Group 1 - UBS Asset Management's Managing Director, Guilin, indicates that the trend of global currency diversification is likely to lead to increased foreign investment in the Chinese bond market, potentially marking the beginning of a third wave of inflows into RMB-denominated bonds [1][2] - UBS launched its first pure RMB bond fund in Luxembourg in 2018, which currently has a size of approximately $4 billion, primarily attracting clients from Europe [1] - Guilin highlights three significant peaks in foreign investment in Chinese bonds over the past fifteen years, with the first peak occurring from 2010 to 2013, the second from 2018 to 2020, and the third expected to start in 2024 [1] Group 2 - Recent communications with international investors reveal that they generally adopt a medium to long-term investment strategy, showing a higher tolerance for short-term currency fluctuations [2] - The scale of the RMB bond market is substantial, making it an essential market for international investors [2] - The trend of investing in non-USD assets is accelerating, suggesting that foreign investors will further increase their allocation to the Chinese bond market [2]

Core Viewpoint - The 30-year government bond ETF from Bosera has shown a significant increase in value and liquidity, indicating strong market interest and potential for further investment from foreign investors as global monetary diversification trends continue [2][3]. Group 1: Performance Metrics - As of August 12, 2025, the 30-year government bond ETF from Bosera has accumulated a 10.05% increase over the past year [2]. - The latest fund size of the 30-year government bond ETF is 14.99 billion yuan [2]. - The fund has achieved a net value increase of 9.93% over the past year, ranking 7th out of 418 index bond funds, placing it in the top 1.67% [3]. Group 2: Liquidity and Trading Activity - The ETF recorded a turnover rate of 21.84% with a trading volume of 3.276 billion yuan, reflecting active market participation [2]. - Over the past five trading days, the ETF has seen a net inflow of 551 million yuan, with an average daily net inflow of 110 million yuan [3]. Group 3: Investment Trends and Market Outlook - UBS forecasts that foreign investment in the Chinese bond market may increase, potentially leading to a third wave of inflows into the renminbi bond market [2]. - The anticipated interest rate cut by the U.S. in September may narrow the interest rate differential between China and the U.S., making Chinese bonds more attractive for diversification [2]. Group 4: Risk and Return Analysis - The maximum drawdown for the ETF over the past six months was 6.75%, with a relative benchmark drawdown of 0.51% [3]. - The fund's management fee is set at 0.15%, and the custody fee is 0.05% [3]. Group 5: Tracking Accuracy - As of August 12, 2025, the tracking error for the ETF over the past two months is 0.043%, indicating a close alignment with the underlying index [4].

Core Insights - UBS Asset Management's Director General highlighted the potential for increased foreign investment in China's bond market due to ongoing global currency diversification trends [1] - The anticipated interest rate cut by the US in September may narrow the interest rate differential between China and the US, making Chinese bonds more attractive [1] - Since March 2018, foreign holdings of Chinese bonds have grown from approximately $200 billion to around $600 billion by March 2025, indicating rapid growth [1] Group 1 - The current foreign investment proportion in China's bond market is relatively low at 2.3% as of March 2025, suggesting room for growth [1][2] - The low foreign investment is attributed to the short time foreign investors have been in the market since the introduction of the CIBM direct investment program in 2016 [2] - China's bond market, being the second largest globally, holds significant value for international investors, indicating a positive long-term outlook for foreign investment [2] Group 2 - In the current structure of China's bond market, interest rate bonds account for approximately 62.3%, while credit bonds make up about 37.7% [2] - Foreign investors tend to start with basic products such as government bonds and policy bank bonds, leading to a concentration in interest rate bonds [2] - There has been a noticeable increase in foreign investment in bank negotiable certificates of deposit (NCDs) over the past two years, driven by favorable yield conditions [2]

Core Points - The US dollar index has experienced a significant decline of nearly 11% in the first half of this year, marking the largest drop for the same period since 1973 [1][2] - Factors contributing to the decline include persistent stagflation in the US economy, increasing risks of fiscal policy mismanagement, overextension of dollar credit, and accelerated global currency diversification [2][3] Economic Conditions - The US economy is facing a slowdown with signs of rising inflation, as evidenced by a 0.5% contraction in GDP in Q1 and a core PCE price index annualized rate of 3.5% [2] - Major financial institutions, including Goldman Sachs and JPMorgan, have raised the probability of a US recession to between 45% and 60% [2] Fiscal Policy Risks - The "Big and Beautiful" bill passed by Congress is projected to increase US debt by $3.3 trillion over the next decade, with federal debt expected to exceed $37 trillion by July 2025, potentially surpassing 123% of GDP [2][3] Dollar Credit Concerns - The US dollar's status as a safe-haven asset is being undermined by political pressures on the Federal Reserve, leading to diminished confidence in US monetary policy [3] - Market expectations suggest a higher likelihood of interest rate cuts by the Federal Reserve by the end of 2026, prompting investors to reduce their dollar holdings [3] Global Currency Trends - The dollar's share in global foreign exchange reserves has fallen to 57.7%, with gold, euro, and renminbi emerging as popular alternative safe-haven assets [3][4] - In May, the dollar's share in global payments dropped to 48.46%, while the euro's share increased to 23.5% [3] Credit Rating Downgrades - Major credit rating agencies, including Moody's, have collectively downgraded US debt ratings, marking the first time since 1917 that the US has lost its AAA rating across all three agencies [4] - This downgrade has weakened the dollar's position as a "global risk-free asset," leading to a shift in capital towards gold and non-US currencies [4] Central Bank Strategies - A survey of 75 central banks indicates that one-third plan to increase gold reserves in the next one to two years, with emerging market central banks showing particularly strong demand [5] - The proportion of central banks planning to increase euro reserves has risen from 7% to 16%, while the renminbi is expected to see its share in global reserves double to 6% over the next decade [6]