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Fixed Income Strategy | August 8, 2019 FIXED INCOME STRATEGY | July 31, 2019

Mark Jolley Global Strategist (852) 3911 8255 Global Perspectives [email protected]

Have bonds become a mania? Diliu Yao

(852) 3911 8269 [email protected]

目前，美国债券市场参与者之间的观点存在着很大的分歧。有人认 The rally looks increasingly speculative 为美国债券收益率将有很大下跌；有人认为债市即将发生重大逆 转。 Republic of Austria 100 Year Bond (Sep 2117) Price 从长期来看，我们怀疑债券多头可能是正确的。但是，如何资产配 200 置可能是个问题。美国国债期货的每日投资情绪指数保持五个交易 190 日百分百看涨。 这是自 2008 年 12 月 16 日后，该指数创下新的高 180 值。当年 11 月 25 日美联储宣布将购买资产抵押债券 , 并改变了市 170 場对貨市政策的看法 , 从而演示了市场的极端配置；使 30 年国債 160 息率急跌 (至 12 月 18 日的低位） ,并在随后的６个月反弹 200 多 150 个基点。而这一切发生在美国经济衰退且在随后的三个月美股大 140 泄。 130 2008 年的经验警告我们，无论基本面如何，极端资产配置都可能推 120 动收益率走高。我们相信 我们正在接近这样的极端。我们更倾向于 110 Jan-19 Mar-19 May-19 Jul-19 Sep-1 关注短期的曲线陡峭程度。信用利差很脆弱，我们认为未来几个月 企业发行人的条件将进一步恶化。 Source: Gallup, CCBIS

Bond market opinion is deeply divided Global bond performance

Opinion among US bond market participants is deeply divided between All returns are in US dollar those who believe US bond yields still have a long way to fall and those who believe a major reversal is imminent. Most investors fall into one of Yield Yield Return Return these extremes. Interest rate bulls do not necessarily expect recession Bond Index Performance* (today) (end '18) (5 day) (YTD) but see the spread of negative interest rates as an inevitable Global Treasury 0.7% 1.3% 2.1% 6.8% consequence of broadening economic stagnation. This week’s US Treasury 1.7% 2.6% 1.4% 7.4% aggressive rate cut by the Reserve of New Zealand is a good example of this relentless trend. Most bulls also believe that collapsing Euro Sovereign 0.0% 0.7% 2.7% 7.2% Treasury yields will contain credit spreads. Bears, on the other hand, Japan Sovereign 0.0% 0.2% 3.0% 6.9% believe the bond rally has become a mania. The Republic of Austria 100 EM USD Sovereign (ex-) 5.4% 6.6% 0.3% 12.3%

Year Bond is seen as the poster child of this mania. This bond has rallied Asia USD Credit 4.2% 5.5% 0.2% 9.4% 64% year-to-date and looks increasingly speculative. Bears focus on the EM Local Sovereign + China 3.7% 4.2% -1.0% 3.4% idea that US bonds are a carry trade and thus subject to currency risk China Sovereign (onshore) 3.0% 3.2% -1.4% 0.2% should the US dollar turn. They focus on the high degree of leverage in China Corporate (onshore) 3.9% 4.3% -1.7% 0.9% fixed income . Unlike the bulls, they see considerable risk to

credit spreads coming from negative rates. In particular, negative rates Change Change are a bank killer, and are forcing to take increasing risk to stay G3 bond market cap (US$ b) Latest End '18 5 day (YTD) alive. Japanese banks are voracious buyers of US dollar bonds, CLOs EM Asia USD Credit Index 990.1 849.3 +1 +141 and other leveraged debt structures. What happens if they become - High grade 733.5 650.5 +6 +83 forced sellers? - High yield 256.6 198.8 -5 +58

