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  1. JPMorgan Funds – China Bond Opportunities Fund

Important information
JPMorgan Funds – China Bond Opportunities Fund
  1. The Fund invests primarily in onshore CNY-denominated debt securities and offshore CNH- or USD-denominated debt securities issued by Chinese issuers.
  2. The Fund is therefore exposed to currency risk, the risks associated with debt securities (e.g. interest rate, downgrade, below investment grade/unrated, investment grade, sovereign debt, valuation, credit rating, credit, volatility and liquidity risks), emerging markets, concentration, active currency position, derivatives, PRC market, RMB currency, “Dim Sum” bond, China interbank bond market (“CIBM”), PRC tax and contingent convertible securities risks. For currency hedged share classes, the currency hedging process may not give a precise hedge and there is no guarantee that the hedging will be totally successful. For “(irc)” share classes, they may have greater capital erosion, and their NAV may fluctuate more and be significantly different to the other share classes. Investment in RMB hedged share class is subject to risks associated with the RMB currency and currency hedged share classes risks. RMB is currently not freely convertible and RMB convertibility from offshore RMB (CNH) to onshore RMB (CNY) is a managed currency process subject to foreign exchange control policies of and restrictions imposed by the Chinese government. There can be no assurance that RMB will not be subject to devaluation at some point.
  3. The Fund may at its discretion pay dividends out of capital, giving priority to dividends rather than capital growth. The Fund may also at its discretion pay dividends out of gross income while charging all or part of the Fund's fees and expenses to the capital of the Fund, resulting in an increase in distributable amount for the payment of dividends and therefore, effectively paying dividends out of realised, unrealised capital gains or capital. Investors should note that, share classes of the Fund which pay dividends may distribute not only investment income, but also realised and unrealised capital gains or capital. Payment of dividends out of capital amounts to a return or withdrawal of part of an investor's original investment or from any capital gains attributable to that original investment. Any dividend payments, irrespective of whether such payment is made up or effectively made up out of income, realised and unrealised capital gain or capital, may result in an immediate reduction of the net asset value per share.
  4. Investors may be subject to substantial losses.
  5. Investors should not solely rely on this document to make any investment decision.

NAVIGATING THE WORLD OF CHINESE BONDS NEEDS VERSATILITY

Fund details

CBO_AEM_KV_1200x676px
jpmorgan-china-bond-opportunities-fund

Which is why the JPMorgan Funds – China Bond Opportunities Fund invests flexibly across the full fixed income spectrum to uncover the vast potential of Chinese bonds.

Chinese Bond Strategy Potential Investment Opportunities
Chinese Bond Strategy

Video on Chinese bond strategy

08/06/2020

A 3-minute video to explore the attractiveness of the Chinese bonds and the distinguished features of our Chinese bond strategy

Potential Investment Opportunities

Potential investment opportunities in Chinese bond market

04/06/2020

In this video, Tai Hui, Chief Market Strategist Asia Pacific, discusses the latest Chinese bond market and its investment implications.

WHERE ARE THE OPPORTUNITIES IN CHINA BONDS?

A MARKET NOT TO BE OVERLOOKED POTENTIAL DIVERSIFICATION BENEFITS MORE APPEALING INCOME POTENTIAL
A MARKET NOT TO BE OVERLOOKED

An enormous market not to be overlooked

Over the past 20 years, China’s bond market has grown more than sixtyfold^ and has overtaken Japan as the second largest in the world.  The launch of Bond Connect and inclusion in major indices have brought about ample opportunities for China bonds, with foreign ownership still at relatively low levels and set to benefit from the potential inflows.

The Chinese first used bonds in the 19th century*. Today, China’s bond market is the second largest in the world.^

The world’s top five bond markets (market size in USD trillion)

* Source: Manyapu, Chirag D. "Modern Evolution of the Chinese Bond Market" (2018).
^ Source: J.P. Morgan Asset Management, BIS, as of 3Q 2019.

Different segments of China bonds come with distinct characteristics.  Relatively small in size, China’s offshore bond markets have seen issuers of higher quality in general, with a forecasted default rate similar to that of Asia and lower than those of Emerging Markets and the US.

