CREDIT SUISSE ASSET MANAGEMENT (Switzerland) Ltd.1/2018

Scope

First We Take Manhattan

Increasing demand for international real estate investments – from London to Berlin

Global Real Estate

Best of China

Easier access to two of the world’s largest equity and bond markets

China Investment Solutions

Ready, Steady, Go!

Profit from China’s strong economic growth

The Scope Interview

China

Think Big, Think China. Insights from the World’s Most Dominant Economy.

Michel DegenHead of Asset Management

Switzerland & EMEA

There is no definitive answer to the question of whether the People’s Republic of China is following a centrally planned or free market economic policy. The fact remains that the govern-ment is currently charting a course towards a market economy. Today, the General Secretary of China’s Communist Party is talking of easier market access for foreign investment while prom-ising to open up the country’s services sector, as well as im-plement a reform of its currency and financial system. The policy roadmap was unveiled in 2015 under the programmatic title “Made in China 2025”, a sweeping initiative to radically upgrade the Chinese economy. Its goals include the promotion of inno-vation, modernization of production structures and enhancement of productivity.

For investors, China’s equity and bond markets are exciting for two reasons. First, the correlation to developments in the West-ern world is low; second, China’s investment universe has grown exponentially over the past 20 years. Credit Suisse boasts a de-cades-long presence and experience in China, as explained in an interview with Eric Varvel, Global Head of Asset Manage-ment. Our vast on-the-ground investment expertise and global know-how in asset management form the basis on which Credit Suisse has developed a broad array of solutions for securities investments in China. For more information, refer to the articles “The Third Way”, “New Universe” and “Chinese for Savvy Investors”.

The Chinese economy has ramped up to become the global leader in a wide range of sectors. This fact is reflected not only in China’s capital market but also in the increasing international presence of Chinese investors. The People’s Republic of China is positioning itself as a leading economic center as it strides inexorably towards the future.

I wish you an enjoyable and inspirational read of our 4th edition of Scope.

Michel Degen

Think big, think China

Editorial

Contents

China Investment Solutions

Best of ChinaCredit Suisse’s China products are ideal for investors with a variety of risk/reward profiles. The spectrum ranges from equity strategies, balanced strategies and index investments up to and including easy access to the world’s third largest market.

Go to article

The Scope InterviewEric VarvelGlobal Head of Asset Management

Credit Suisse is the ideal partner for investors looking to participate in China’s economic growth.

Go to article

Economic OutlookSteep Learning CurveHow China Is on Its Way to the Top of the World

China owes its stronger-than-average growth to the unprecedented sense of purpose demonstrated by its political leaders. Their targets are set out in com-prehensive initiatives and programs such as “The New Silk Road.”

Go to article

Global Real EstateDiscover London Chinese Investors Are Re-shaping Their Preferences

Instead of properties in Manhattan and Asia-Pacific, today European me-tropolises are highly popular among investors. The Monument Building in the heart of London is a perfect fit for this investment profile.

Go to article

The “disclaimer/important information” at the end of this publication applies to every page of the document.

Contents

Editorial

The time is now to get serious about securities investments in China

Go to article

Think Big, think China

Topical articles

Interview with Eric Varvel

Go to article

“We are well positioned”

How China is on its way to the top of the world

Go to article

Steep Learning Curve

Bringing skills and capabilities within reach

Go to article

Thomas Gottstein

Farsighted investors cannot afford to ignore investments in China

Go to article

Best of China

Capitalizing on China’s equity and bond markets using a balanced strategy

Go to article

The Third Way

Easy access to the world’s second largest equity market

Go to article

Chinese for Savvy Investors

The inclusion of China A-shares in the MSCI Emerging Markets Index will in-crease the country’s weight in the index

Go to article

Index of the Future

Chinese investors are increasingly targeting international real estate, with an eye on Europe in particular

Go to article

Discover London

Miscellaneous

The Chinese Garden on Zurich’s lake-side promenade has symbolized the city partnership between Zurich and Kunming for 24 years

Go to article

Garden of Friendship

Contact

Imprint

Sources

Disclaimer / important information

Knowledge Nuggets

Easy access to the world’s third largest bond market

Go to article

New Universe

Contents

Interesting facts about China

Go to article

Urs Buchmann has been in China for Credit Suisse since 1987 so he knows how the Chinese tick

Go to article

Hand in Hand

Frontrunners in innovative technologies, new sales channels and changing consumer behavior

Go to article

China’s New Retails

Advertisement

The Scope Interview

“We are well-positioned to help our clients benefit from China’s

growth trajectory”Interview with Eric Varvel

Global Head of Asset Management

Eric VarvelMr. Eric M. Varvel serves as Global Head of Asset

Management and President and Chief Executive Officer of Credit Suisse (USA), Inc. Prior to assuming his

current role, Mr. Varvel was Chairman of the Emerging Markets and Sovereign Wealth Funds. He was also

previously CEO of Asia Pacific and CEO of Europe, Middle East and Africa.

The Scope Interview

Thanks to its several decades of local presence in China and in-depth knowledge of local conditions, Credit Suisse is

the ideal partner for investors wanting to participate inthe Middle Kingdom’s impressive economic growth. Now is a

good time to invest as China has lowered the barriers to entry for foreign investors, which should help gradually

globalize its capital markets, as Eric M. Varvel explainsin the following interview.

Mr. Varvel, China has rapidly become an economic powerhouse, and may eventually displace the US as the world’s largest economy. How is Credit Suisse affected by this economic shift and positioned to capi-talize on potential opportunities in China?Eric Varvel: Credit Suisse has demonstrated its commitment to China over time and we are strong believers in the opportunity presented by the growth as well as the dynamic develop-ments of China’s economy. Our business in China started in 1955 when we established a corre-spondent banking relationship with the Bank of China. Credit Suisse was among the first global financial institutions to set up a local presence in China in 1985. In 2005, we established ICBC Credit Suisse Asset Management (ICBCCS), which was the first asset management joint ven-ture between a Chinese commercial bank and a foreign asset manager. ICBCCS is now one of the largest asset managers in China with over RMB 1 trillion of AuM.

While many of our competitors have been fo-cused on how to extract money from China, we are working on becoming a leader in providing investors access to investment opportunities in China. We recently launched two RMB funds for international investors focused on Chinese domestic bonds and China A-shares. The key to our success in China and the value that we

bring to our clients is combining the onshore presence and expertise of our leading partner, ICBCCS, with the institutional investment ca-pabilities of Credit Suisse Asset Management. In summary, we’ve invested a lot in China over a long time to build a strong franchise and are well-positioned to help our clients benefit from the continuation of this growth trajectory.

While China has become integral to the global economy, has that been mirrored in China being a critical component in the portfolio of global investors? China is already the second largest economy in the world with a GDP of approximately USD 12 trillion and it is the biggest contributor to global growth. The Chinese equity market is the second largest and the local bond market is ranked third in the world. Even with the scale and growth of China, international investors are sig-nificantly under-allocated. This is beginning to change. The inclusion of China A-shares in MSCI indices and strong market performance is stimulating increasing interest and urgency for investors to start the process of right-sizing their geographic allocations. While having exposure to China was not historically viewed as a neces-sity, we believe it is an essential part of a global investment portfolio. A shift in the geographic composition of portfolios towards China is sup-ported by improving regulatory transparency

“Over time, the internationalization ofthe RMB and capital markets in China should translateinto the Shanghai and Shenzhen Exchanges operating

similarly to their global peers.”

The Scope Interview

and corporate governance. We also think invest-ing in China makes economic sense for investors with attractive valuations relative to earnings growth, higher yields and a lower correlation to developed markets that we believe will enhance the risk-adjusted returns of a global investor’s portfolio.

The majority of Chinese companies are only traded as “A-shares” on the mainland stock exchanges of Shanghai and Shen-zhen. How do these exchanges differ from their counterparts in the US and Europe?There are important differences that have made it more challenging for global investors to gain access to most Chinese companies. As a result, the A-shares listed on the Shanghai and Shen-zhen stock exchanges are primarily held by do-mestic investors. The combined market capital-ization of these exchanges has grown to more than USD 7 trillion. Recognizing the need to open these large markets to international capital, the Chinese government and regulators have been making meaningful changes to reduce the barriers of entry for global investors. This was initially done through quota programs like the Qualified Foreign Institutional Investor scheme that allotted capacity for institutional investors to invest in RMB-denominated stocks and bonds. More recently, the Stock Connect and Bond Connect programs have substantially alleviated constraints to trading onshore subject to certain daily volume and volatility limitations. Individual in-vestors are able to utilize offshore fund vehicles to avoid the complexities of navigating these mar-kets directly. Over time, the internationalization of the RMB and capital markets in China should translate into the Shanghai and Shenzhen Ex-changes operating similarly to their global peers.

A-shares are on the verge of being incor- porated into the MSCI indices. What will this development mean for investors? The amount of the initial allocation to A-share in the MSCI emerging market indices is less mean-ingful than the symbolic significance. I remem-ber when China became a member of the World Trade Organization in 2001 and the IMF included the Chinese RMB in their Special Drawing Rights Basket in 2016. These are historic moments that can often only be appreciated in hindsight. In June 2018, a subset of large-cap A-shares will represent 0.73% of the MSCI Emerging Mar-ket indices. We believe the A-share allocation will increase significantly within the EM indices and eventually be included in the global indices. Passive index-tracking and benchmarkoriented strategies will steadily and predictably increase their allocation to China in line with these chang-es. More broadly, MSCI inclusion is a reflection of the opening of China, market liquidity and RMB internationalization. This is already causing global investors to fundamentally re-evaluate their ex-posures to A-shares and local currency bonds.

You mentioned that Credit Suisse recently launched two China funds that invest in on-shore equities and bonds. For which inves-tor profiles are these products a good fit?We believe that exposure to the economic growth in China through equities and fixed income is appropriate for any globally diversified, balanced portfolio. The problem that we tried to solve is the best approach and structure for investors to access these markets. It is not a great epiphany to suggest that an investment allocation to China makes sense. The bigger challenge is doing it in a manner that is seamless and value-added. We did not want to be just another global asset man-ager claiming to have unique insights into China. Our competitive advantage is having the largest asset management joint venture in China with

The Scope Interview

“People are going tobe surprised by the innovation,

competitiveness andeventual penetration of China’s

technology companies.