Positioning matters, even if the bulls are right Yield Yield Return Return Longer term, we suspect the bond bulls are probably right. However, the Credit Performance (USD) (today) (end ‘18) (5 day) (YTD) bulls are massively in the majority and this suggests positioning might be EM Asia Overall USD Credit 4.22% 5.51% 0.2% 9.4% a problem. The Daily Sentiment Index of US T-bond futures, for example, EM China Overall USD Credit 3.99% 5.17% 0.1% 8.4% has been 100% bullish for five consecutive sessions. The only time that US Corp Investment Grade 2.96% 4.20% 0.8% 12.2% consecutive sentiment readings have been higher was on 16 Dec 2008. EM Asia USD Invest Grade Corp 3.04% 4.27% 0.6% 9.5% This extreme occurred after the Fed announced it would begin buying US Corp High Yield Corp 6.27% 7.95% -1.0% 9.4% asset-backed securities on 25 Nov. This news signaled the start of radical EM Asia USD High Yield 7.03% 8.99% -0.8% 10.1% , causing the US 30-year bond yield to collapse almost 150 bp. The extreme sentiment readings leading up to 16 Dec, however, Spread Spread – Change Change revealed extreme positioning. The 30-year bond yield reached a low on Credit Spreads (OAS) (today) (end ’18) (5 day) (YTD) 18 Dec and rose more than 200 bp in the following six months even though the US was in recession and notwithstanding a 27% collapse in US EM Asia Overall USD Credit 259.5 290.5 +23 -31 stock prices in the following three months. EM China Overall USD Credit 239.4 262.1 +19 -23 US Corp Investment Grade 121.7 153.1 +13 -31 Implications for bond investors and issuers EM Asia USD Invest. Grade Corp 140.7 166.8 +13 -26 US Corp High Yield Corp 440.3 526.0 +68 -86 The experience of 2008 warns that extreme positioning can drive yields higher regardless of fundamentals. We believe we are approaching EM Asia USD High Yield 543.1 640.2 +62 -97 such an extreme. We prefer short duration with curve steepeners. Credit * Bloomberg Barclays bond indexes spreads are vulnerable and we believe that conditions for corporate Source: Bloomberg, CCBIS issuers will continue to deteriorate in coming months.

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Strategy | August 8, 2019

Weekly chart set – high yield spreads

The high yield spread reflects economic conditions Aggressive spread widening need not require a recession

Spread bp Spread bp 2000 10 2000

* Economic conditions 1800 is a combination of the 1800 ISM Index and jobless 8 claims 1600 1600

6 1400 1400

1200 4 1200

1000 1000 2 800 800

600 0 600

400 400 -2 200 200 0 -4 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 0 US HY Credit Spread US Current Economic Conditions*(rhs) 1987 1992 1997 2002 2007 2012 2017 NBER Recession Bloomberg Barclays HY Spread Source: Bloomberg, CCBIS Source: Bloomberg, CCBIS

Falling bank valuations can warn of widening credit spreads The crude oil price remains an important driver of US spreads

400 900 20 1,200

30 1,100 800 40 1,000 600 700 50 900

60 800 600

800 70 700

500 80 600

400 90 500 1000 100 400 300 110 300

1200 200 120 200 2011 2013 2015 2017 2019 2009 2011 2013 2015 2017 2019 Systemically Important Bank Index (Inverse scale) West Texas Crude (Inverse scale) High Yield Spread (rh scale) High Yield Spread (rh scale) Source: Bloomberg, CCBIS Source: Bloomberg, CCBIS

