Chinese Bonds - Institutional Money

Bryan Collins, CFA

Head of Asian Fixed Income

Chinese BondsFidelity InternationalFebruary 26th 2019

For professional investors only

|1 Fidelity Asian Fixed Income

RisksThe value of investments and the income from them can go down as well as up so you may get back less than you invest.

Bond investments

These funds invests in bonds whose price is influenced by movements in interest rates, changes in the credit rating of bond issuers, and other factors

such as inflation and market dynamics. In general, as interest rates rise the price of a bond will fall. The risk of default is based on the issuer's ability

to make interest payments and to repay the loan at maturity. Default risk may, therefore, vary between different government issuers as well as

between different corporate issuers.

Corporate bonds

Due to the greater possibility of default an investment in a corporate bond is generally less secure than an investment in government bonds.

High yield bonds

Sub-investment grade bonds are considered riskier bonds. They have an increased risk of default which could affect both income and the capital value

of the Fund investing in them.

Overseas Markets

These funds invests in overseas markets and so the value of investments can be affected by changes in currency exchange rates.

Currency Hedging

Currency hedging is used to substantially reduce the risk of losses from unfavourable exchange rate movements on holdings in currencies that differ

from the dealing currency. Hedging also has the effect of limiting the potential for currency gains to be made.

Emerging Markets

These funds invests in emerging markets which can be more volatile than other more developed markets.

Derivatives

These funds may make increased and more complicated use of derivatives and this may result in leverage. In such situations performance may rise or

fall more than it would have done otherwise. These funds may be exposed to the risk of financial loss if a counterparty used for derivative instruments

subsequently defaults.

Other

The funds do not offer any guarantee or protection with respect to return, capital preservation, stable net asset value or volatility. Reference to specific

securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Investors

should note that the views expressed may no longer be current and may have already been acted upon.


Fidelity International

Chinese Bonds

Why are Chinese Bonds relevant for German investors?

Characteristics of Chinese Bonds

Risks to consider

Fidelity in Asia

2

1

3

4

1


Source: Fidelity International, 2019.

Decision tree

Do you want to invest in China?

Do you

want to

invest in

China?

YES

NO

Better diversification

Higher risk-adjusted returns

More Alpha?

Informed Decision?

Can you change the benchmark?

Can you take tracking error?

YES

NO

YES

NO

YES

NO

YES

NO

YES

NO

YES

NO

YES

NO

Wantto learn?

YES

NO

Build own capability?

Consultant

Outsource

HURRY

TALKTO US

DON’T BOTHER

1


GBI-EM

BBG-Barclays Global Agg

WGBI1)

0

50

100

150

200

250

300

US

D b

n

Source: Fidelity International, Citi, Standard Chartered Research, December 2017. Third party trademark, copyright and other intellectual property rights are and remain the property of their respective owners. 1) World Government Bond Index

Index inclusion will bring further inflows

>$280bn potential inflows

2017

Reviewing

▪ Global Agg. + China Index

▪ EM Local Currency Government

+ China Index

▪ FTSE World Government Bond Index

▪ EM Govt Bond Index

▪ Asian Govt Bond Index

▪ Asia Pacific Govt Bond Index

Bloomberg-Barclays Global

Aggregate Index2018

1


Source: Bloomberg, as of 31 January 2019 projected universe.

Pro Forma Impact on key Indices

6% by end 2020

Projected Count MV (USD bn) MV (%)

Global Aggregate Index:

+ 100% China (Full Weight in Nov 2020) 364 3,323 6.06% 4th place after USD, EUR, JPY

+ 5% China (April 2019 Scaling Factor) 364 166 0.32% 11th place

Global Treasury Index:

+ 100% China (Full Weight in Nov 2020) 159 1,551 5.24% 5th place after USD, EUR, JPY, GBP

+ 5% China (April 2019 Scaling Factor) 159 78 0.28% 16th place

Asia-Pacific Aggregate Index:

+100% China (Full Weight in Nov 2020) 364 362 23.83% 2nd place after JPY

+5% China (April 2019 Scaling Factor) 364 18 1.54% 5th place

EM Local Currency Government Index:

+ 100% China 159 1,551 42.07% 1st place

+ 5% China 159 78 3.50% 9th place

1


Forecasted growth

0

50

100

150

200

250

300

350

400

450

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

Further growth potential

Source: Fidelity International, Hong Kong Exchanges and Clearing Limited, China Central Depository & Clearing Co., Ltd (CCDC), Citi, WIND, as of December 2018. The forecasted market sizes are estimated values and are based on assumptions made by Fidelity. Therefore, Fidelity gives no guarantee for the accuracy of the information.