The Scope Interview

The Scope Interview

ICBCCS. They already have an outstanding long-term track record, a talented team, quality infrastructure, differentiated market knowledge and corporate access that can’t be replicated by an offshore manager. We seek to complement their expertise in security selection and macro analysis with our institutional approach to port- folio construction and risk management. Our funds were then designed to be accessible and efficient in UCITS-compliant structures with daily liquidity. It’s a hard combination to beat for investors seeking to invest in China. The ques-tion of the fit for a client’s portfolio is usually a matter of their individual risk-return profile to determine the right long-term allocation.

There has been a lot of attention around Chinese internet companies and valuations seem to be expensive. What is your view on whether these companies represent an opportunity or a risk for investors?Naturally, there are both opportunities and risks to be managed. China has a thriving technology sector that has become quite pioneering, par-ticularly in the adoption of mobile technologies. Unlike companies in the US and Europe that have already globalized, China’s technology com-panies are just beginning to expand geographi-cally and people are going to be surprised by their innovation, competitiveness and eventual penetration. There is tremendous potential in many of these companies, but you also have to be thoughtful about valuations and potential risks. This is where our research-based, fun-damental investment approach can add value for investors.

China no longer wants to be just the “world’s factory.” It is currently pursuing the China Manufacturing 2025 plan, which involves a complete technological overhaul of the do-mestic manufacturing industry. How will the implementation of this plan impact on the global economy?With rising labor costs and an aging population, China may no longer produce the cheapest shoes or T-shirts. China is maturing like other countries that have gone through an industrial revolution. The focus on education and quality labor is facilitating competitiveness in both higher-value manufacturing and other sectors like technology as we discussed. The quality of growth has improved as China continues its transition from an export and invest-ment-led economy to a consumption and servi- ces-driven economy. We believe this is positive for sustaining global growth, but it will also pose challenges for international companies that are competing in these businesses. Ultimately global trade and competition are good things.

• February 2018

Steep Learning CurveHow China Is on

Its Way to the Top of the World

Burkhard VarnholtChief Investment Officer (CIO) Switzerland of

Credit Suisse, Deputy Global CIO and Vice-Chairman of the Investment Committee of

Credit Suisse

After the US, China is already the world’s second biggest economy. China’s gross domestic product (GDP)

climbed by 6.9% in 2017. Above-average growth is also forecast for the coming years thanks to more research,

more innovation, and greater efficiency.

Everyone has an opinion on China. The world’s second biggest economy inspires politicians, academics, scientists, entrepreneurs, artists and the media worldwide to conduct analyses, pro-duce specialist literature and, of course, air their views. These opinions cover the whole spectrum from blatant criticism to unabashed admiration.

However, the common denominator here is respect for what the country has achieved over the last several decades. The single-minded way in which China targets – or has already achieved – leading positions across a whole raft of fields is impressive.

Economic Outlook

A look backWhen the People’s Republic of China was found-ed in 1949, the Communist Party of China (CPC) faced a multitude of huge challenges. Agriculture was at a low ebb, the irrigation system was in very poor shape due to ramshackle dams, and the transportation infrastructure was in a precarious state. The “Great Leap Forward” campaign pro-claimed by Chairman Mao Zedong ended in a catastrophic famine that caused millions of deaths. The “Great Proletarian Cultural Revolution”, Mao’s other key project, also claimed millions of lives and only came to an end on Mao’s death in 1976. Up until then, the People’s Republic was largely iso-lated from the West. It was not until after the Cultural Revolution that the Communist Party em-barked upon a controlled process of opening the country up to the outside world.

For reasons of space, we are unable to provide a detailed description of how China has developed over the 40 years since then in this article. We have restricted ourselves to three initiatives and programs with a direct link to the present: “The New Silk Road”, “Made in China”, and “China Manufacturing 2025 (CM2015)”.

The New Silk RoadThe New Silk Road, also referred to as “One Belt, One Road” or the “Belt and Road Initiative”, has been a key priority of the Communist Party lead-ership under Chinese President Xi Jinping for a number of years now. The term harks back to the old Silk Road, which linked China to central Asia, the Middle East, and Europe.

Essentially, the initiative is a vast infrastructure project with which China aims to facilitate free trade across the globe. The New Silk Road runs through 60 countries, which are home to more than 60% of the world’s population. As well as building roads, railways and ports, the initiative envisages the establishment of special economic zones. Besides the Middle Kingdom itself, neigh-boring countries are also set to benefit from the New Silk Road.

For their part, many Europeans take a skeptical view of this project, accusing the Chinese of con-ducting this huge undertaking predominantly out of self-interest. There is a widespread sense that China wishes to exploit this enhanced infra-structure to gain efficient access to countries that it would like to take over the cheap mass produc-tion of goods in future. The Chinese aim to lose the “workshop of the world” tag by bidding fare-well to mass production via an industrial upgrade.

A sovereign investment fund – the Silk Road Fund – was set up in late 2014 to finance the ini-tiative. A hydroelectric power plant in northern Pakistan is one of the first projects it has funded. The China Development Bank, the Export-Im-port Bank of China, and the Asian Infrastructure Investment Bank (AIIB), whose members in-clude Switzerland, are also providing funding for projects within the New Silk Road initiative. The AIIB was established at China’s instigation. Its founder members include India, Russia, In-donesia, the Philippines, Germany, France, the United Kingdom, Italy, and the Netherlands.

Economic Outlook

Source: NZZ

Figure 1: A Silk Road for the 21st century

Moscow

China

Beijing

Xian

Fujian

Hanoi

Indonesia

Singapore

Jakarta

Kolkata

India

Colombo

Tehran

Istanbul

Nairobi

Kenya

Venice

DuisburgRotterdam

New Silk Road over land

Maritime Silk Road

Russia

Kazakhstan

Iran

Turkey

Indian Ocean

Economic Outlook

25,000

20,000

15,000

10,000

5,000

0

2016 2022 Estimates

BIP in USD Mia.

US China Japan Germany UK France India Italy Brazil Canada

18, 624

23 ,505

18 ,383

11 ,232

4 ,9375 ,482

3 ,4794 ,452

2 ,629 2, 961 2, 4663 ,1622, 264

3 ,924

1, 851 2, 244 2 ,6291, 799 1, 5302, 052

Figure 2: Global economic rankings

Sources: IMF, Credit Suisse; Data as of October 31, 2017

Historical performance indications and financial market scenarios are not reliable indicators of current or future performance.

Made in China 2025The initiative is partly inspired by Germany’s “Industry 4.0” program, which aims to combine the opportunities provided by information and communications technology with industrial pro-duction. However, the Chinese program goes a lot further. The aim is not only to digitalize Chi-na’s industry, but also to make the whole coun-try ready to manufacture products that add the highest value possible. At the same time, the plan is to boost productivity, enhancing compet-itiveness to world-class levels. “China still lags a huge distance behind leading multinational cor-porations in many industries, but the catch-up process is gaining traction,” was the recent as-sessment of the Mercator Institute for China Studies, Berlin.

China Manufacturing 2025 (CM2015)This initiative, which was launched in 2015, aims to promote ten specially selected econom-ic sectors. These include various industries such as IT, robotics, aviation, the manufacturing of rail transport equipment, electric vehicles, agricultural machinery and ships as well as bio-technology and pharmaceutical products. The program gives priority treatment to building up local expertise quickly. The aim is to put Chi-nese companies in a position to compete with the best European and US corporations when it comes to quality, efficiency, sustainability, and innovation. Chinese companies that meet these criteria can benefit from tax privileges and sub-sidies. In contrast, it is by no means unusual for foreign suppliers to be at a disadvantage, as they either face obstacles to market entry or are denied access altogether.

Economic Outlook

Source: https://www.credit-suisse.com/microsites/private-banking/investment-outlook/en/global-economy/regions-in-focus/china.html

Figure 3: China is achieving faster growth

15

10

5

0

–5

–101998 2000 2002 2004 2006 2008 2010 2012 2014

Forcast 2017 (IMF, January 2018)

China: 6.7%

US: 2.5%Eurozone: 2.4%Japan: 2.0%

2016

Sources: IMF, Datastream, Credit Suisse/IDC; Data as of December 29, 2017

These forecasts are not reliable indicators of future performance.

Annual GDP growth rates (in percent)

The quest for stabilityAccording to Credit Suisse’s Investment Outlook 2018, China’s policy focus this year will likely switch from economic stimulus to limiting growth in debt. Having achieved a surprisingly strong level in 2017, growth may therefore slow down somewhat, not least because of what will prob-ably be ongoing consolidation in key industries.

On the back of their quest for stability, the Chinese authorities have tightened up capital controls, which has recently prompted a mod-est rise in money market rates. As a result, after a weak 2016 the RMB appreciated slightly on a trade-weighted basis last year as outflows eased amid a recovery in foreign exchange reserves. The authors of the Investment Outlook 2018 take the view that, while a more restrictive policy

approach will likely be pursued again this year, capital controls could be eased a little. In light of what are relatively robust Chinese fun-damentals, they do not expect this to trigger another phase of weakness in the RMB. Further-more, the currency’s stability should limit the risks of protectionist measures against China and of heightened pressure on other emerging market currencies.

Hats off to China!Commentators may well take a critical view of the general conditions under which China’s economic success has been achieved. Yet there can be no doubt that the end has justified the means. The Chinese government’s track record is indisputable. China’s GDP of USD 11.9 trillion now accounts for 15% of global output, which

China US Japan Eurozone

Economic Outlook

Sources: https://www.merics.org/de/china-flash/wirtschaftsausblick-2018; IMF estimates; https://www.credit-suisse.com/ch/de/articles/private-banking/die-weltwirtschaft-lauft-heiss-201710.html; Global Wealth Report 2017, Credit Suisse

Two million millionaires

The Chinese took just 17 years (2000 to 2017) to increase wealth by the same factor achieved in the US over 70 years (1946 to 2016). Per capita wealth in China climbed from USD 5,410 to USD 26,870 between 2000 and 2017, more than half of which was made up of tangible fixed assets, especially real estate. After the US and ahead of Japan, Chinese households now have the second highest assets in the world.

Despite the divide between urban areas and the countryside, until several years ago the disparity in the distribution of wealth was limited because it is unusual for large sums to be inherited. Furthermore, there is a relatively even distribution of residential property and ownership of rural land. However, inequality has been rising rapidly since 2000, and China is now home to more than two million millionaires. With the exception of the US, there is no country on earth with more inhabitants whose wealth exceeds USD 50 million than China.

runs to an estimated USD 79.3 trillion at present. The gap versus the US, whose GDP comes in at USD 19.4 trillion (24.5% of global GDP), is steadily shrinking. With its growth last year alone

Economic Outlook

of 6.9%, China boosted its economic output by some USD 750 billion, which is higher than Switzerland’s entire GDP of around USD 660 billion.