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Strategy | August 8, 2019

Investment grade winners and losers

Top gainers Top losers

Name Price (31 Jul) 5D price change Name Price (31 Jul) 5D price change Grp Over 4.1% 1945 106.18 1.19% Zhaohai Invst 4% 2020 98.53 -0.32% Nexen Inc 7.5% 1939 151.64 1.09% Rongshi Intl Fin 3.625% 2027 103.07 -0.24% CNOOC Fin 2013 L 4.25% 1943 108.09 1.07% Cosl Sg Capital 4.5% 2025 106.56 -0.23% CNPC HK Overseas 5.95% 1941 131.97 1.06% HK Xiangyu Inv 4.5% 2023 98.31 -0.21% Sinopec Capital 4.25% 1943 107.25 1.02% BJ State Ast Hk 4.125% 2025 103.17 -0.19% Holdings 3.925% 1938 103.05 1.00% Chongqing Energy 5.625% 2022 103.12 -0.18% 4% 1937 104.46 0.99% CHN Oversea Fin 5.375% 2023 109.34 -0.18% Sinopec Grp Over 4.875% 1942 117.43 0.96% CGNPC Intl Ltd 4% 2025 105.09 -0.18% Tencent Holdings 4.525% 1949 112.10 0.94% ICBCIL 3.375% 2022 100.86 -0.18% Sinopec Overseas 4.25% 1946 108.55 0.87% Exp-Imp Bk China 2.625% 2022 100.35 -0.17% CNOOC Fin 2014 4.875% 1944 118.35 0.87% Westwood Grp 5.375% 2023 105.95 -0.17% CNOOC Fin 2011 5.75% 1941 129.71 0.85% CRCC Yuxiang Ltd 3.5% 2023 101.89 -0.17% Sinopec Group 4.6% 1948 114.91 0.84% CHN Clean Energy 4% 2025 104.83 -0.16% Sinopec Overseas 3.25% 2027 101.53 0.83% China State Con 3.375% 2022 100.39 -0.16% Sinopec Group 4.25% 2028 109.38 0.82% ICBCIL Finance 3.75% 2024 102.98 -0.15% 7.25% 2026 105.46 0.82% CQ Logistics Dev 3.25% 2021 96.92 -0.15% Sinopec Overseas 4% 1947 104.28 0.80% Exp-Imp Bk China 2.75% 2022 100.78 -0.15% CNOOC Fin 2012 5% 1942 119.49 0.79% Weibo Corp 3.5% 2024 100.27 -0.14% Sinopec Grp Over 5.375% 1943 125.82 0.79% CNAC HK Finbrid 3.375% 2024 100.05 -0.12% Nexen Inc 5.875% 1935 125.02 0.78% CITIC Ltd 6.8% 2023 112.05 -0.12% Alibaba Group 4.2% 1947 106.35 0.74% GLP China 4.974% 2024 104.88 -0.12% Nexen Inc 6.4% 1937 133.38 0.73% CHN Const Bk/Hk 3% 2022 100.81 -0.12% Sinopec Overseas 3.625% 2027 104.10 0.71% CNAC HK Finbrid 3.875% 2029 100.95 -0.12% Country Garden 5.125% 2025 97.60 0.68% China (People'S) 3.25% 2023 104.16 -0.12% Sinopec Overseas 3.5% 2026 103.35 0.68% CNAC HK Finbrid 4.875% 2025 107.51 -0.11% Source: Bloomberg, CCBIS

High yield winners and losers

Top gainers Top losers

Name Price (31 Jul) 5D price change Name Price (31 Jul) 5D price change New Metro Global 6.5% 2021 95.04 2.65% Tewoo Group No 5 5.8% 35.83 -10.83% China Evergrande 8.75% 2025 89.21 1.47% Zhongrong Int 7.25% 2020 65.01 -3.16% Sino Ocean Land 4.9% 89.43 1.25% Nuoxi Capital 5.35% 2023 86.44 -1.66% China Evergrande 10.5% 2024 97.01 1.23% Guorui Propertie 13.5% 2022 100.63 -1.02% Franshion Brilla 5.75% 97.19 1.19% 361 Degrees Intl 7.25% 2021 84.04 -0.77% Scenery Journey 13.75% 2023 105.72 0.96% Modern Land Chn 15.5% 2020 103.83 -0.75% China Evergrande 7.5% 2023 91.95 0.91% Modern Land Chn 7.95% 2021 92.00 -0.60% CFLD Cayman Inv 8.6% 2024 101.49 0.81% Tsinghua Unic 5.375% 2023 94.86 -0.54% China Evergrande 9.5% 2024 94.74 0.81% Kaisa Group 11.25% 2022 103.17 -0.53% King Talent Mgmt 5.6% 87.87 0.78% Forward 6.95% 2022 97.88 -0.44% China Evergrande 10% 2023 98.43 0.74% Tsinghua Unic 4.75% 2021 97.50 -0.43% Wanda Properties 7.25% 2024 99.85 0.73% Hejun Shunze Inv 11% 2020 101.33 -0.41% Agile Group 6.7% 2022 103.78 0.68% Unigroup Int 6% 2020 99.94 -0.35% Scenery Journey 13% 2022 105.31 0.66% Tuspark Forward 7.9% 2021 101.87 -0.32% China Aoyuan Grp 8.5% 2022 105.30 0.61% Tuspark Forward 7.95% 2021 102.06 -0.20% Yuzhou Propertie 8.5% 2023 103.96 0.55% Sunshine 100 Chn 8.5% 2020 88.15 -0.20% China Oil 4.625% 2022 99.60 0.51% Jiayuan Intl Grp 12% 2020 101.83 -0.19% Logan Property H 5.25% 2023 96.63 0.48% Oceanwide Intl17 7.75% 2020 88.44 -0.18% China Evergrande 8.25% 2022 97.02 0.47% China Hldg 6.875% 2020 101.14 -0.17% Kaisa Group 9.375% 2024 93.04 0.47% Powerlong 5.95% 2020 99.96 -0.17% CFLD Cayman Inv 7.125% 2022 101.18 0.46% Jiuding Group 6.5% 2020 87.98 -0.16% Lenovo Perpetual 5.375% 98.32 0.46% EHI Car Services 5.875% 2022 91.56 -0.15% Country Garden 5.625% 2026 101.78 0.45% Haimen Zhongnan 10.875% 2022 100.20 -0.13% Sunac China Hldg 7.95% 2023 101.63 0.45% Union Life Insur 3% 2021 86.59 -0.12% China Shandon 4% 2020 98.97 0.43% Gemstones Int Lt 8.5% 2020 98.46 -0.11% Source: Bloomberg, CCBIS