Size of China onshore bond market

Lower Range Upper Range

Size (RMB tn.)

2015 50 – 60

2020 90 – 100

2025 180 – 200

2035 Lower range 280 – 330

2035 Upper range 370 – 440

Market Size (RMB tn.)

1


Source: Fidelity International, WIND, December 2018. 1) Chinese Government Bonds

Evolution of China’s onshore CNY bond market

2012 Industry breakdown 2018 Industry breakdown

1

2

3

4

5

6

7

8

CGBs1) 17%

Local Government 21%

Interbank Notes 12%

Financials 24%

Corporates 3%

SME 7%

Medium Term Notes 7%

Short Term Financing 2%

1

2

3

4

5

6

7

8

CGBs1) 30%

Local Government 2%

Central Bank Notes 4%

Financials 35%

Corporates 7%

SME 2%

Medium Term Notes 10%

Short Term Financing 5%

1

2

3

4

5

6

7

8

1

2

3

4

5

6

7

8

Rapidly developing, not yet developed

1


Source: Bloomberg, Chinabond, Fidelity International, December 2018. Pie Chart : CEIC, Morgan Stanley.

Foreign ownership of China Government Bonds

Foreign participation increasing

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18

> 8%

1

18%Overseas

Banks76%

Central Banks

& Sovereign

Wealth Funds

6%

Others

(incl. asset

managers)


Source: Bloomberg, ICE BofAML Bond Indices, J.P. Morgan Indices, MSCI Equity Indices based on 10-years to 31st July 2018. The table uses a linear color scalefrom 0 = green to 1 = red. For offshore RMB Bond, data since January 2011. For Onshore RMB Bond, data since January 2013.

Low correlation offers diversification benefits

Onshore

RMB

Bond

Asian

IG Asian HY US IG Euro IG

EM Corp

USD

Asian

Equity US Equity

Euro

Equity

US

Treasury

Onshore RMB Bond 1.00

Asian IG -0.11 1.00

Asian HY -0.16 0.86 1.00

US IG -0.12 0.88 0.74 1.00

Euro IG -0.08 0.66 0.59 0.80 1.00

EM Corp USD -0.20 0.92 0.92 0.83 0.67 1.00

Asian Equity -0.17 0.61 0.79 0.58 0.52 0.75 1.00

US Equity -0.14 0.44 0.63 0.38 0.40 0.61 0.82 1.00

Euro Equity -0.17 0.41 0.57 0.41 0.53 0.58 0.71 0.82 1.00

US Treasury 0.23 0.40 0.06 0.44 0.20 0.13 -0.13 -0.26 -0.30 1.00

1


0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

Japan Germany UK US China

Source: Bloomberg, Fidelity International, February 2019.

Chinese government bonds offer higher yields

10-year government bond yields

1

Past Performance is not a reliable indicator of future results. The value of shares may fluctuate and can not be guaranteed.


1,92

0,78

0,95

0,63

0,97

0,12

0,0 0,2 0,4 0,6 0,8 1,0 1,2 1,4 1,6 1,8 2,0 2,2

Onshore RMB Bond

Euro IG

Asian IG

US IG

EM Corporate

Euro Equity

Source: Fidelity International, Bloomberg, ICE BofAML Bond Indices, J.P. Morgan Indices, ChinaBond, MSCI Equity Indices based on 5-years to September 2018. US 3-Month T-bill was used for Sharpe ratio calculation.