Sources: https://www.merics.org/de/china-flash/wirtschaftsausblick-2018; IMF estimates; https://www.credit-suisse.com/ch/de/articles/private-banking/die-weltwirtschaft-lauft-heiss-201710.html; Global Wealth Report 2017, Credit Suisse

“It’s about bringing our capabilities and expertise even more within reach”

Interview with Thomas GottsteinCEO Credit Suisse (Switzerland) AG

Investment Conference

Thomas GottsteinThomas Gottstein, 53, is CEO of Credit Suisse (Switzerland) AG.

He has held various functions at the Bank over the last 18 years, including Head of Premium Clients Switzerland, Head of Investment

Banking Switzerland and Co-head of Equity Capital Markets EMEA. Born in Rüschlikon (ZH), he graduated from the University of Zurich

with a degree in Finance and Accounting. He lives with his wife and two children in the Zurich region.

Mr. Gottstein, Switzerland is an attractive and highly competitive market for private bank-ing. What do you see as Credit Suisse’s core strengths?Thomas Gottstein: On the one hand, we can look back on a long tradition in private banking; on the other, we are also continuously investing in the further expansion of our business. As a leading provider of private banking services, we are well placed to offer top quality advisory ser-vices thanks to our highly trained, experienced relationship managers. Clients’ needs and the

market environment have become more wide-ranging and complex, which explains the ever- increasing importance of comprehensive advi-sory services. We see ourselves as long-term partners to our clients and provide services uniquely suited to the needs of every generation and stage of life, whether it’s defining invest-ment strategies, personal pension provisions or inheritance consulting. We have broad exper-tise at our Bank, which is brought most particu-larly to bear in addressing more complex needs and requirements.

Switzerland is a comparatively small albeit wealthy country. Thomas Gottstein, CEO of Credit Suisse (Switzerland),

elucidates the Bank’s focus in providing advisory services for high-net-worth private clients. He also explains why –

digitalization notwithstanding – a key role will continue to be played by client events, which are held regularly

throughout Switzerland.

Investment Conference

“Long-term trends are an interesting alternative for investors who are

less keen on the rapid changes in financial markets and stock exchanges.”

Credit Suisse is also esteemed as a bank for entrepreneurs. What can you offer entrepreneurs that other banks cannot?As a bank for entrepreneurs, we introduce pre-cisely the kind of comprehensive approach that an entrepreneur seeks: We understand not only the situation at the corporate level but also private financial themes. Thanks to our wide array of services, we can support companies at each step of the way – from company creations and financ-ing issues in the start-up / growth phases to po-tential initial public offerings, company sales and succession planning. We also offer advisory solutions for clients’ private financial needs. Here, too, our levers of success are our interna-tional footprint and the resources at our disposal to mobilize the expertise of the entire bank.

How do you respond to the increasingly large number of clients interested in using digital channels to interact with the bank?Digitalization spurs us on to embark on new paths instead of resting on our laurels. This ex-plains why we invest a great deal of time and capital into our digital platforms, as well as the services that they make accessible. Last year, for instance, we rolled out Digipigi, Switzerland’s first electronic digital money box for young-sters. Also last year we launched our digital on-boarding for new clients, which allows them to open an account with us online in just 15 min-utes – without having to step so much as a

foot inside the Bank. The trend couldn’t be any clearer: electronic channels are becoming in-creasingly popular; conversely, the use of counter and ATM services is declining with every year. The trend notwithstanding, we continue to lay great store by direct personal contact. Backed by our team of relationship managers and ex-perts, we maintain an on-the-ground presence in all of Switzerland’s regions.

Speaking of on-the-ground: In the age of digital networking, why bother with client in-vestment conferences like the one to be held at Bocken’s historic conference center in the vicinity of Zurich in early June 2018?In a nutshell, it’s about bringing our capabilities and expertise even more within reach. Today, thanks to the internet, knowledge – including of financial matters – is available to us in infinite abundance around the clock. When it comes to in-depth topical discussions, however, we con-tinue to appreciate the key value of interpersonal dialogues and discussion panels, which are even becoming all the more valuable. At our con-ferences and events, which not only focus on a wide panoply of themes and topics but also feature prominent guest speakers and work-shops, clients can enjoy the opportunity to par-take directly in the Bank’s enormous expertise. Such forums make it possible for them to be-come personally involved while exchanging valuable information as well.

Investment Conference

What is the message that Credit Suisse (Switzerland) will want to convey as host at the Bocken conference center?What we will want our customers to take away is a great deal of knowledge – not just in terms of facts and figures but even more importantly in terms of insights and practical perspectives concerning markets and trends – and perhaps also to inspire them to engage with an invest-ment theme that had not previously blipped on their radar. Offering workshops conducted both by internal experts and by external partners is also our way of showing how closely connected we are as a bank – which additionally helps us to find the right solutions for our clients. Last but not least, the conference will also include some form of entertainment – but I’d rather not give away too much at this point.

One theme that will be explored at the conference is supertrends, i.e. long-term developments in the world: Why should investors focus on these trends already?Our investment experts have identified five major global trends that promise to be of relevance to investors in the years ahead, thereby enabling us to suggest thematic investment opportunities to clients so they can profit from long-term societal trends. Take technology, for example. It is con-stantly bringing out innovations that carry great potential for change. Just look at virtual reality or the use of robots, for instance. Another exam-ple involves so-called millennials, aged 19–35, who will have an impact on specific investment areas by virtue of their consumer habits and life-styles. Focussing on long-term trends can also prove an interesting alternative for investors who are less keen on the rapid changes in finan-cial markets and stock exchanges.

In 1856 Alfred Escher founded “Schweizeri-sche Kreditanstalt”, forerunner of today’s Credit Suisse. A business leader and pioneer, he too thought in bold strokes. What can we learn from Alfred Escher, also with a view to today’s economic and market environment?Alfred Escher identified the major trends of his time in the construction of the railroad network and industrialization, and took farsighted action. Granted, today’s economy and markets are much more fast-paced – yet what still continues to in-spire us to this day is his brand of looking ahead to the future while taking advantage of oppor-tunities that might only pay off after a number of years. That calls for entrepreneurial courage, which after all is one the secrets behind Switzer-land’s economic success.

• March 2018

Investment conferencesorganized by Credit Suisse

(Switzerland) Ltd.

At Credit Suisse’s investment conferences, various specialists at Credit Suisse, including from Credit Suisse

Asset Management, present investment solutions and products for investors in Switzerland. The conferences are aimed at providing clients with the opportunity to

thoroughly delve into investment themes, as well as to in-teract and dialogue with experts and other participants.

Investment Conference

Advertisement

Best of China

Farsighted investors jumped on the bandwagon long ago. Others are still reluctant to hop on. Investments in

China – a theme every investor should startthinking about. Investors aiming for portfolio diversification in keeping

with the times cannot afford to ignorethe world’s second largest equity market and third largest bond market.

For investors lacking both the expertise and the time for costly security selection and investment processes,

Credit Suisse Asset Management has just the thing: products with different risk/reward tradeoffs. They belong on

the radar of all investors with a long-term horizon and global focus.

China Investment Solutions

HarmoniousThe Harbin Opera House, completed in the

megacity of Harbin in 2015, represents the per-fect symbiosis between nature, culture and

man. The architectonic masterpiece designed by MAD architects, Beijing, is today regarded

as a mighty symbol of yet another one of China’s up-and-coming, heretofore little-known

metropolitan citiess.

The Third Way

Alexandre BouchardyHead of Asset Management Singapore and

Fixed Income APACalexandre.bouchardy.2@credit-suisse.com

Investors wishing to achieve broad diversification for their investments on the Chinese capital market can

benefit from a balanced strategy, which enables them to participate in the second largest equity market and the third largest

bond market in the world.

China Investment Solutions

There is a clear expert consensus that the Chinese economy offers good growth prospects over the long term. This underpins the case for exposure to equities and the opportunity to benefit from rising valuations. However, this approach also entails exposure to the risks in-herent in equities, including poor returns or falling stock prices. Investors wishing to mitigate these risks cannot ignore the asset class of bonds, which is suited to those who value steady income.

With a view to combining the best of both worlds, Credit Suisse Asset Management has designed a product tailored to the balanced requirements of investors with an interest in China. The target allocation is split down the middle between equities and fixed-rate bonds, giving investors the chance to benefit from rising Chinese stock prices while achieving attractive bond returns.

Risk/return profileDer The fund pursues a holistic approach with the aim of generating relative value

across all corporate capital structures.

Source: Credit Suisse Asset Management (Switzerland) Ltd., February 2018

Low

Low

Low

Medium

High

High

Gov. Bonds

Senior Secured Debt

Senior Unsecured Debt

Subordinated/ Convertible Debt

Preferred Equity

Common Equity

Deb

tE

quity

Lower RiskLower Return

Higher RiskHigher Return

China Investment Solutions

Optimal DiversificationCredit Suisse Asset Management, which is advised by ICBC Credit Suisse Asset Manage-ment Co. Ltd. (ICBCCS), is responsible for managing the innovative balanced product. The advisory service covers the macroeconomic environment (including interest rate policy), the analysis of equity and bond markets, as well as the preparation and evaluation of fundamental data and corporate growth prospects.

Within the sector allocation of the equity compo-nent, the highest weightings are assigned to banks, industrials, raw materials, cyclical consum-er goods, IT, and real estate. Within the fixed in-come allocation, the investment focus is on banks (including the state-controlled policy banks), state institutions, real estate, local government, engineering and construction, and investment companies. Around 50 holdings in the equity segment and some 70 bond positions ensure optimal diversification.

Robust renminbi

Das The new balanced product is around 95% invested in renminbi. The currency of the People’s Republic of China became increasingly stable versus the US dollar, the euro, and the Swiss franc between 2005 and 2017

and offers the potential for long-term appreciation.

Sources: Bloomberg, Credit Suisse; Data as of February 2018

Historical performance indications and financial market scenarios are not reliable indicators of current or future performance.

USDCNY Cur EURCNY Cur CHFCNY Cur

Evolution of the renminbi exchange rate (in RMB)

5,0

6,0

7,0

8,0

9,0

10,0

11,0

12,0

2005 2007 2009 2011 2013 2015 2017

China Investment Solutions

New Universe

Adrian CheeHead of Portfolio Management and Credit, Asia

adrian.chee@credit-suisse.com

Lei ZhuSenior Portfolio Managerlei.zhu@credit-suisse.com

A Credit Suisse Asset Management fund launched just a few months ago offers investors

access to the Chinese bond market, the world’s third largest. The fast growing market is

increasingly opening up to foreign investors.