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Strategy | August 8, 2019

Recent issue performance

Ticker Name Sector MDY S&P Fitch $M Coupon% Issue date Maturity date Priced Now Chg % AZ987606 Corp CICC FINANCIAL PRODUCTS Financial 30 2.90 8/12/2019 8/10/2020 100 99.83 -0.17 AZ907436 Corp WUYI MOUNTAINS Financial 25 7.0 8/2/2019 8/2/2020 100 na AZ905843 Corp MEILUN BVI LTD Basic Materials 163 9.0 8/6/2019 4/28/2022 100 100.23 0.23 AX163154 Corp LTD Financial B2 B BB- 475 7.95 2/19/2019 2/19/2023 na 102.32 na AZ906317 Corp SINOPEC GRP DEV 2018 Energy A+ 700 2.95 8/8/2019 8/8/2029 99.596 100.01 0.42 AZ906315 Corp SINOPEC GRP DEV 2018 Energy A+ 700 2.95 8/8/2019 8/8/2029 99.596 100.41 0.82 AZ906311 Corp SINOPEC GRP DEV 2018 Energy A+ 800 2.50 8/8/2019 8/8/2024 99.762 100.13 0.37 AZ906312 Corp SINOPEC GRP DEV 2018 Energy A+ 800 2.50 8/8/2019 8/8/2024 99.762 100.08 0.32 AZ906328 Corp SINOPEC GRP DEV 2018 Energy A+ 500 3.68 8/8/2019 8/8/2049 100 103.00 3.00 AZ906325 Corp SINOPEC GRP DEV 2018 Energy A+ 500 3.68 8/8/2019 8/8/2049 100 103.18 3.18 AZ905966 Corp CENTRAL CHN REAL ESTATE Financial BB-e 300 6.875 8/8/2019 8/8/2022 na 98.19 na AZ908506 Corp CICC FINANCIAL PRODUCTS Financial 25 3.14 8/8/2019 8/6/2020 na 100.23 na AZ908167 Corp GUOTAI JUNAN INTL HLDGS Financial 200 2.5 8/8/2019 8/5/2020 100 100.02 0.02 ZS133669 Corp GROUP Financial B3 B 300 11.75 4/17/2019 4/17/2022 na 96.10 na AZ869613 Corp DEXIN CHINA HOLDINGS CO Financial B3 200 12.875 8/6/2019 8/6/2021 na 98.03 na AZ871412 Corp GUOTAI JUNAN INTL HLDGS Financial 200 2.90 8/6/2019 8/4/2020 100 100.02 0.02 AZ850662 Corp GUOTAI JUNAN INTL HLDGS Financial 200 2.20 8/5/2019 8/3/2020 100 100.02 0.02 AZ804781 Corp COASTAL EMERALD LTD Financial A3 A- 900 4.30 8/1/2019 100 98.91 -1.09 AZ804798 Corp COASTAL EMERALD LTD Financial Baa2 500 3.95 8/1/2019 8/1/2022 na 100.38 na AZ804103 Corp GSP RENEWABLE ENERGY Utilities 15 4.98 7/30/2019 7/30/2024 100 99.90 -0.10 AZ804776 Corp CHINA DEVELOPMENT BK/HK Financial 100 2.793 8/1/2019 8/1/2022 100 99.99 -0.01 AZ804106 Corp BRIGHT SCHOLAR EDUCATION Consumer, Non-cyclical Ba3 BB- 300 7.45 7/31/2019 7/31/2022 na 102.06 na AZ784936 Corp IND & COMM BK CHN/ Financial A1 600 1.50 7/31/2019 7/31/2022 na 100.32 na AZ787233 Corp CHINA GREAT WALL INTL IV Financial BBB+ 400 3.95 7/31/2019 na 99.38 na AZ787009 Corp CHINA GREAT WALL INTL IV Financial BBB+ A- 200 3.125 7/31/2019 7/31/2024 na 100.45 na AZ785353 Corp GUOTAI JUNAN INTL HLDGS Financial 242 0.0 7/30/2019 1/30/2020 na 98.88 na AZ783644 Corp AGRICULTURAL BK CHINA/HK Financial A1 1,000 2.946 7/30/2019 7/30/2022 na 100.05 na AZ745939 Corp CHINA DEVELOPMENT BK/HK Financial 230 2.896 7/29/2019 7/29/2024 na 99.81 na AZ743408 Corp KWG GROUP HOLDINGS Financial BB- 300 7.40 7/29/2019 3/5/2024 99.819 96.49 -3.34 AZ565480 Corp DETA HOLDING Utilities BBB- 300 5.95 7/29/2019 7/29/2022 na 99.69 na AZ744841 Corp COASTAL EMERALD LTD Financial 100 4.30 7/25/2019 