Attractive risk-adjusted returns

5-year Sharpe ratio of asset classes

1



Source: Barclays, Bloomberg, Factset, FTSE Russell, ICE, Fidelity International as of January 2019.Note: Analysis period is from 31/12/2013 to 31/01/2019. Chinese Government Bond (CGB) returns represented by ICE China Government Index (G0CN). Returns shown are USD unhedged. 1) World Government Bond Index

Backtesting including China

Performance

Ann. Std. Dev. Cumulative Return

Global Agg 4.47% 7.13%

Global Agg + 5% CGB 4.36% 7.76%

Global Agg + 10% CGB 4.27% 8.39%

Global Agg + 20% CGB 4.12% 9.66%

WGBI 2.86% 16.62%

WGBI1) + 5% CGB 2.78% 16.82%

WGBI1) + 10% CGB 2.72% 17.01%

WGBI1) + 20% CGB 2.69% 17.38%

1




Chinese Bonds



Risks to consider

Fidelity in Asia

2

1

3

4

2


Source: Fidelity International, ICE BofAML ADOL and CNHJ Indices, 2019.

Asia’s bond market

USD

12tn

China onshoreCNY denominated

Rates, FX, Credit

Other Local CurrencyIncludes KRW, MYR, IDR, INR, SGD, HKD

Rates, FX, limited Credit

USD

1tnAsian USD bond marketUSD denominated. IG, HY Credit

USD

35bnChinese offshoreCNH denominated. Unique

Three quite different ways to buy China

2


Source: Fidelity International, 2019. 1) Chinese Interbank Bond Market; 2) QFII = Qualified Foreign Institutional Investors; RQFII = Renminbi QFII

Various options

Accessing China onshore

China Onshore

Bond Market2011 2016

2017

QFII/RQFII2) CIBM1)

Bond Connect

2


Source: Chinabond, Goldman Sachs Global Investment Research, 2018.

Growing in depth and breadth

Onshore China bond market investor base

1 Commercial Banks 56%

2 Funds Institutions 22%

3 Special Members 6%

4 Insurance Institutions 6%

5 Exchanges 5%

6 Other 2%

7 Credit Cooperative Banks 2%

8 Securities Companies 1%

1

2

3

4

5

6

7

8

2


Source: Wind, Fidelity International. Credit rating comparison is indicative.

Investment grade by international standards

Onshore China bond universe

1% AA-

8% A

60%AAA

13% AA

17% AA+

Onshore Credit

Rating

International

Equivalent

AAA ~AA/A

AA ~BBB/BB

A ~B

2



Chinese Bonds



Risks to consider

Fidelity in Asia

2

1

3

4

3



Is China any different? 3

Access to Issuers Data Integrity

State Owned Enterprises

Local Government Debt

Asymmetric information

ESG Defaults

Transaction costsCapital flows

Structural Subordination

Cultural differences Language Skills Political Risks

Investing in China

International Investors


85

90

95

100

105

110

Dez 1

6

Jun

17

Dez 1

7

Jun

18

Dez 1

8

Rebased t

o 1

00

Trade-weighted Index

CNYUSD

CNYEUR

0

1

2

3

4

5

6

7

8

Dec-1

3

Jun

-14

Dec-1

4

Jun

-15

Dec-1

5

Jun

-16

Dec-1

6

Jun

-17

Dec-1

7

Jun

-18

Dec-1

8

Yie

ld %

Overnight SHIBOR 1 Week SHIBOR

1 Month SHIBOR 3 Month SHIBOR

6 Month SHIBOR 9 Month SHIBOR

1 Year SHIBOR

2

4

6

8

10

12

De

c-1

4

De

c-1

5

De

c-1

6

De

c-1

7

De

c-1

8

Yie

ld %

AAA (Intl. rating AA/A)

AA (Intl. rating BBB/BB)

A (Intl. rating B)

Structural improvements

Key developments in China

Source: Bloomberg; Fidelity International, December 2018. Source: PBOC; Bloomberg; Fidelity International, December 2018. Source: Bloomberg; Fidelity International, December 2018.