China Investment Solutions

Nr. 3

In terms of total debt outstanding, China boasts the world’s third largest onshore bond market. However, foreign investors hold less than 2% of the market.

Sources: BIS, Credit Suisse; Data as of June 30, 2017

40, 000

35, 000

30, 000

25, 000

20, 000

15 ,000

10, 000

5 ,000

0

US Japan China UK France Germany Italy Canada

38,501

12, 59410, 367

5 ,6924 ,395 3 ,533 3 ,159 2 ,317

Total Bond-Market Debt Outstanding (in USD bn)

What many bond investors have been waiting for: the opportunity to invest in a new universe that has a target yield of 4.5%–5.5% and that is characterized by a relatively high credit rating and low interest rate sensitivity. A Credit Suisse Asset Management fund launched last year turns this wish into reality. The fund invests mainly in onshore renminbi-denominated corporate and financial bonds on the interbank market. The

issuers either have their headquarters in China or conduct a significant part of their business activities there. In addition, the fund may also invest to a lesser extent in government bonds, bonds issued by state-owned banks and local governments, and other Asian onshore and off-shore markets. The fund aims to generate alpha through active management of duration, active sector allocation and bottom-up issuer selection.

China Investment Solutions

Yield pickup

Compared to European and US markets, Chinese onshore bonds offer much higher yields (in percent).

6.0

5.0

4.0

3.0

2.0

1.0

0

EURTreasuries

US Treasuries

China TreasuriesOnshore

EUR Corporates

US Corportaes

China CorporatesOnshore

0.71

0.09

2.47

0.40

3.87

0.630.82

0.16

3.45

0.46

5.83

2.69

Yield Yield / Unit of Duration

EUR Treasuries:EUR Corporates:US Treasuries:US Corporates:China Treasuries Onshore:China Corporates Onshore:

Bloomberg Barclays Euro Aggregate Treasury IndexBloomberg Barclays Euro Aggregate Corporate Index Bloomberg Barclays US Aggregate Treasury IndexBloomberg Barclays US Aggregate Corporate IndexChinaBond Treasury Bond IndexChinaBond Credit Bond Index

In the sector allocation, the following account for the highest shares: banks (including state- controlled policy banks), government bonds,

coal mining, metals and mining, real estate, power utilities, and distributors and wholesalers.

Sources: Bloomberg Barclays Index, ChinaBond, Credit Suisse; Data as of January 31, 2018

China Investment Solutions

Low correlation

Compared to the Bloomberg Barclays US Credit Index and the Bloomberg Barclays US Treasury Index, the China Bond New Composite Bond Index (in USD unhedged terms)

displays a low or even negative correlation.

Sources: ChinaBond, Wind, Bloomberg, Credit Suisse;Data from January 31, 2008 – January 31, 2018

Jan 2008–Jan 2013 Jan 2013–Jan 2018

0.40

0.20

0

–0.20

–0.40

Bloomberg Barclays US Credit Index Bloomberg Barclays US Treasury Index

–0.21

0.25 0.210.16

Participate in the world’s third largest bond marketOur new fund product offers investors access to a bond market that not only is among the world’s three largest but has also established itself as an asset class in its own right. The market has a good chance of inclusion in global bond indices, attracting both active and passive fund flows.

Owing to the low correlation to global bond mar-kets, investors reap substantial diversification benefits. In addition, the strong government back-ing of corporate entities provides stability while contributing to the ongoing improvement of issuer fundamentals. Corporate governance and trans-parency are also coming gradually closer to meet-ing Western investors’ expectations. Still, consid-eration must be given to risks typically associated with emerging market bonds and investments. Not least are currency risks relating to renminbi in-vestments.

Given that more than 85% of the bonds have a maturity of less than five years, the universe of Chinese corporate bonds exhibits relatively low interest rate sensitivity. The Chinese bond market stands out for offering the highest real yield among major bond markets. The risk/re-ward profile is seen as attractive.

An experienced Asia-based investment team oversees the fund’s management. The team has an impressive track record in investing in Chinese offshore and Asian corporate bonds. Moreover, it benefits from the experience and local in-depth knowledge of ICBCCS, one of the largest fixed income managers in China.

China Investment Solutions

China Investment Solutions

Mountain AirIn addition to being a UNESCO World Cultural

and Natural Heritage site, the Huangshan mountain range also provides the topographic

setting for the unique Huangshan Mountain Vil-lage as of 2017. As part of a major tourism

master plan, the mountain village is designed to instill a renewed sense of awareness for na-

ture and sustainability in its inhabitants.

Chinese for Savvy Investors

There is no alternative in the long run to investing in China’s equity market. Ample opportunities for globally oriented investors are there for the taking. All the same,

a mindful eye should be kept on the risks.

There is no alternative in the long run to investing in China’s equity market. Ample opportunities for globally oriented investors are there for the taking. All the same,

a mindful eye should be kept on the risks.

Lily ChangPortfolio Manager

lily.chang@credit-suisse.com

Xiao LiPortfolio Manager

xiao.li@credit-suisse.com

China Investment Solutions

With a population of around 1.4 billion, China’s share of the estimated world population of 7.5 billion is almost 19%. In 2016, the People’s Re-public of China contributed USD 11,218 billion or roughly 15% to the total global gross domes-tic product of USD 75,278 billion. It is but a mat-ter of time before China overtakes the US as the world’s largest economic power. China’s econo-mic growth rates and the government’s targets for growth are indeed impressive. At the same time, however, Chinese equities – allowing West-ern investors to participate directly in China’s dynamic growth – either continue to be under- represented in, or else are entirely absent from, Western investors’ portfolios.

There were good reasons in the past for inter-national investors to shy away from Chinese equities. In particular, uncertainty surrounding the government’s economic strategy, the bu-reaucratic regulations and limited transparency tended to put off investors from the Western hemisphere. But the framework conditions have begun to change for some time now. China has been sending clear signals that foreign cap-ital is welcome. Today, China should be on the radar of equity investors with a longer term horizon who are keen to diversify globally.

Straightforward fund solutionProfessional fund solutions provide easy access to China’s stock market. Since September 2017, Credit Suisse Asset Management has been managing an equity fund as a connecting bridge between China’s A-shares in Shenzhen and Shanghai, which – combined with the Hong Kong stock market – form the world’s second largest equity market. There is every indication that the trading volume and market cap of tradable shares will continue their growth trajectory. The inclusion of China A-shares in MSCI indices slated to begin in May 2018 will give this asset class an added boost.

Both passive (index-tracking) and active (bench-mark-oriented) fund managers will be pushed into this asset class, which should bolster share prices.

The fund not only invests in a well-diversified portfolio of stocks listed mainly on the exchang-es in Shanghai, Shenzhen and Hong Kong but also offers daily liquidity. The portfolio concen-trates on the Chinese economy’s most promis-ing growth areas. The Shenzhen-Hong Kong Stock Connect program, which was launched in December 2016, offers optimal portfolio di-versification opportunities as over 50% of the Shenzhen-listed stocks belong to the new- economy sectors in China – versus only 20% of the stocks listed in Shanghai. Now is an oppor-tunity to directly invest in China A-shares from HK, which are currently trading at a steep dis-count to global equities (MSCI World). Earnings are broadly anticipated to grow at double-digit percentage rates over the next two years.

Attractive macroeconomic environmentChina’s large-scale initiative for economic coop-eration and trade should provide an additional boost to the equity market. Under its “One Belt, One Road” initiative – also dubbed the “New Silk Road” – the Chinese government aims to create new trade channels, stimulate the inter- nationalization of China’s economy and strength-en its position among its main trading countries. Its “Made in China 2025” initiative, which is de-signed to transform the country into a high-tech economic powerhouse, has the greatest potential to accelerate China’s economic growth. China harbors grand ambitions in dynamic fields like biotechnology, artificial intelligence, Internet of Things (IoT), renewable energy and nuclear technology.

China Investment Solutions

Attractive valuations

CSI 300 Shanghai Composite

Shenzhen Composite MSCI China (offshore listed)

From a historical perspective, index valuations are attractive.

Source: Bloomberg; Data as of January 2018

Historical performance indications and financial market scenarios are not reliable indicators of current or future performance.

12-month forward P/E Average +/- stdev

12.0x

17.4x12.7x

40

35

30

25

20

15

10

52007 2009 2011 2013 2015 2017

12.6x

2007 2009 2011 2013 2015 2017

40

35

30

25

20

15

10

5

40

35

30

25

20

15

10

5

40

35

30

25

20

15

10

52007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017

China Investment Solutions

Sources: Bloomberg, World Bank; Data as of January 2018

No. 2

China A-share and Hong Kong stock market ranks second worldwide by market capitalization and turnover velocity.

Market capitalization 2017 (in USD trn)

Annual equity turnover in 2016 (in USD trn)

0 5 10 15 20 25 30 454035

42.1

19.718.3 1.4

5.2

1.9

1.6

1.2

1.1

1.1

0.8

0.8

US

China + HK

Japan

UK

South Korea

Canada

Germany

France

Switzerland

India

USA

China + HK

Japan

UK

France

Germany

India

Canada

Switzerland

South Korea

29.6

13.17.7 5.4

6.3

3.8

2.5

2.4

2.4

2.3

1.8

1.7

0 5 10 15 20 25 30 35

China Investment Solutions

Home advantage thanks to ICBCCSAlthough China is increasingly opening up its markets to international investors, on-the-ground experience and direct access remain indispens-able. Credit Suisse Asset Management enjoys the privileged position of being able to rely on a proven and highly successful partnership in China. Credit Suisse Asset Management owns a 20 % stake in ICBC Credit Suisse Asset Management Co. Ltd. (ICBCCS), a joint venture initiated in 2005 with Industrial and Commercial Bank of China (ICBC), which holds an 80 % interest.

The joint venture company became the first fund manager in China formed from the partnership between a domestic commercial bank and a for-eign asset manager. As of end-2017, ICBCCS had assets under management of RMB 1,100 bil-lion (USD 174 billion), making it the second larg-est asset manager in China. Not only is ICBCCS one of the few fully licenced fund managers in China offering a broad spectrum of investment services to international clients but it has also earned an outstanding reputation worldwide as a manager of China A-share strategies.