7/25/2029 na 102.42 na AZ744298 Corp CHINA DEVELOPMENT BK/HK Financial 150 2.796 7/29/2019 7/29/2022 100 99.84 -0.17 AZ744289 Corp CHINA DEVELOPMENT BK/HK Financial 1,700 2.538 7/30/2019 7/30/2021 100 100.01 0.01 AZ565316 Corp EASTERN CREATION II INVE Industrial A 300 2.80 7/15/2019 7/15/2022 na 100.17 na AZ712169 Corp XINGSHENG BVI CO LTD Financial A+ 500 3.375 7/25/2019 7/25/2022 na 100.62 na AZ654325 Corp CHINA OIL AND GAS GROUP Utilities Ba2 BB 320 5.50 7/25/2019 1/25/2023 99.373 101.25 1.88 AZ712252 Corp JINGRUI HOLDINGS LTD Financial B3 260 12.0 7/25/2019 7/25/2022 na 99.67 na AZ712597 Corp CICC FINANCIAL PRODUCTS Financial 15 3.103 7/24/2019 1/24/2020 100 100.01 0.01 AZ709589 Corp OVERSEAS Financial 400 7.50 7/24/2019 7/24/2022 na 99.25 na AZ694459 Corp GRAND AUTOMOTIVE SERVICE Consumer, Cyclical BB-e 75 8.625 7/22/2019 4/8/2022 na 94.88 na AZ694573 Corp CHINA DEVELOPMENT BK/HK Financial 1,500 2.538 7/29/2019 7/29/2021 100 100.02 0.02 AZ674859 Corp KAISA GROUP HOLDINGS LTD Financial B2 B 300 10.875 7/23/2019 7/23/2023 na 95.73 na AZ693598 Corp CIFI HOLDINGS GROUP Financial BB- BB 1,600 6.70 7/23/2019 4/23/2022 na 99.84 na AZ675668 Corp FRANSHION BRILLIANT LTD Financial Baa3 500 4.25 7/23/2019 7/23/2029 na 99.48 na AZ674988 Corp RONSHINE CHINA Financial B+ 300 8.95 7/22/2019 1/22/2023 na 99.49 na AZ672704 Corp POWERLONG REAL ESTATE Financial B2 170 6.95 7/23/2019 7/23/2023 na 96.17 na AZ677020 Corp POWERLONG REAL ESTATE Financial 1,000 6.0 7/26/2019 1/26/2022 na na AZ654324 Corp CHINA HONGQIAO GROUP LTD Basic Materials B2 BB- 300 7.125 7/22/2019 7/22/2022 100 100.22 0.22 AZ654434 Corp FANTASIA HOLDINGS GROUP Financial B3 200 12.25 7/18/2019 10/18/2022 na 96.66 na AZ654783 Corp EXPORT-IMPORT BANK CHINA Government 30 2.0 7/22/2019 7/22/2024 na 98.56 na AZ618602 Corp HAIMEN ZHONGNAN INV DEV Financial 100 10.875 7/16/2019 6/18/2022 na 100.51 na AZ618639 Corp GET INTL INVEST HLDS LTD Financial Baa1 BBB+ 500 3.75 7/18/2019 7/18/2022 na 100.38 na AZ565460 Corp DAWN VICTOR LTD 350 8.45 7/17/2019 7/14/2020 na 98.95 na AZ341404 Corp CHONGQING HECHUAN CITY Financial BB+ 300 6.30 7/18/2019 7/18/2022 na 100.75 na AZ616789 Corp CD AIRPORT XINGCHENG Industrial BB 500 6.50 7/18/2019 7/18/2022 100 101.75 1.75 AZ565245 Corp CHINA Consumer, Non-cyclical BBB+ 500 3.0 7/18/2019 7/18/2024 na 100.88 na AX916769 Corp COUNTRY GARDEN HLDGS Financial BBB- 1,350 7.25 4/8/2019 4/8/2026 100 102.41 2.40 AZ618152 Corp CHINA DEVELOPMENT BK/HK Financial 200 2.90 7/18/2019 7/18/2024 100 99.77 -0.23 AZ618375 Corp CHINA DEVELOPMENT BK/HK Financial 200 2.903 7/19/2019 7/19/2024 100 99.77 -0.23 AZ565159 Corp GREENLAND HLDG Financial Ba3 300 6.0 7/17/2019 7/17/2021 na 100.46 na AZ593935 Corp CHINA SCE GRP HLDGS LTD Financial B2 500 7.250 7/19/2019 4/19/2023 na 97.72 na AZ595141 Corp CHINA DEVELOPMENT BK/HK Financial 1,200 2.476 7/19/2019 7/19/2021 100 100.02 0.02 AZ592808 Corp BLUESTAR FIN HOLDINGS Basic Materials BBB A- 