Onshore credit differentiation Monetary policy mechanism Controlled currency

Nov 2015: Interest rate

corridor introduced

3



2,5

3,0

3,5

4,0

4,5

5,0

5,5

6,0

6,5

7,0

CGB 10Y Yield CDB 10Y Yield AAA 10Y Yield

Targeted easing to stabilize

financial system

Reflecting the evolution of the financial system

Chinese government bonds

Historical 10-year Chinese Government, Chinese Development Bank, and AAA Bond Yield

Source: Bloomberg, Fidelity International, 2019. 1) Wealth Management Products; 2) Macro Prudential Assessment

Rise in WMPs1), expansion of off-balance

sheet business by banksIntroduction of interest rate corridor and

MPA2); guiding rates lowerTargeted deleveraging through

monetary and regulatory tightening

3



Source: Fidelity International, January 2019.

Monetary easing bias to continue

China policy responses

1. Jan 2018: 1st targeted 50-100bps RRR cut

2. Apr: 2nd 100bps RRR cut

3. Early June: Medium-term Lending Framework (MLF) expanded to include lower grade AA+ and AA onshore corporate

bonds

4. Late June: 3rd RRR cut of 50bps across 5 SOE banks and 12 joint stock banks which would release around RMB500-700bn

liquidity into the market to support debt-to-equity program

5. Mid July: Providing banks with additional funding through MLF to support additional loan supply and buying of lower rated

onshore bonds

6. Mid July: Fine tuning Asset Management Product (AMP) rules

7. Early Oct: 4th 100 bps RRR cut

8. Late Oct: Launched public consultation for personal income tax deduction

9. Mid Nov: PBoC’s Shanghai unit will introduce more debt financing tools to support fundraising of POEs

10. Early Jan 2019: The PBOC delivered a blanket 100bps RRR cut

11. End Jan 2019: CBS (Central Bank Bills Swap) to improve liquidity of Bank’s perpetual bonds

INC

RE

AS

ING

EA

SIN

G B

IAS

3



Chinese Bonds



Risks to consider

Fidelity in Asia

2

1

3

4

4


Source: Fidelity International, 2018. *Fidelity International, 3Q18. * Includes Boston managed assets of $11.6bn of assets. 1) Chinese Government Bonds, 2) State Development Bank of China

Offering China focused strategies across the risk and return spectrum

Our product range continues to expand

Fidelity Asian fixed income strategies

Re

turn

Risk (volatility of returns)

FF-EM Corporate Debt Fund

FF-Asian High Yield Fund

FF-China High Yield Fund

F Enhanced Reserve Fund

FF-Asian Bond Fund

FF-China RMB Bond Fund

FF-Asia Pacific Strategic Income Fund

Income driven solutions

Stability driven solutionsDate Fund Launches

2007 Asian High Yield Fund (USD)

2011 China RMB Bond Fund (RMB)

2015 China High Yield Fund (USD)

2017 1st Onshore WOFE FI Private Fund

2018 Onshore CGBs1) & SDBCs2) Pool

Fund

2018 3rd Onshore WOFE FI Private Fund

▪ Managing bond assets since 1982, with

fixed income team structure in place

since 1995

▪ Established Asia FI since 2002

▪ $84.7bn fixed income AUM for

institutional, wholesale and retail clients

globally*

4


Source: Fidelity International, WIND, as of 3 February 2019. * Only available for onshore institutional or private clients

Fully integrated on-the-ground investment team

New onshore bond strategies

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

0

24

48

72

96

120

144

168

192

216

240

264

288

312

336

360

Onshore China Government Bond (CGB)

Onshore China Development Bank Bond (SDBC)

Onshore AAA Rated Corporate (~ AA/A Int'l Rating)

Onshore AA Rated Corporate (~ BBB/BB Int'l Rating)

Onshore A Rated Corporate (~ B Int'l Rating)

Years

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Fidelity Multi-Asset onshore CGB-SDBC Pool

