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Eric D. Schwerin
eschwerin@rosemontseneca.com

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Begin forwarded message:

*From:* James Bulger <jbulger@thorntonai.com>
*Date:* June 4, 2016 at 9:12:40 AM EDT
*To:* "Godfrey, Andrew" <AGodfrey@burnhamasset.com>, "Zellmer, Stefan" <
SZellmer@burnhamasset.com>, Michael Leonard <mleonard@thorntonai.com>,
Eric Schwerin <eschwerin@rosemontseneca.com>
*Subject:* *Fwd: WSJ/Harvest Global Investments*

Thomas Kwan of Harvest is interviewed
Jimmy

---------- Forwarded message ----------
From: *James Bulger* <bulgerthor@aol.com>
Date: Saturday, June 4, 2016
Subject: Fwd: WSJ/Harvest Global Investments
To: James Bulger <jbulger@thorntonai.com>


Sent from my iPhone

Begin forwarded message:

*From:* Eileen Kerwin <agkerwin@gmail.com
<javascript:_e(%7B%7D,'cvml','agkerwin@gmail.com');>>
*Date:* June 4, 2016 at 7:27:03 AM EDT
*To:* James <bulgerthor@aol.com
<javascript:_e(%7B%7D,'cvml','bulgerthor@aol.com');>>
*Subject:* *WSJ/Harvest Global Investments*


Mainland Chinese Investors Stock Up on Foreign Shares and BondsPrograms
that let Chinese invest abroad get a fresh look amid concerns about the
yuan
[image: A Chinese investor looks at a screen showing stock market movements
at a securities firm in Hangzhou, a city in eastern China on May 31, 2016.]
ENLARGE
A Chinese investor looks at a screen showing stock market movements at a
securities firm in Hangzhou, a city in eastern China on May 31, 2016.
ILLUSTRATION: AGENCE FRANCE-PRESSE/GETTY IMAGES
By
CHAO DENG
June 3, 2016 4:36 a.m. ET
0 COMMENTS
<http://www.wsj.com/articles/mainland-chinese-investors-stock-up-on-foreign-shares-and-bonds-1464942999#livefyre-comment>

Mainland Chinese investors have been on a buying spree of late, snapping up
stocks and bonds outside their country’s tightly-controlled borders.

Interest has risen in two programs allowing Chinese mom and pops access to
foreign investment assets: a trading link between the Shanghai and Hong
Kong stock markets, and a program that allows Chinese professional fund
managers to invest in overseas stocks and bonds.
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inRead invented by Teads <http://inread-experience.teads.tv/>

The increased appetite comes as mainland investors worry the Chinese yuan
may further weaken, undermining their savings and domestic investments.

“From the global financial crisis [of 2007-2008] all the way until last
year, asset prices were good in China—people could invest in property,
trust loans etc.,” said Thomas Kwan, chief investment officer at Harvest
Global Investments Ltd. in Hong Kong.

But, “the slowdown in [economic] growth, the high volatility of the
[domestic] equity market, as well as the disappearance of high-yield trust
products and lower [domestic] bond yields have made assets classes outside
start to look attractive for Chinese investors in a way that we haven’t
seen for the last 10 years,” Mr. Kwan added.

The Shanghai-Hong Kong Stock Connect, which has allowed investors in the
two cities to buy and sell stocks on each other’s exchanges since 2014, has
seen a runup in buying by mainland Chinese this year. These investors have
now used up more than 60% of the total 250 billion yuan that they are
permitted to buy of Hong Kong stocks.
ENLARGE

Interest by mainland Chinese investors surged in May, with monthly
net-buying reaching the highest in one year, at a total of 26.2 billion
yuan (roughly US$4 billion).
ENLARGE

Another reason Hong Kong appeals to Chinese investors is that dual-listed
Chinese companies trade at a 35% discount in Hong Kong, compared to their
mainland listing, according the Hang Seng China AH Premium Index.

But the yuan is fueling Chinese investment abroad over a longer time
horizon.

The currency has been declining in value since January 2014, when it topped
out after years of appreciation. Many investors expect further weakening as
China’s economy slows. They also don’t rule out more volatility stemming
from how Chinese authorities handle the currency, after the central bank
forced a sudden devaluation last year.
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In both the stock connect and the Qualified Domestic Institutional Investor
(QDII)—the older channel for fund managers to invest in overseas stocks and
bonds—investment returns ultimately get paid back in Chinese yuan on the
mainland. Retail investors can choose to stay invested in their foreign
assets for years, staving off a conversion back into yuan.

In the QDII program, managers say they have maxed out on quotas given by
Chinese regulators.

This program includes funds run by Chinese asset managers and also global
funds sold through Chinese banks onshore. For the former, total assets
under management grew last year and in the first quarter of this year to 65
billion yuan, according to Morningstar. Previously, total assets had
declined for two consecutive years.
ENLARGE

Harvest’s Mr. Kwan says that his firm closed most of its QDII funds to new
money at the end of last year and ran out of quota to invest a few months
ago. The team is increasingly targeting Chinese money already outside
mainland borders.

“There’s still a lot of pressure on the renminbi in the second half,” he
said, referring to the Chinese currency. “The expectation is that new quota
will not come this year.”
ENLARGE

Write to Chao Deng at Chao.Deng@wsj.com
<javascript:_e(%7B%7D,'cvml','Chao.Deng@wsj.com');>
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James J. Bulger
Chairman
Thornton Group LLC
14 Beacon Street, Suite 804A
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Office tel: 617.248.944