Investment processBacked by the expertise of ICBCCS in Beijing and the know-how of Credit Suisse Asset Man-agement Hong Kong, the fund employs a multi-step bottom-up securities selection process.

The Luxembourg-domiciled fund invests in a diversified portfolio of 30–80 companies active in traditional and new sectors of the Chinese economy. The investment universe is initially com-prised of stocks listed on the Shanghai and Shenzhen exchanges (China A-share market) which are eligible to be traded via the Stock Connect program. The fund also invests in Hong Kong-listed shares – for example, in order to exploit valuation discrepancies in dual-listed

stocks – as well as in Chinese companies listed in the US (ADRs).

The focus lies on stocks with valuations that are strongly supported by fundamentals. The fund offers a high level of exposure to small and mid-cap stocks, to new-economy sectors listed in Shenzhen and to stocks of blue-chip companies undergoing the state-owned enterprise reforms. The investment objective of the fund is to gen-erate long-term capital growth.

Although the chances are good that in the current geopolitical environment this objective will be achieved over the longer term, the risks should not be ignored. These are namely emerg-ing market investment risks in general, as well as specific risks associated with the Chinese market. Tax laws, regulations and practices in China are constantly changing and may even change with retroactive effect. Tax burdens for issuers or securities may also have a negative impact on performance. As always, it is ultimate-ly up to the investor to weigh the opportunities and risks, including for Chinese equities.

China Investment Solutions

Sources: ICBCCS, AMAC; Data as of December 2017

ICBCCS – key data

ICBCCS assets under management

in RMB bn

600

500

400

300

200

100

0

2005 2006 2010200920082007 2011 2012 2013 2014 2015 2016 2017

AUM – Mutual Fund

> USD 198 bnof assets under

management

600employees

No. 44th largest player in

the enterprise annuity and government

pension business

> 40investment

fund portfolio managers

No. 2Second largest

mutual fundmanager in China

No. 77th largest playerin the segregated account business

in China

Source: ICBCCS; Data as per December 2017

China Investment Solutions

Signs of the upswingIn China’s cities the signs of the upswing are

unmistakable. Investors keen to profit from the economic growth potential

without costly securities selectionshould put index products squarely on

their radar.

Index ofthe Future

Valerio Schmitz-EsserHead of Index Solutions

valerio.schmitz-esser@credit-suisse.com

At present, the main equity indices do not provide an adequate reflection of China’s economic standing in the world. This is largely because, in the past, foreign

investors could only gain access to the market for Chinese domestic stocks, or A-shares, subject to major restrictions.

The forthcoming inclusion of Chinese A-shares in the MSCI Emerging Markets Index means that China will be assigned

a greater weight in this benchmark. This is reason enough in itself to look at index investments

on Chinese equities.

China Investment Solutions

Foreign investors generally find it harder to access emerging markets such as China than their developed counterparts. Ownership lim-its and capital controls certainly make it more difficult for foreigners to obtain access. Re-duced competition among providers of trading platforms and stock market services as well as idiosyncrasies in the market structures pose an additional challenge.

In the past, these barriers to market entry have meant that the geographical distribution of glob-al market capitalization in the indices has failed to properly reflect the corresponding economic output, or gross domestic product (GDP). Rela-tive to the country’s economic output, the US is over-represented in market-weighted indices. In contrast, the People’s Republic of China is un-der-represented due to the restrictions imposed on foreign investors’ access to A-shares.

Sharp rise in China’s weight inthe MSCI Emerging Markets Index

China’s weight in the MSCI Emerging Markets Index before and after inclusion of A-shares

China A-shares: 0.9%

5 % Inclusion

China A-shares: 0%

Before

China A-shares: 15.1%

100 % Inclusion

24.6% 27.3% 37.8%

Source: MSCI

Fresh focus on Chinese domestic stocksThe good news is that the Chinese market is becoming more and more open to foreign inves-tors (see “The Gateway Is Opening”), including index-oriented investors. Although Chinese eq-uities are already included in the main MSCI indices, this is only true of stocks that are traded in HKD, USD and SGD. The current MSCI China Index does not include any A-shares and therefore only covers some 60% of the invest-ment opportunities in China at present. As a re-sult, the benchmark offers no coverage of a significant chunk of the market. Nevertheless, this year will see around 230 A-shares being admitted to the MSCI Emerging Markets Index. However, the index will initially only include 5% of A-shares’ market capitalization.

For investors wishing to participate in the Chinese equity market without the need for labor-inten-sive stock selection, time-consuming monitoring and elevated cluster risks, an index product is the most suitable choice. An index such as the MSCI China All Shares, which already replicates the full market capitalization of the A-shares in the MSCI China benchmark, should be seriously considered. The MSCI China All Shares Index benefits from very broad diversification across stocks and sectors, giving investors the oppor-tunity to participate in the full spectrum of the Middle Kingdom’s investment opportunities via a single instrument.

The MSCI China All Shares Indexin brief

ComprehensiveThe MSCI China All Shares Index captures large and mid-cap representation across Chinese A-shares, B-shares, H-shares, Red-chips, P-chips and foreign listings (e.g. ADRs). The index aims to reflect the full opportunity set of Chinese share classes listed in Hong Kong, Shanghai, Shenzhen and outside of China. It is based on the concept of the integrated MSCI China equity universe but with Chinese A-shares included. The sector weight-ing of the MSCI China. All Shares Index is also more diversified as compared with the MSCI China Index, for example.

ConsistentThe MSCI China All Shares Index is constructed by applying the MSCI Global Investable Market Indexes (GIMI) methodology, the same framework used for the MSCI Emerging Market Index.

DynamicBy targeting a full investable market representation instead of a fixed number of securities, the MSCI China All Shares Index is designed to dynamically reflect the evolution of China’s opportunity set.

PerformingFor the past five years ending January 2018, the MSCI China All Shares Index has produced a higher relative return than the China A International Index, for example.

China Investment Solutions

The gateway is opening

The gateway to Chinese domestic stocks is opening ever wider. For many years, the only way for foreign equity investors to gain exposure to Chinese stocks was via equities traded

in HKD, USD and SGD. Via Stock Connect, the stock exchanges in Shanghai and Shenzhen now also offer foreign investors access to Chinese domestic stocks traded in CNY, which

make up the largest proportion and feature the most liquid trading on the Chinese equity market. As things stand, only 2% of A-shares are in the hands of foreign investors.

Source: Credit Suisse Asset Management (Switzerland) Ltd.

This article is neither a recommendation nor advice to buy or sell securities, units in investment funds, or to follow a particular investment strategy.

The Share Classes

Share Class Definition Stock Exchange Exemplary companies

A-shares Stocks of companies incorporated in mainland China that are listed on the Shanghai or Shenzhen Stock Exchange and traded in renminbi (CNY).

Shanghai (CNY) Shenzhen (CNY)

Kweichow Moutai

B-shares A Stocks of companies incorporated in mainland China that are listed on the Shanghai Stock Exchange (USD) and Shenzhen Stock Exchange (HKD)..

Shanghai (USD) Shenzhen (HKD)

Chongqing Changan Auto

H-shares Stocks of companies incorporated in mainland China that are listed on the Hong Kong Stock Exchange (HKD).

Hongkong (HKD) China Construction Bank

Red-Chips Chinese stocks of state-controlled com-panies from outside of mainland China that are listed on the Hong Kong Stock Exchange (HKD).

Hongkong (HKD) China Mobile

P-Chips Chinese stocks of non-state-controlled companies from outside of mainland Chi-na that are listed on the Hong Kong Stock Exchange (HKD).

Hongkong (HKD) Tencent Holdings

Foreign Listings (S-Chips/N-Chips)

Chinese stocks (including American De-positary Receipts/ADRs) outside of China (Chinese mainland, Hong Kong, Macao and Taiwan) that are listed and traded on the Singapore exchange in Singapore dollars (SGD) and on the NYSE Eu-ronext-New York, NASDAQ or NYSE AMEX in USD.

Singapore (SGD) New York (USD)

Alibaba Group Holding

China Investment Solutions

Christopher ChiangHead of Real Estate, Asia Pacificchris.chiang@credit-suisse.com

Zoltan Szelyes

Head of Global Real Estate Researchzoltan.szelyes@credit-suisse.com

Global Real Estate

Discover London Chinese Real Estate

Investors Are Reshaping Their

Preferences

Then We Take LondonEurope’s megacities are increasingly taking the place of

Manhattan and the Asia-Pacific region. Demand on the part of Chinese investors for attractive properties, such as for example the Monument Building in the heart of London,

is continuing unabated.

Global Real Estate

Real estate has become an increasingly important part of the asset allocation of both (U)HNWI and international

investors over the past decade. While cross-border capital in real estate markets has historically been predominantly

of US and European origin, this pattern has shifted since the Great Financial Crisis.

Asian investors now take up a larger share of global transaction volumes, and investors from China have become the most dominant seg-ment of the Asian buyer group. In 2017, investors from mainland China and Hong Kong directly bought international commercial real estate to-talling roughly USD 114 billion, which accounts for 32% of total global cross-border capital flows, according to Real Capital Analytics. The chart on the following page depicts the evolution of quarterly transaction volumes since 2007. The data illustrates that these investors have gained significant global importance over the past 10 years. It also documents the sheer scale of bilat-eral investments volumes between China and Hong Kong. Of this USD 114 billion of cross-bor-der activity in 2017, USD 65 billion was from mainland Chinese investors buying in Hong Kong or else Hong Kong buyers in China.

In 2017, the focus of Chinese investors was on Europe and Asia Pacific while declining activity in the US also reflects the general weakness of transaction volumes in that market. In UK com-mercial real estate, however, Chinese investors

were the most important buyer group not only in terms of transaction volumes but also in terms of making the headlines with the two largest deals since Brexit. The “Cheesegrater” and “Walkie Talkie” buildings in the City of Lon-don, with a transaction volume of GBP 1.3 billion and GBP 1.2 billion, respectively, have greatly impacted the market.

Anecdotal evidence in the last quarter of 2017 points to a slowdown of activity even as the highlighted numbers were still high due to the time lag between signing and closing. This slow down has been mainly driven by the impo- sed restrictions on overseas investments by the Chinese government. The motivations behind the imposition of these restrictions are mani- fold. We believe they are related to concerns of the government with regard to the strong growth of international investments by some Chinese in-stitutions in recent years combined with the high use of domestic leverage when buying in-ternational real estate, as well as the limited specialist skills of some of the investors, such as in running hotels.