700 3.375 7/16/2019 7/16/2024 na 100.34 na AZ575320 Corp LOGAN PROPERTY HOLDINGS Financial B+ 400 6.50 7/16/2019 7/16/2023 na 97.92 na AZ575184 Corp TIMES CHINA HLDG LTD Financial B1 B+ BB- 400 6.75 7/16/2019 7/16/2023 na 97.76 na ZS537582 Corp IND & COMM BK CHN/ Financial 6 2.458 5/13/2019 8/13/2024 100.5973 100.48 -0.11 ZS537576 Corp IND & COMM BK CHN/SYDNEY Financial 9 2.458 5/13/2019 8/13/2024 100.5973 100.56 -0.03 AZ565479 Corp CN OVERSEAS FIN KY VIII Financial BBB+ A- 2,000 2.90 7/15/2019 1/15/2025 na 100.63 na AZ565473 Corp CN OVERSEAS FIN KY VIII Financial BBB+ A- 450 3.45 7/15/2019 7/15/2029 na 101.80 na AZ459863 Corp CHONG HING BANK LTD Financial Ba2 400 5.70 7/15/2019 na 101.73 na AZ564914 Corp HLDGS Financial BBB- 1,000 5.60 7/15/2019 7/15/2026 100 100.32 0.32 AX798960 Corp CIFI HOLDINGS GROUP Financial BB- BB 555 6.55 3/28/2019 3/28/2024 na 96.81 na AZ565703 Corp CICC FINANCIAL PRODUCTS Financial 50 2.90 7/10/2019 10/10/2019 100 99.97 -0.03 AZ565488 Corp CHINA DEVELOPMENT BK/HK Financial 200 2.843 7/15/2019 7/15/2022 100 100.31 0.31 AZ565463 Corp CHINA DEVELOPMENT BK/HK Financial 1,800 2.46 7/15/2019 7/15/2021 100 100.11 0.11 AZ369323 Corp JIAYUAN INTL GROUP LTD Financial 225 13.75 7/11/2019 3/11/2022 na 100.23 na AZ460019 Corp DAFA PROPERTIES GROUP Financial B3 B- 180 12.875 7/11/2019 7/11/2021 na 95.80 na AZ461400 Corp CHINA GOVERNMENT BOND Government 1,700 3.05 7/11/2019 7/11/2022 100 101.00 1.00 AZ527289 Corp EASY TACTIC LTD Financial BB- 450 8.125 7/11/2019 7/11/2024 na 97.25 na AZ527355 Corp TAIYUAN STATE OWN INVT Financial 55 6.20 7/9/2019 7/9/2022 100 101.35 1.35 AZ094813 Corp PINGDINGSHAN TIANAN COAL Energy 100 6.25 7/11/2019 7/9/2020 100 100.30 0.30 AZ396385 Corp GUOHUI INTERNATION BVI Financial BBB+ 800 4.37 7/9/2019 7/9/2022 na 100.34 na AZ341643 Corp TONGFANG AQUA LTD Technology 300 6.80 7/10/2019 1/10/2022 na 98.01 na AZ396241 Corp TIANJIN JIZHOU NEW CITY Industrial 70 4.80 7/9/2019 7/9/2022 100 100.35 0.35 AZ421316 Corp TAHOE GROUP GLOBAL CO LT Financial Caa1 CCC+ 400 15.0 7/10/2019 7/10/2022 na 96.70 na AZ396318 Corp SKYFAME REALTY HOLDINGS Financial B- 105 13.0 7/8/2019 7/8/2022 100 97.89 -2.11 AZ398259 Corp MACROLINK GLB DVLP Financial 40 9.50 7/8/2019 1/4/2021 na 99.28 na AZ400393 Corp YANGO JUSTICE INTL Financial 60 9.50 7/8/2019 4/3/2021 na 97.08 na AZ368822 Corp SUNSHINE 100 CHINA HLDGS Financial CCC+e 200 11.50 7/5/2019 7/5/2021 na 98.31 na AZ342110 Corp QUDIAN INC Financial 345 1.0 7/1/2019 7/1/2026 100 109.89 9.89 AZ342120 Corp QUDIAN INC Financial 345 1.0 7/1/2019 7/1/2026 100 109.27 9.26 AZ208022 Corp CHINA DEVELOPMENT BK/HK Financial 500 2.989 6/25/2019 6/25/2024 na 99.84 na AZ369743 Corp GUOTAI JUNAN INTL HLDGS Financial 49 1.75 7/3/2019 9/23/2019 100 99.95 -0.06 ZS334092 Corp HANRUI OVERSEAS INVST Industrial 490 7.95 4/29/2019 4/29/2022 100 99.89 -0.11 AZ341591 Corp WEIBO CORP Communications Baa1 BBB 800 3.50 7/5/2019 7/5/2024 100 100.75 0.75

