China: a new universe for your investments

China: a new universe for your investments

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.

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 offshore markets. The fund aims to generate alpha through active management of duration, active sector allocation and bottom-up issuer selection.

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.

Participate in the world’s third largest bond market

Our 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 markets, investors reap substantial diversification benefits. In addition, the strong government backing of corporate entities provides stability while contributing to the ongoing improvement of issuer fundamentals. Corporate governance and transparency are also coming gradually closer to meeting Western investors’ expectations. Still, consideration must be given to risks typically associated with emerging market bonds and investments. Not least are currency risks relating to renminbi investments.

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/ reward 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.

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