Global Real Estate

Cross-border commercial real estatetransaction volumes

As this figure only measures direct discretionary transaction activity, we estimate the true volume of Chinese exposure to international real estate to be substantially higher,

as many investors invest abroad by means of real estate funds that are managed by foreign asset managers and these flows do not go into this statistics.

140

120

100

80

60

40

20

0

07 Q

107

Q3

08

Q1

08

Q3

09

Q1

09

Q3

10 Q

110

Q3

11 Q

111

Q3

12 Q

112

Q3

13 Q

113

Q3

14 Q

114

Q3

15 Q

115

Q3

16 Q

116

Q3

17 Q

117

Q3

Buyers from Hong Kong and China Hong Kong buyers in China and Chinese buyers in Hong Kong

Buyers from other countries

Sources: Real Capital Analytics, Credit Suisse; Last data point: December 2017

Global Real Estate

While we forecast that in 2018 international transaction volumes of Chinese investors will de-cline versus 2017, we continue to believe they will remain an important player in international real estate markets for the foreseeable future. This is due to the size of the Chinese economy and the need for international diversification of companies and UHNWI abroad.

To successfully implement real estate in an in-ternational context, knowledge of local market dynamics, general practices and regulations remains important. In some European markets such as Germany, Spain, France, the Nether-lands and the UK, access to private networks in real estate acquisitions, asset management, construction and development as well as financ-ing remains essential to be able to achieve the targeted returns. Real estate continues to main-tain the character of a private market, with the strong benefit of local networks. That’s why we recommend to investors who are diversifying into overseas property to go with strong partners that have a deep understanding of the local sit-uation of each market and possess a consistent track record. Ongoing personal contact with that partner remains equally important as we be-lieve trust is the essential element of a successful professional relationship. This is based on our historical experience in Switzerland, where we

have a trust-based relationship with many companies from non-financial industries for over 150 years.

We believe we are well positioned to become a preferred partner for many Chinese investors who want to invest. Our team of 160 real estate professionals brings the necessary expertise to the table. Proximity and understanding client needs are equally important. We have a re-gional presence with a team of real estate spe-cialists in Singapore. Additionally, the dedicat-ed asset management distribution teams and the client relationship managers can connect clients with the real estate professionals. Depending on their needs, different approaches to diver-sify into international real estate will be applied. As a first step, we recommend investing in di-versified European or global funds. Such funds give access to a diversified professionally man-aged portfolio. They also typically give clients who want to co-invest with the fund access to co-investment opportunities that they wouldn’t be able to access without the proper network. Other clients prefer discretionary solutions or large deals.

In any case, the individual solution can be de-fined with the client in cooperation with relation-ship management and real estate professionals.

Fully LeasedThe Monument Building at 11–19 Monument Street

in London was completed in 2016 and today is fully leased out. As of end-February 2018, it is held by an international real estate fund of Credit Suisse

Asset Management Global Real Estate.

Advertisement

Experience China

Kunming on the Lakeside PromenadeThe temple, situated on the right-hand shore of Lake Zurich, was opened in 1994 and symbolizes the city partnership between Kunming, a city of more than eight million inhabitants, and Zurich.

Garden of FriendshipFor 24 years, the Chinese Garden on Zurich’s lakeside promenade has symbolized the city partnership between Zurich and Kunming.

What does Zurich have in common with Nairobi, Denver, Cocha-bamba (Bolivia), Chittagong (Bangladesh), Calcutta (India) and Jyväskylä (Finland)? The answer is a city in the Chinese province of Yunnan by the name of Kunming. With a population of around eight million, Kunming maintains partnerships with all of these cit-ies. In the case of its twin city Zurich, the symbols of its partner-ship are twofold: first, the drinking water supply in Kunming, which was expanded with the help of Zurich’s technical and scientific assistance, and, second, the Chinese Garden located on the promenade along Lake Zurich.

The Chinese Garden was opened in 1994 and was a gift from the city of Kunming to the people of Zurich. Classed as a temple garden, it is one of the highest ranking gardens outside of China. The garden was geographically situated in keeping with the principles of geomancy, which relies on traditional criteria to identify ideal locations that promote harmony between man and nature.

Guest View

Life is work and work is life, both spheres go hand in hand in a nation that is waging fundamental transformation.

Accordingly the work-life balance notion assumes a slightly different meaning than in a Western context. Work is

perceived as the all-encompassing dimension guiding us through our lives in the sense that the performance of

meaningful professional activities forms the essential basis from which our existence evolves. In this context work

and its contribution to family members, friends and the society at large assumes an essentially positive function and is

thus much less conceived in terms of the challenge and attrition a s also experienced in professional activity and thus to

be complemented in life outside the work realm.

Dr. Urs BuchmannVice Chairman, Greater China

urs.buchmann@credit-suisse.com

Handin Hand

Sit back and enjoyChina’s rich culinary tradition helps to

temper the complexity of Chinese daily life in a most congenial way.

mentoring by specific business area and prod-uct responsibles helping me to cope with my new assignment as well as their frequent invita-tions for lunches, dinners and outings. I was also encouraged to join the bank’s calligraphy classes organized over lunch breaks or in the evenings. In participating I discovered that work and fun often go hand in hand as far as a Chi-nese reality is concerned as there is a regular interchange between work and ensuing relax-ation with cuisine, sports and culture performing essential functions. Some observers argue that

Lunch-break calligraphy courseHaving arrived in China in 1987 I was initially seconded as a trainee to a Chinese bank, most likely the institution’s first-ever foreign employee and thus a thoroughly exotic experience for all parties involved. While trying to cope with my professional responsibilities I continued to work on my Chinese. From the very beginning I was profoundly impressed with the hospitality and genuinely integrating attitude of my new superi-ors and colleagues and at a later stage also the bank’s clients manifest in such aspects as the

Guest View

China’s awesome culinary traditions serve a crucial role in digesting and overcoming the equally impressive complexities and rigidities of the country’s bureaucratic systems and achieve-ments. The challenge is serious enough to have prompted a refined sense of humor, another aspect that adds to the enjoyment of a Chinese existence and as evident in the anecdote re-cently related by one of China’s most senior de-cision-makers. One of his friends had booked an overseas journey with a travel operator who requested an emergency contact number, should anything happen during his excursion. “I give you my mother’s mobile number” he said whereupon the travel agency asked “Can you prove that she is your mother?”

The holistic nature of the Chinese persona and work reality implies a mutual interest and re-spect for extracurricular activities. Many of my Chinese business partners and friends are ac-complished calligraphers, painters and Wei Qi players, to some extent the country’s highly sophisticated equivalent to chess. One partner and senior executive of a leading financial in-stitution occasionally practises calligraphy while discussing a transaction with me. He maintains that this activity reinvigorates him and significant-ly enhances his creativity, notably also in a busi-ness context. All this happens in a very playful

manner, a Tang dynasty poem being recited while a major asset management mandate emerges in increasingly distinct shape. Our meet-ings normally begin with his inquiring into my musical activities and regularly cover aspects of our family lives such as his mother’s career as an accomplished violinist or his daughter’s work with a leading architectural firm in the US. Need-less to say that our business interaction has tran-scended into personal friendship over time.

Colorful working environmentDespite China’s highly inviting cultural features the scope of exchange with the outside world remains surprisingly limited. The intercultural dia-logue is regularly challenged by the significant linguistic barriers that have to be overcome on both sides. Moreover the continental features of China’s civilization and economy entail a society that is relatively self-contained. Consequently as an outsider one has to wage the first step in engaging Chinese counterparts. For those will-ing to do so the reaction is regularly forthcoming and genuinely rewarding. I positively recall briefing sessions at Chinese companies as well as lectures at some of the country’s leading universities, which were not only met with great interest, but regularly entailed further and mostly expanded cooperation.

“Outsiders must Take the first step to engage their Chines counterparts.”

Guest View

Calligraphy as life principle Calligraphy is highly revered in Chinese society.

Also practiced by business people, the art of beautiful writing offers at least 23,000 characters

to choose from.

Guest View

A few years ago I was asked to contribute a presentation on working conditions in the finan-cial industry in China, an invitation that provid-ed me with ample opportunity to reflect on my existence and the question why I actually en-joyed my assignment in the country and what was possibly different to other working realms. In preparation and illustration of daily condi-tions I went for a stroll in Shanghai and I recall the incredibly rich and colourful facades and notably balcony structures of some large-scale housing estates. Each of them reflected the significant levels of freedom and tolerance that permeate the personal life and for that matter also working spheres in China. Similarly colorful conditions may easily prevail within the office landscape, where notably foreign managers might be challenged to enact aspects such as clean desk policies as overly rigid rules and notably their implementation might be resented as an intrusion into the personal life sphere. As entrepreneurs work themselves into their man-dates they may also discover that aspects such as atmosphere represent essential assets and that the so-called soft factors quite regularly become the hard facts in winning the race. At the same time they may realize that the value Chinese society attaches to interpersonal rela-tionships forms one of the most rewarding aspects in working and living in China.

Dr. Urs BuchmannUrs Buchmann serves as Vice-Chairman Greater China of Credit Suisse as of January 1, 2017. He joined Credit Suisse Group in 1985 and became the bank’s Chief Representative in 1987 and was eventually promoted to the Country Head for CSFB’s China organization. From 1997 he served as the Head for Credit Suisse Financial Services in China and as of 2007 as Head China Corporate Banking. In August 2015 he was appointed as a Vice-Chairman Corporate & Institu-tional Clients APAC. In this capacity he coordinated the activities of the various Credit Suisse business units in the corporate and institutional areas in China and Asia.

Prior to joining Credit Suisse he worked on the editorial board of Neue Zürcher Zeitung (NZZ), Switzerland’s leading business daily covering macro-economic and corporate topics. Urs Buchmann was educated in Belgium and Switzer-land, graduating with a Ph.D. in International Public Law from the University of Berne.

As interpersonal relations are highly importantin China, the experience of working

and living there is an enriching one.

Guest View

China’s New Retails

Seamless Platforms,Distinct Consumer

BehaviorDr. Dong Tao

Vice Chairman Greater Chinadong.tao@credit-suisse.com

Daphne Li

Research analystdaphne.li@credit-suisse.com

Insight

In retail trade, China is becoming the front-runner in innovative technologies, new sales channels and changing

consumer behavior. No fewer than 20% of all retail purchases are already made online. The big winners are integra-

ted offline-online platforms, which cover all touchpoints of the customer journey – from information gathering through to

the physical delivery of products. Growth is driven most significantly by the generation of Chinese born after 1990, who

demonstrate an above-average willingness to spend.

lion in 2017, accounting for 20% of total retail sales. Figure 1 shows that China’s e-commerce increased sharply from 2010 to 2015, outper-forming major European countries, the US and some emerging markets. We believe that the main drivers behind these jaw-dropping num-bers are

1. seamless and integrated online-offline platforms,2. distinct Chinese consumer behavior, and3. a personalized online experience.