Default rates of high yield bonds# across different regionsSource: J.P. Morgan, as of 31.03.2020.
# It refers to corporate bonds which are given ratings below investment grade and are deemed to have a higher risk of default. For illustrative purposes only, exact allocation of portfolio depends on each individual’s circumstances and market conditions. Yield is not guaranteed. Positive yield does not imply positive return.

POTENTIAL DIVERSIFICATION BENEFITS

Potential diversification benefits

Both onshore and offshore China bonds exhibit a lower correlation with global aggregate and developed market bonds when compared with those in Emerging Markets, while offering relatively attractive risk-adjusted returns.

In times of uncertainty, allocating to lowly or negatively correlated assets may help increase sources of diversification.

Relatively low correlation between China and global aggregate bonds

Source: J.P. Morgan Asset Management, Bloomberg, USD return, data from 31.12.2004 to 31.03.2020. Indices used: SSE Composite Index (Shanghai A-Shares), S&P 500 Index (US Equities), Bloomberg Barclays Global Aggregate Index (Global Aggregate Bonds), J.P. Morgan Asia Diversified Index (Asian markets shown), J.P. Morgan Government Bond Index (the rest of the markets shown). Past performance is not indicative of future performance. Investors should note that different asset classes have varying risk/return profiles.

MORE APPEALING INCOME POTENTIAL

Income potential looking more appealing

Amid rising economic risks, the US Federal Reserve has cut rates aggressively and renewed quantitative easing to help tackle ongoing uncertainties and volatility. In an environment of low or even zero interest rates, it has become more challenging for global investors to find income, making the income potential of China bonds more appealing.

China Bond yields over the past five years

HY: high yield. IG: investment grade.
Source: J.P. Morgan, FTSE Russell, as of 31.03.2020. Indices used: J.P. Morgan Asia Credit China Investment Grade Index (USD offshore IG bonds), J.P. Morgan Asia Credit China High Yield Index (USD offshore HY bonds), FTSE Dim Sum Bond Index (CNH offshore bonds), J.P. Morgan Asia Diversified Index (CNY onshore bonds). Yield is not guaranteed. Positive yield does not imply positive return.

 

China’s bond yield level looks appealing in the USD Asian credit market

Source: J.P. Morgan, Moody’s, S&P, data of J.P. Morgan Asia Credit Index as of 31.03.2020. Yield is not guaranteed. Positive yield does not imply positive return.

J.P. MORGAN ASSET MANAGEMENT’S ASIAN FIXED INCOME TEAM

Source: J.P. Morgan Asset Management, as of end-May 2020.

Why invest in the JPMorgan Funds – China Bond Opportunities Fund?

 

Focus on flexibility and quality

Benchmark-agnostic, the Fund invests flexibly across the onshore and offshore CNY-, CNH- and USD-denominated China bond markets. The portfolio may include bonds and debt securities issued by governments and their agencies, financial institutions as well as corporates to capture the diverse opportunities in varying market conditions.

With a focus on quality, the Fund allocates at least 50% of the portfolio in securities that are rated investment grade at the time of purchase.

 

Active currency management

Within a macro framework, the investment team seeks to achieve competitive total returns by combining top-down strategies and sector views with bottom-up security selection. The portfolio managers may also take active currency positions to maximise returns, offering potential advantages in foreign exchange terms.

 

Attractive income opportunities

The Fund offers monthly distributing “(mth)” and “(irc)” share classes, providing attractive income opportunities. It is also available in USD, HKD and RMB Hedged classes to help meet investors’ need for different currencies. (* Aim at monthly distribution. Dividend rate is not guaranteed. Distributions may be paid from capital. Refer to important information 3)

Click here to see the fund details about the JPMorgan Funds – China Bond Opportunities Fund.
Click here to learn more about our other income offerings.

In the press

China bond: high quality and / or high yield?
Seeking opportunities from china bond markets

This article is not issued by J.P. Morgan Asset Management. Available in Chinese only.

Why should investors take a look at the Chinese fixed income market?

A consequence of the COVID-19 pandemic is that developed market central banks have pushed policy rates to zero, while engaging in asset purchases to keep bond yields low.

Read more

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GET AHEAD OF THE CURVE IN YOUR INVESTING

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