Fidelity China Bond No.1 Private Fund*

Fidelity China Bond Opportunity No.1 Private Fund*

Fidelity Asian Fixed Income Funds in Onshore China

Onshore China Bond Market Yield Curves

4



Kris Atkinson Bryan Collins Andy Falco Marty Dropkin Curtis Evans Tim Craigen Maria AbbonizioPortfolio Manager Head of Asian Fixed Income Head of Trading Head of Research Head of Inv Directing, European FI Director - FI Portfolio Construction & Risk Global Head of Operations, IM

James Durance Eric Wong Duncan Fraser Jan Berthold Katsumi Ishibashi Joe Hanmer Steve Bramley Henrietta Owusu-Banahene Olly FawcettPortfolio Manager Portfolio Manager Senior Trader Sovereign Analyst Director of Research Director of Quantitative Research Investment Director, UK, FI & Flex Strategies FI Portfolio Construction & Risk Analyst Head of PSG, Fixed Income, Europe

Chris Ellinger Morgan Lau Lars Salmon Tiago Parente Crystal Cui Matthew Hurd Andrea Iannelli Lina Katabi Jane SnooksPortfolio Manager Portfolio Manager Senior Trader Senior Credit Analyst Credit Analyst Senior Quantitative Analyst Investment Director, Southern Europe Quantitative Analytics Associate Team Leader, PSG

Ario Emami-Nejad Belinda Liao Bharat Choda Nathan Sribalasundram Chris Ding Nicolas Singer Rosie McMellin David Killpack Karl RangePortfolio Manager Associate Portfolio Manager Trader Research Associate Credit Analyst Quantitative Analyst Investment Director, UK Inst, FI Investment Risk Analyst PSG Analyst

Claudio Ferrarese Freddy Wong Sam Knight Andressa Tezine Claire Xiao Oli Shakir-Khalil Virginia Galloway Sarah RiwayehPortfolio Manager Portfolio Manager Trader Senior Sovereign Analyst Research Associate Investment Director, Emerging Market Debt Business Change Manager Senior PSG Analyst

Ian Fishwick Luc Froehlich Andrew Martin Federico Wynne Akash Tillu Amie Stow Sherene SmithPortfolio Manager Head of Investment Directing, Asia FI Trader Senior Credit Analyst Research Associate Investment Director, European FI & HY Senior PSG Analyst

Tim Foster Vanessa Chan Daniel Ushakov Gita Bal Adrian Chan Ilia Chelomianski Neil VisawadiaPortfolio Manager Investment Director Trader Director of Research Research Associate Investment Director, FI Solutions PSG Analyst

Andrei Gorodilov Kyle DeDionisio Stephen Whyman Rebecca Clements Nitesh Kathuria Ben Deane Gary WillisPortfolio Manager Investment Director Trader Senior Credit Analyst Director of Research Investment Specialist Operations Support

Paul Greer Isao Yashiro Jennifer Jackson Phillip Davies Ke Tang Faidra Kouri Elaine RogersPortfolio Manager Investment Director Associate Trader Credit Analyst Senior Credit Analyst Investment Specialist Office Administator

Peter Khan Stanley Shek Cristiana Gentea Sahil Kapoor Terrence Pang Daniel Missen Sandeep GrewalPortfolio Manager Associate Investment Director Associate Trader Research Analyst Credit Analyst Marketing and Design Manager PA

Rick Patel Giselle Lai Michail Vezyrtis Paul Louie Ming Gong Investment Fund Analysts Ray Cen Lianne FlorencePortfolio Manager Investment Specialist Trading Assistant Research Associate Credit Analyst Head of Fixed Income Analytics Senior Coordinator

David Simner Sabina Awan Rebecca Motta Alvin Cheng Rahul Kathuria L Richard Homer Gina PhillimorePortfolio Manager Trading Business Manager Senior Credit Analyst Credit Analyst Asst. Director, Investment Fund Analyst Senior Analytics Specialist Senior Coordinator

Sajiv Vaid James Anderson Paul Simenauer Jasmine Bhatia L Helmut Tang Sarah BrucePortfolio Manager Trading Data Analyst Credit Analyst Investment Fund Analsyt Senior Analytics Specialist Coordinator