Seamless and integrated online-offline platforms in China China is a front-runner in e-commerce and online retail thanks to its distinctive online and offline platforms which provide a one-stop ‘station’ for consumers. Consumers can visit an integrated platform, ranging from pre-purchase search to product delivery: They can 1) discover new trends; 2) select their targeted products based on users’ reviews, sellers’ comments, on-line shows, cyber celebrities’ recommendations, and discussions in different online communities; 3) compare products in different online shops and virtually try the products online; 4) pay for the products; and 5) decide where to pick up the products, either by courier, physical stores,

“New Retail” has been a hot topic in the last couple of years. We believe that the “New Re-tail” concept will revolutionize the sector and change the future of the retail sector in China and the world.

New Retail – New concept “New Retail” means the seamless connection between the online and offline world. China’s online retail giants plan to transform the retail industry by building a retail ecosystem that in-tegrates online and offline strengths. In this new world there will be no difference between online and offline commerce, consumers will be the center of the new omni-channel retail world; consumer behavior, preferences and feedback will be the main drivers of how mer-chants plan their business. Both online and offline merchants can benefit from this model by engaging their customers with personalized content and experience. Also, players benefit from marketing, inventory management, inno- vation, new brands development and logistics to better fit ever-changing customer needs.

How China online retail could be a market leader According to the National Bureau of Statistics, China’s online retail sales reached CNY 7,175 bil-

Insight

Sources: Economist Intelligence Unit, Internet World Stats, International Telecommunication Union, World Bank, Euromonitor, BCG analysis

other local distribution centers or some conve-nient stores on the one-stop single platform. The Tmall Double 11 Shopping Festival is a typical successful case in this ecosystem. Tmall’s one-day sale on November 11, 2017 reached CNY 168 billion, which is equivalent to the 10-month average attributable sales of the top 10 Chinese property developers in 2016 and to the average contracted sales of the top 5 Hong Kong prop-erty developers in the last 9.6 years. Tmall em-barked upon a digital revolution across sectors and built a new retail ecosystem in China. In the US, the online shopping providers also offer unlimited product selection, product recommen-dations, users’ reviews and payment systems for clients. While it also has to manage product inventory (which Tmall does not), it does not connect buyers and sellers directly. US buyers have to search for the products themselves and select the sellers with the users’ reviews, and they cannot decide how they are going to receive the products. Chinese consumers are

experiencing totally different and more ad-vanced online shopping activity.

Chinese consumer behavior fosters a great environment Major online consumers in China are young-sters born in the 1990s or 2000s, the so-called Generation Y and Generation Z, or the post-’90s generation. They are the new engine behind New Retail as they are aged 18 to 28 and are a young working population with strong internet savvy. Based on our observation, China’s post-’90s generation displays distinct consumption behavior:

1. instinctive buyers,2. upgrading their consumption,3. health conscious,4. shifting preference from foreign brands to local brands,5. “individualism”.

Figrure 1: China's e-commerce expanded sharply in 2010–2015

E-commerce share of retail (%)

Note: Internet penetration = the number of internet users divided by the populatoin. An internet user is someone at least two years of age who has been online in the past 30 days.

2010 2015

20

15

10

5

0

20 60 8040 100

IndiaThailand

China

BrazilMalaysia

US

South Korea

Japan

UK

France

Internet Penetration (%)

Insight

The post-’90s generation is generally highly knowledgeable about the internet, some of them even skipping the PC era and moving straight to mobile devices. They are usually well educated and have a positive economic outlook; hence, they are willing to buy more and spend a lot of time online. According to the OMD industry re-port, only 26% of them save part of their income, 38% of them spend their entire income, and 36% even overspend. According to Boston Con-sulting Group, every day Chinese consumers spend three times longer e-shopping than US consumers.

At the same time, China’s new generation is also upgrading its consumption, is keen on buying premium products with good quality, does not mind spending more on quality goods and is really brand conscious. According to McKinsey & Company, nearly 20% of all Chinese con- sumers are trading up in key FMCG categories, compared to only 8% and 12% in the US and Germany, respectively.

They are health conscious and, given that they are more well educated and earning more than older generations, are willing to spend more on healthful and organic products and spend more time participating in sports activities. They are on the lookout for new health trends and pur- chase organic health products online.

Although the new generation is brand conscious, it is increasingly indifferent to the distinction between foreign and local brands. In the past, Chinese consumers preferred well-known for-eign brands, but nowadays they are shifting to local brands. According to McKinsey & Com-pany, Chinese consumers prefer local brands in half of their surveyed categories because of better after-sales service, value for money and quality products.

“Individualism” is popular among the youth, who are more individualistic than their parents and focus more on their self-image, self-experience, and self-development than they do on social responsibility, family responsibility, or even job stability. They have a different interpretation of what it means to be “successful”. According to McKinsey & Company, only 27% of the new generation believes that getting rich is success-ful, which is the traditional value in the Chinese community.

Personalized shopping experience In China, online consumers are like shoppers in a virtual mall, where they engage with sellers via different channels, online shows, videos, news, games and online chatting communities. They see the online experience as entertainment, fash-ion, social engagement and fun. Tmall’s “Retail as Entertainment” leverages China’s social me-dia; youngsters enjoy their online shopping ex-perience, while all their shopping data, including product preferences, shopping habits, behavior, feedback, and payment methods, are collected. Over 454 million active buyers use one of the online retail giants’ platforms, which provides ample data to develop accurate consumer mod-els and offer a personalized shopping experience. Consumers enjoy bespoke newsfeeds, display ads, new brands, product recommendations and personalized sales experiences with direct con-nections to sellers. Online merchants can manage inventories efficiently, understand consumers’ needs and enhance product development.

“New Retail” consolidates online-offline logistics and mega data into one single platform which ties consumers and sellers together, and we be-lieve China will remain the global e-retail leader.

Insight

Advertisement

ChinaThe modern word “China” is likely

derived from the Qin (pronounced “chin”) Dynasty. Qin Shi Huang, the first

emperor of the Qin Dynasty (260–210 B.C.), unified the Chinese empire in 221 B.C.,

which marked the beginning of the Imperial period that lasted until 1912.

Interesting facts about

Official designation: People’s Republic of China (Zhonghua Renmin Gongheguo)Form of government: Communist stateCapital city: BeijingPopulation: 1,393,783,836Official language: Chinese, MandarinCurrency: Yuan (or renminbi)Surface area: 9,596,960 km2

Biggest mountain range: HimalayaLongest rivers: Yangtze, Yellow River

Knowledge Nuggets

Knowledge Nuggets

Time zoneChina is roughly the size of the continen-tal US. Whereas the latter has four time zones, China has collapsed its original five time zones into one. This means that the sun rises only at 10 a.m. in some areas of the Republic of China.

PandaAll the giant pandas in the world are loaned out by China. When a baby panda is born, it is shipped back to China by FedEx to help spread the gene pool. The Chinese regard pandas not only as a symbol of peace and friendship but also as intelligent and strong as a tiger with magic powers to ward off natural disas-ters or evil spirits.

Luxury goodsWith 71% of the Chinese people identifying success by the things they own, China is considered to be the world’s most materi-alistic country. Estimates in recent years have put the percentage share of the per-sonal luxury goods market worldwide of Chinese consumers at 32%, with a global market volume of around USD 262 billion. While the Swiss watch industry exported 652 million wristwatches to China in 2016, a year later 24.2 million passenger cars were sold there.

EconomyChina overtook the US in 2014 as the world’s largest economy. Its per capita gross do-mestic product (IMF, adjusted for purchasing power) averages USD 8,900. Chinese companies invested USD 57.6 billion in European firms in 2017. If Walmart were a coun-try, it would be China’s sixth largest export market. The People’s Republic of China is the world’s largest exporter and second largest importer of goods. In 2015, Chinese com-panies manufactured 90% of all cell phones. China’s status as “world factory” is also confirmed by the following facts and figures: China produces 80% of all computers and air conditioners, 60% of all color TVs, 50% of all refrigerators, 40% of all ships and 28% of all automobiles.

SustainabilityChina is at the heart of the global energy revolution, driven by falling costs of renew- able energy sources. China invests more than any other country in sustainable power. In early 2017, the Republic of China an-nounced that it planned to invest USD 360 billion in renewable energy by 2020 while suspending the planned construction of 85 coal-fired power stations.

ChopsticksChina uses 45 billion chopsticks a year, for which 20 million 20-year-old trees are chopped down annually in China.

Great WallThe mortar required for building the Great Wall wasmade with sticky rice!

Knowledge Nuggets

DragonsChinese dragons are legendary creatures in Chinese mythology. Dragons tradition-ally symbolize auspicious powers, notably control over water, rainfall, typhoons and floods. Moreover, the Chinese dragon is a symbol of power, strength and good luck. The Emperors of China often used it as a symbol of imperial power and strength, with some even claiming to be the descen-dants of a dragon.

PopulationIt is estimated that by the year 2020 be-tween 30 and 40 million men in China will be looking for a partner of the opposite sex (in 1973 China proposed to send 10 million Chinese women to the US to boost the lat-ter’s population). A total of 21% of the po- pulation in China bear the three most com-mon Chinese surnames – Wang, Li and Zhang. Female students in China outperform their male colleagues by such a consider-able margin that a number of universities have introduced a quota system for male students. In addition, the “Elderly Rights Law” prescribes that everyone must regu- larly visit their parents once the latter have reached the age of 60. Furthermore, the Chinese are by far the largest source of rev-enue for the international tourism market.

WealthWith 190 billionaires and over 2 million mil-lionaires, China ranks second after the US in terms of the number of high-net-worth individuals. A new billionaire is added every five days in China.

BuildingsChina consumed more cement over the three-year period of 2011 to 2013 than the US used in the entire 20th century. China gains a new skyscraper every five days. At 632 meters in height, the Shanghai Tower is the second tallest building in the world. In 2021, it will be superseded by the Suzhou Zhongnan Center, which will reach 729 meters. The Beipanjiang Bridge is the high-est in the world, spanning 500 meters above the gorge of the Beipan River. The world’s longest bridge is the Hong Kong-Zhuhai Bridge, which is alleged to cut travel time between Hong Kong and Zhuhai down from six hours to 30 minutes.

