capital and/or income in the process. The value of assets may be significantly impacted by liquidity risk during

adverse market conditions

• Emerging market risk: Emerging economies typically exhibit higher levels of investment risk. Markets are not

always well regulated or efficient and investments can be affected by reduced liquidity

• Derivative risk: The use of derivatives instruments can involve risks different from, and in certain cases greater

than, the risks associated with more traditional assets. The value of derivative contracts is dependent upon the

performance of underlying assets. A small movement in the value of the underlying assets can cause a large

movement in the exposure and value of derivatives. Unlike exchange traded derivatives, over-the-counter (OTC)

derivatives have credit and legal risk associated with the counterparty or the institution that facilitates the trade

• Operational risk: The main risks are related to systems and process failures. Investment processes are

overseen by independent risk functions which are subject to independent audit and supervised by regulators

• Concentration risk: Funds with a narrow or concentrated investment strategy may experience higher risk and

return fluctuations and lower liquidity than funds with a broader portfolio

• Interest rate risk: As interest rates rise debt securities will fall in value. The value of debt securities is inversely

proportional to interest rate movements

• Derivative risk (leverage): The value of derivative contracts depends on the performance of an underlying asset.

A small movement in the value of the underlying can cause a large movement in the value of the derivative.

Over-the-counter (OTC) derivatives have credit risk associated with the counterparty or institution facilitating the

trade. Investing in derivatives involves leverage (sometimes known as gearing). High degrees of leverage can

present risks to sub-funds by magnifying the impact of asset price or rate movements

• Emerging market fixed income risk: Emerging economies typically exhibit higher levels of investment risk.

Markets are not always well regulated or efficient and investments can be affected by reduced liquidity, a

measure of how easily an investment can be converted to cash without a loss of capital, and a higher risk of

debt securities failing to meet their repayment obligations, known as default

• High yield risk: Higher yielding debt securities characteristically bear greater credit risk than investment grade

and/or government securities

• Contingent Convertible Security (CoCo) risk: Hybrid capital securities that absorb losses when the capital of the

issuer falls below a certain level. Under certain circumstances CoCoscan be converted into shares of the issuing

company, potentially at a discounted price, or the principal amount invested may be lost




Key risks

14

For Professional Clients and intermediaries within countries set out below; and for Institutional Investors and Financial Advisors in Canada and the

US. This document should not be distributed to or relied upon by Retail clients/investors.

The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested. Past

performance contained in this document is not a reliable indicator of future performance whilst any forecasts, projections and simulations contained

herein should not be relied upon as an indication of future results. Where overseas investments are held the rate of currency exchange may cause the

value of such investments to go down as well as up. Investments in emerging markets are by their nature higher risk and potentially more volatile than

those inherent in some established markets. Economies in Emerging Markets generally are heavily dependent upon international trade and,

accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency

values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may

continue to be affected adversely by economic conditions in the countries in which they trade. Mutual fund investments are subject to market risks,

read all scheme related documents carefully.

The contents of this document may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose. All non-authorised

reproduction or use of this document will be the responsibility of the user and may lead to legal proceedings. The material contained in this document is for general

information purposes only and does not constitute advice or a recommendation to buy or sell investments. Some of the statements contained in this document may

be considered forward looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not guarantees of

future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a

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china market access primer · 2018-07-19 · for professional investors only. not for further...

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