Marton Huebler Olivia He Michael Dolan Apoorva Harsh L Nitika Sharma L Hamzah Begg Keith LauAssistant Portfolio Manager Trader Director of Research Associate Director - Research Investment Fund Analsyt Analytics Specialist Head of PSG - AP

Lucette Yvernault Juli Loh Lucy Van Amerongen Kavish Chauhan L Himanshu Batra L James Beldham Desmond ChanPortfolio Engineer & Team Leader Trader Research Associate Research Specialist Data Specialist Analytics Specialist PSG Senior Analyst

Karim Lamine Tae Ho Ryu Randy Cutler Abhishek Dhawan L Mansi Chauchan A Jean-Paul Efang Mbome Vincent ChengPortfolio Engineer Senior Trader Senior Credit Analyst Research Specialist Investment Fund Analsyt Analytics Specialist Senior PSG Analyst

Daniel Seimertz Natalie Hak Marco Gironi Akanksha Johari L Udit Gaur A Farshad Safael Roy TangAssociate Portfolio Engineer Associate Trader Senior Credit Analyst Research Specialist Investment Fund Analsyt Application Developer PSG Analyst

Wen-Wen Lindroth Sayan Mukherjee L Kevin Lo Emily LauSenior Credit Analyst Research Specialist Senior Analytics Specialist Coordinator

Jonathan Neve Champak Chakraborty L Ravinder Singh Rawat L Lily WooSenior Credit Analyst Research Specialist Data Specialist Coordinator

Olivier Simon-Vermot Minnie Dissoria L

Director of Research Research Specialist

Robert Glatt Rohit Sethi L

Credit Analyst Associate Research Specialist

Jason Senensky Ankit Gupta A

Credit Analyst Research Specialist

Smriti Smriti A

Research Specialist

Cody Chen A

Associate Research Specialist

Frank Huang A

Research Specialist

Angela Zhong A

Associate Research Specialist

Research Specialists

Akash Mahey

Steve EllisGlobal Chief Investment Officer, Fixed Income

Investment Graduates

AnalyticsMatthew Phillips

Wen Wei Tow

Niclas Nink

Olivia Martin

Daniel Youles

Young Choi

Lauren Song

Andy Ng

Moritz Natmessnig

Total* UK Canada Asia L Covers London142 85 3 54 A Covers Asia

Total UK Asia Total UK Asia Total UK Asia Total UK Canada Asia Total UK Asia Total UK Asia Total UK Asia Total UK Asia Total UK Asia Total UK Asia

19 14 5 3 3 0 16 12 4 33 19 3 11 13 0 13 4 4 0 22 10 12 2 2 0 21 14 7 9 7 2

Total UK Asia

10 5 5

Graduates

Tokyo

Hong

KongLondon

OFFICE LOCATIONS

Investment DirectingPortfolio Construction &

RiskAnalytics

Portfolio

Engineering GroupQuantitative ResearchTrading Research Specialists

GLOBAL FIXED INCOME

Portfolio Management

India China

Singa-

pore Canada

Credit Research

Source: Fidelity International 2nd Jan 2019

Operations / Risk / Business Management

Fixed Income Organisation Structure 4



Summary

Chinese Bonds

Characteristics: Different but similar

Risk: Consider China like any other market

Fully integrated on-the-ground investment team

2

1

3

4

Why? ▪ Higher risk-adjusted returns

▪ Diversification benefits

▪ Alpha opportunities increasing

▪ Index inclusion

Appendix


China Generally supportive backdrop and manageable near-term risks

Growth still robust, albeit

moderating

Supportive fiscal and monetary

policy

Regulatory tightening

bias

Bad debt burden

Current Environment

What to watch?

RMB and Capital flows

Regulatory Environment

Consumption

Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity International.Source: Fidelity International, 2018.

Employment

Property


Source: Fidelity International, NAFMII, ADB, 2018.