MegacitiesChina has 15 megacities with upward of 10 million inhabitants, in addition to almost 100 cities in which more than 1 million people live. Around 20 million people re-side in Beijing, a city that is over 3,000 years old, while 19 million live in Shanghai. The planned city of Shenzhen, which plays an important role in terms of foreign investment, is one of the fastest growing cities in the world.

BeijingBeijing is the world’s most expensive city for tenants to rent housing, with rental costs roughly 1.2 times higher than the average monthly wage. The Chinese gov-ernment controls the central heating for every home in Beijing.

Hong KongHong Kong has more skyscrapers than any other city in the world.

Nice to knowThe most basic dictionary of the Chineselanguage records over 23,000 characters with more than 370,000 definitions.

In 2015, a Chinese billionaire used hiscredit card to buy a USD 170 millionpainting in order to use his credit cardpoints for free flights.

During peak periods, Alipay processes120,000 transactions a second.

One in every three socks is manufactured in the Datang district of Zhuji, China, alsoknown as “Sock City”.

China is the world’s largest market for red wine consumption.

Fortune cookies, popular the world over,are not a Chinese tradition. Instead, theywere invented in San Francisco in theearly 1900s.

RubrikAdvertisement

[GOU]

Take-away

The Year of the Dog

Unlike in Western astrology, in which the zodiac constellation changes every month, in Chinese astrology each of the 12 animal zodiac signs lasts a whole year.

A different animal each year, but they always recur in the same sequence: Rat, Ox, Tiger, Rabbit, Dragon, Snake, Horse, Goat, Monkey, Rooster, Dog and Pig.

The year 2018 is represented by the Chinese astrological sign of the Dog and runs from February 16, 2018, to February 4, 2019. The years of the Dog are 1934,

1946, 1958, 1970, 1982, 1994, 2006 and 2018.

The Dog stands for loyalty, reliability and vigilance. Those who offend his sense of justice must expect to face sanctions. According to astrological interpretation,

people born under the sign of the Dog tend to pursue public service careers. Would-be typical careers for (two-legged) Dogs include priest, judge, politician,

police officer, professor, nurse and scientist.

Source: www.chinarundreisen.com

Take-away

Contact

AddressCredit Suisse Asset Management (Schweiz) AG Kalandergasse 4, 8045 Zürich, Schweiz

Emailcommunication.assetmanagement@credit-suisse.com

SubscriptionTo subscribe or cancel, or if you would prefer in future to read “Scope” as magazine:credit-suisse.com/scope

Newsletter subscriptionOur electronic newsletter gives you information on a periodic basis or as needed about Credit Suisse Asset Management news, offers and services. Register now and get everything sent directly to your inbox quickly and free of charge.credit-suisse.com/am/subscribe

Imprint

PublisherCredit Suisse Asset Management (Switzerland) Ltd.Kalandergasse 4, 8045 Zurich, Switzerland

Editor-in-chiefDaniela Zulauf Brülhart Head of Marketing & CommunicationCredit Suisse Asset Management (Switzerland) Ltd.

Project managementGabriele Rosenbusch Caroline Stössel Communication der Credit Suisse Asset Management (Schweiz) AG

Design and realizationadvertising, art & ideas ltd.Steiner Kommunikationsberatung

Translation/proofreadingCLS Communication AG

Publication frequencyThree times a year

Sources

Data sourcesUnless otherwise noted, the statements and information used in this publication are based on sources from Credit Suisse AG.

Picture sources (in order of appearance)Cover: iStockphoto LP;Editorial: Iris C. Ritter/Finanz und Wirtschaft;Contents: iStockphoto LP, Marc Wetli;The Scope Interview: Marc Wetli;Investment Conference: Keystone AG;China Investment Solutions: © Adam Mork, Getty Images International, Hufton+Crow, iStockphoto LP;Global Real Estate: CAMimage/Alamy Stock Photo;Experience China: www.schweizfotos.ch;Guest View: Getty Images International, iStockphoto LP

Disclaimer / important information

Disclaimer / important informationThe information provided herein constitutes marketing material. It is not investment advice or otherwise based on a consideration of the personal circumstances of the addressee nor is it the result of objective or independent research. The information provided herein is not legally binding and it does not constitute an offer or invitation to enter into any type of financial transaction.

The information provided herein was produced by Credit Suisse Group AG and/or its affiliates (hereafter “CS”) with the greatest of care and to the best of its knowledge and belief.

The information and views expressed herein are those of CS at the time of writing and are subject to change at any time without notice. They are derived from sources believed to be reliable.

CS provides no guarantee with regard to the content and completeness of the information and does not accept any liability for losses that might arise from making use of the information. If nothing is indicated to the contrary, all figures are unaudited. The information provided herein is for the exclusive use of the recipient.

Neither this information nor any copy thereof may be sent, taken into or distributed in the United States or to any US person (within the meaning of Regulation S under the US Securities Act of 1933, as amended).

It may not be reproduced, neither in part nor in full, without the written permission of CS.

Investment principal on bonds can be eroded depending on sale price, market price or changes in redemption amounts. Care is required when investing in such instruments. Investments in foreign currencies involve the additional risk that the foreign currency might lose value against the investor’s reference currency.

Private equity is private equity capital investment in companies that are not traded publicly (i.e., are not listed on a stock exchange). Private equity investments are generally illiquid and are seen as a long-term investment. Private equity investments, including the investment opportunity described herein, may include the following additional risks: (i) loss of all or a substantial portion of the investor’s investment, (ii) investment managers may have incentives to make investments that are riskier or more speculative due to performance-based compensation, (iii) lack of liquidity as there may be no secondary market, (iv) volatility of returns, (v) restrictions on transfer, (vi) potential lack of diversification, (vii) high fees and expenses, (viii) little or no requirement to provide periodic pricing and (ix) complex tax structures and delays in distributing important tax information to investors. Equities are subject to market forces and hence fluctuations in value, which are not entirely predictable.

The key risks of real estate investments include limited liquidity in the real estate market, changing mortgage interest rates, subjective valuation of real estate, inherent risks with respect to the construction of buildings and environmental risks (e.g., land contamination).

Commodity investments and derivatives or indices thereof are subject to particular risks and high volatility. The performance of such investments depends on unpredictable factors such as natural catastrophes, climate influences, hauling capacities, political unrest, seasonal fluctuations and strong influences of rolling-forward, particularly in futures and indices.

Emerging market investments usually result in higher risks such as political, economic, credit, exchange rate, market liquidity, legal, settlement, market, shareholder and creditor risks. Emerging markets are located in countries that possess one or more of the following characteristics: a certain degree of political instability, relatively unpredictable financial markets and economic growth patterns, a financial market that is still at the development stage or a weak economy.

Investments in hedge funds may involve significant risks, including the loss of the entire investment. The funds may be illiquid, as there is no sec-ondary market for interests in the funds and none is expected to develop. There may be restrictions on transferring interests in the funds, invest-ments may be highly leveraged and the investment performance may be volatile.

Investments in Insurance Linked Strategies, including the investment oppor tunity described herein, are speculative and risks include, among other things: (i) loss of all or a substantial portion of the investment due to leveraging, short-selling, use of derivatives or other speculative practices, (ii) incentives to make investments that are riskier or more speculative due to performance based compensation, (iii) lack of liquidity as there may be no secondary market for insurance-linked interests and none is expected to develop, (iv) volatility of returns, (v) restrictions on transfer, (vi) potential lack of diversification and resulting higher risk due to concentration, (vii) higher fees and expenses associated that may offset profits, (viii) no require-ment to provide periodic pricing or valuation information to investors, (ix) complex tax structures and delays in distributing important tax information and (x) fewer regulatory requirements than registered funds.

The underlying indices are registered trademarks and have been licensed for use. The indices are compiled and calculated solely by licensors and the licensors shall have no liability with respect thereto. The products based on the indices are in no way sponsored, endorsed, sold or promoted by the licensors.

Copyright © 2018 Credit Suisse Group AG and/or its affiliates. All rights reserved.

“Ограничение ответственности” Настоящий документ подготовлен компанией Credit Suisse AG и (или) ее аффилированными лицами (далее по тексту – “CS”) с макси-мальной степенью тщательности и исходя из имеющейся у нее информации и мнений. При этом CS не дает гарантий относительно его содержания и полноты и не несет ответственности за убытки, могущие возникнуть в результате использования представленной инфор-мации. Мнения, выраженные в настоящем документе, принадлежат CS, относятся к моменту написания настоящего документа и могут быть изменены в любое время без предварительного уведомления. Если не указано иное, количественные данные, содержащиеся в настоящем материале, не проходили процедуру аудиторской проверки. Настоящий документ предоставляется исключительно в инфор-мационных целях и лишь для использования получателем. Настоящий документ не является предложением или рекомендацией купить или продать финансовые инструменты или банковские услуги и не освобождает получателя от необходимости делать собственные выводы. Получателю особенно рекомендуется убедиться, что представленная информация соответствует его обстоятельствам с точки зрения юридических, нормативно-правовых, налоговых и прочих последствий (если необходимо – с привлечением профессиональных консультантов). Настоящий документ не может полностью или частично воспроизводиться без предварительного письменного согла-сия CS. Настоящий документ не предназначен для лиц, которые в силу своего гражданства или места проживания не могут иметь доступ к указанной в нем информации в соответствии с применимым законодательством. Настоящий документ и его копии не могут отправляться или ввозиться в США, распространяться на их территории и среди лиц США (в значении, установленном Положением S Закона США «О ценных бумагах» 1933 г. в действующей редакции). Любые инвестиции подвержены риску – в частности, риску коле-баний их стоимости и доходности. Инвестиции в иностранной валюте несут дополнительный риск, связанный с возможностью сниже-ния курса соответствующей валюты по отношению к базовой валюте инвестора. Прошлые показатели доходности и сценарии ситуаций на финансовом рынке не являются гарантией определенной динамики в настоящем или будущем. В показателях инвестиционных ин-струментов не учитываются комиссии, взимаемые при подписке и (или) погашении. Также не дается гарантий того, что описываемые инвестиционные инструменты достигнут базовых показателей или превзойдут их. Авторские права © 2018 принадлежат Credit Suisse Group AG и (или) ее аффилированным лицам. Авторские права защищены.

Disclaimer / important information