AZ341488 Corp GANSU HIGHWAY AVIATION Consumer, Cyclical BBB BBB 300 3.875 7/5/2019 7/5/2022 na 100.09 na

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Strategy | August 8, 2019

Rating definitions: Outperform (O) – expected return > 10% over the next twelve months Neutral (N) – expected return between -10% and 10% over the next twelve months Underperform (U) – expected return < -10% over the next twelve months

Analyst certification: The author(s) of this document, hereby declare that: (i) all of the views expressed in this document accurately reflect his/her personal views about any and all of the subject securities or issuers and were prepared in an independent manner; and (ii) no part of any of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this document; and (iii) he/she receives no insider information/non-public price-sensitive information in relation to the subject securities or issuers which may influence the recommendations made by him.

The author(s) of this document further confirm that (i) neither he/she nor his/her respective associate(s) (as defined in the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission issued by the Hong Kong Securities and Futures Commission) has dealt in/traded or will deal in /trade the securities covered in this document in a manner contrary to his/her outstanding recommendation, or neither he/she nor his/her respective associate(s) has dealt in or traded in the securities covered in this document within 30 calendar days prior to the date of issue of this document or will so deal in or trade such securities within 3 business days after the date of issue of this document; (ii) neither he/she nor his/her respective associate(s) serves as an officer of any of the companies covered in this document; and (iii) neither he/she nor his/her respective associate(s) has any financial interests in the securities covered in this document. document. Disclaimers: This document is prepared by CCB International Securities Limited. CCB International Securities Limited is a wholly-owned subsidiary of CCB International (Holdings) Limited (“CCBIH”) and Corporation (“CCB”). Information herein has been obtained from sources believed to be reliable but CCB International Securities Limited, its affiliates and/or subsidiaries (collectively “CCBIS”) do not guarantee, represent and warrant (either express or implied) its completeness or accuracy or appropriateness for any purpose or any person whatsoever. Opinions and estimates constitute our judgment as of the date of this document and are subject to change without notice. CCBIS seeks to update its research as appropriate, but various regulations may prevent it from doing so. Besides certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate according to the analyst's judgment. 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