Focus on CIBM (China Interbank Bond Market)

Onshore bond market structure overview

<10% of the total

onshore market

>90% of

the total

onshore

marketChina Foreign Exchange Trade System

(CFETS)

China Interbank Bond Market (CIBM) Exchange Market

Shanghai Stock

Exchange (SSE)

Shenzhen Stock

Exchange (SZSE)

Shanghai Clearing

House (SHCH)

China Central Depositary

& Clearing (CCDC)

PBoC China National Advanced Payments System

(CNAPS) and China Cross-Border Inter-Bank

Payment System (CIPS)

China Central Depositary

& Clearing (CCDC)

Commercial Banks

Institutional investorsIndividuals and small- & medium-sized

institutions

Market

Trading

Operators

Bond

Settlement

Cash

Settlement

Investor

Base


Source: PBoC, HKMA, Citi Research, 2018.

China “Bond Connect” mechanism

Mainland China

Hong Kong

SETTLEMENTTRADING

China Foreign Exchange

Trade System (CFETS)

Bond Connect Market Maker

Approved electronic platform Central Moneymarket Unit (CMU)

China Central Depositary & Clearing

(CCDC)/Shanghai Clearing House (SCH)

CMU Participant

HK or Overseas Investors Global Custodian

Operational


Source: Bloomberg, 31 January 2019.

Scope of local Chinese bonds that will be added

Chinese Treasury and Policy Bank Debt Being Included in the Global Aggregate Index

Issuer Ticker Count MV

(CNY tn.)

Amt Out

(CNY tn.)

MV

(USD tn.)

Amt Out

(USD tn.)

Duration

(Years)

YTW

(%)

China Government Bond CGB 159 10,400.5 9,992.7 1,551.0 1,490.2 6.69 3.00

China Development Bank SDBC 102 6,558.2 6,272.4 978.0 935.4 4.78 3.37

Agricultural Development Bank ADBCH 58 3,321.5 3,192.5 495.3 476.1 4.08 3.33

Export-Import Bank of China EXIMCH 45 2,002.0 1,926.4 298.6 287.3 3.86 3.31

Total 364 22,282.1 21384.0 3323.0 3189.0 5.49 3.19


China Duration Model

-40

-35

-30

-25

-20

-15

-10

-5

0

20

10

20

10

20

11

20

11

20

12

20

13

20

13

20

14

20

14

20

15

20

15

20

16

20

17

20

17

20

18

20

18

Dra

wdow

n (

bps)

Underwater Plot @ 25.05 bp

-1

0

1

2

3

4

5

6

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Information Ratio per year post transaction cost (ptc)

0,98

0,99

1,00

1,01

1,02

1,03

1,04

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Performance by Signal

commocvncglobal_momentumgrowthliquiditymomentumreversion

Commo CvncGlobal

momentumGrowth Liquidity Momentum Reversion

Cvnc 0.51

Global momentum 0.50 0.61

Growth 0.36 0.69 0.43

Liquidity 0.17 0.16 0.24 0.25

Momentum 0.35 0.55 0.53 0.55 0.28

Reversion -0.32 -0.47 -0.47 -0.49 -0.22 -0.82

Slope -0.24 -0.31 -0.06 -0.27 -0.06 -0.03 -0.08

Signal Correlation (W)

0,99

1

1,01

1,02

1,03

1,04

1,05

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Cumulative Performance

pl pl_ptc

Source: Fidelity International, 31 January 2019. pl = profit and loss; ptc = post transaction cost



Wichtige Informationen Diese Informationen richten sich ausschließlich an professionelle Anleger – nicht an Privatkunden. Die Vervielfältigung und Verbreitung dieser Informationen sind

nicht ohne eine vorherige Genehmigung erlaubt. Die genannten Unternehmen / gezeigten Logos dienen zu rein illustrativen Zwecken. Dies stellt keine

Aufforderung zum Kauf oder Verkauf der jeweiligen Werte dar. Die genannten Unternehmen zählen ggf. nicht zu den Fondsbeständen. Top Holdings zeigen

Wertpapiere in die prozentual die größten Teile des Fondsvermögens investiert sind. Wertentwicklungen in der Vergangenheit sind keine Indikatoren für

zukünftige Erträge. Der Wert der Anteile kann schwanken und wird nicht garantiert. Fremdwährungsanlagen sind Wechselkursschwankungen unterworfen.

Anlagen in Schwellenländern können volatiler sein als solche in höher entwickelten Märkten. Der Kurs von Anleihen wird durch Zinssatzänderungen, Änderungen

der Bonität von Anleiheemittenten und andere Faktoren wie Inflation und Marktdynamik beeinflusst. Im Allgemeinen wird der Kurs einer Anleihe fallen, wenn die

Zinsen steigen. Das Ausfallrisiko gibt die Fähigkeit des Emittenten wieder, Zinszahlungen zu leisten und das Darlehen bei Fälligkeit zurückzuzahlen. Es kann sich

daher bei verschiedenen staatlichen Emittenten sowie verschiedenen Unternehmensemittenten unterscheiden. Die Nennung von Einzeltiteln dient ausschließlich

der Illustration und ist nicht als Kauf- oder Verkaufsempfehlung zu verstehen. Der Fondsmanager wird die Aktien, die das Fondsportfolio zum Zeitpunkt der

Auflegung bilden, einzeln auswählen. Die gezeigten Einzelwerte könnten zu dieser Auswahl gehören. Der Fondsmanager wird die Renten, die das Fondsportfolio

zum Zeitpunkt der Auflegung bilden, einzeln auswählen. Die gezeigten Einzelwerte könnten zu dieser Auswahl gehören. Die Skala gilt für Investitionen in Euro.

Fidelity, Fidelity International, das Fidelity-International-Logo und das “F-Symbol” sind Markenzeichen von FIL Limited. Markenzeichen und Logos, sowie das

Copyright und sonstiges Eigentum sind und bleiben Eigentum des entsprechenden Unternehmens. Data Source - © [2018] Morningstar, Inc. All Rights Reserved.

Die enthaltenen Informationen (1) sind Eigentum von Morningstar und/oder seiner Datenlieferanten; (2) dürfen nicht kopiert oder vertrieben werden; und (3)

garantieren keine Vollständigkeit, Richtigkeit und Aktualität. Weder Morningstar noch seine Datenlieferanten sind verantwortlich für Schäden, die aus der Nutzung

dieser Information herrühren. Alle geäußerten Meinungen sind, falls keine anderen Quellen genannt werden, die von Fidelity International. Fidelity / Fidelity

International steht für FIL Limited (FIL) und ihre jeweiligen Tochtergesellschaften. Daten sind ungeprüft. Weltweit – außerhalb Nordamerika. Eine

Anlageentscheidung sollte in jedem Fall auf Grundlage des Kundeninformationsdokumentes „Wesentliche Anlegerinformationen“ und des veröffentlichten

Verkaufsprospektes, des letzten Geschäftsberichtes und – sofern nachfolgend veröffentlicht – des jüngsten Halbjahresberichtes getroffen werden. Diese

Unterlagen sind die allein verbindliche Grundlage des Kaufes und können kostenlos über www.fidelity.de oder beim Herausgeber angefordert werden. Fidelity

International stellt lediglich Informationen zu Produkten und Dienstleistungen bereit und erteilt keine Anlageempfehlung/Anlageberatung auf Grundlage

persönlicher Umstände. Bitte beachten Sie, dass die geäußerten Ansichten unter Umständen nicht mehr aktuell sind und dass darauf möglicherweise bereits

reagiert wurde. Die Inhalte in diesem Dokument können Informationen von Dritten enthalten, die nicht mit einem Unternehmen von Fidelity verbunden sind (Third-

Party-Material). Fidelity war nicht an der Vorbereitung, Einbeziehung oder Anpassung solcher Third-Party-Materialien beteiligt und bestätigt oder belegt diese

Inhalte weder ausdrücklich noch implizit. Herausgegeben für institutionelle Investoren in Deutschland von FIL Fondsbank GmbH, Postfach 11 06 63, 60041

Frankfurt am Main. Stand Februar 2019, sofern nicht anders angegeben. MK10273

Chinese Bonds - Institutional Money

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