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- 1 -

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4

Fig 1: Ima

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- 2 -

hanghai-Hon

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eases, etc.

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ong Kong eginning,, e first day. ent of the

as

zuho Bank

opinions

vestment hares via

Dec 2014

1 Qualifiedinstitutionsrecognizedforeign inv2 Renminb2014, the restricted t2013 to incthe schem3 Qualifiedto invest inquota of $8

4

d Foreign Institus that meet cerd 260 companievestors can invebi Qualified Foreprogram recog

to the Hong Koclude foreign fine expanded to

d Domestic Instin foreign marke88.673 billion.

the QFII1 RQFII2 pmeanwhileThus, as the intentequity mamainland via the QF

Some alsocompany statementWestern iHong Kontotal numbwhile the need be institutiona80% of thabout howindividual

Fig 3: Inve

Of coursemainland informatioKong sechalf of 201suggests

utional Investorrtain criteria to

es with a total invest indirectly in Ceign Institutionagnized 93 compong branches ornancial institutioLondon and Sinitutional Investoets. As of the en

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al investors e trading vaw to make investors in

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. This program invest in Chin

vestment quotaChina’s marketsal Investor. This panies with a tor subsidiaries ons based in Hon

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- 3 -

or foreign-cur RMB-deno

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FII.”

d that investon China, dowritten in Cn contrast, aish and Chineas investorf Chinese inFurthermordominate t

alue of the Sinvestment

n China.

Hong Kong S

cheme is upHong Kon

dual investorany put it, “I

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otal investment of mainland secng Kong. Restri

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urrency denominated ingn equity mty company

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Stock Exchan

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of approved QFIominated versioquota of RMB

urities companictions on invest

ws Chinese finagram recognize

outh China –

nominated innvestments).markets via t

put it, “Maieady been nvestors witg in the ma

of informatiouch as prosphich obviousformation abestern inves3), English itargeting Chosition to Hindividual in

arket. Thus,Kong more

nge (2013)

ng, securitiesg to provider, as the af

place, turnovd 1.25 timesre filled, the

2002 as a wayhe end of Novech company hasI institutions. on of the QFII. A

B 298.4 billion. es, but the systment portfolios

ancial institutioned 127 compan

Asia Busines

nvestments). Chinese inthe QDII3 pnland invesinvesting in

th an intereinland equity

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y to allow foreigember 2014, ths an upper inves

As of the end ofThe program wtem was relaxe have also been

ns that meet ceries with a total

ss Report

) and the nvestors, program. tors with

n foreign st in the y market

Chinese financial

urdles to listed in

nt 70% of anguage, stors still

g, where count for

questions to these

rce: HKEx

s in both vestment ed Hong the first ai, which

would still

gn financial he program stment limit,

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rtain criteria investment

Dec 20144

account fcontributecontinuescompaniesetting upin early stapplied tobefore full

It takes ti

Charles Lregards toperationssluggish tgap betwethat in 20directly inexpect toinstitutionaannounceas eligibleof not lesstheir mostknowledgenumber of

In particuConnect. market prQDII scheparticipatiChinese outflows cauthoritiescomparingmarkets. Aattractive

The timin(off-mainlaThe ball wRMB crowhipped recoveredoffshore RChina’s srelatively sfor long tefrom mon

for a small e much to t to see slug

es may not bp systems totage, there

o join the scly participati

me before

Li, Chief Exthe project s,. Howeverhan expecteeen shares

007 when thn Hong Kono make shal investors

ed yet. (3) Ine investors ins than (arout favored sme and familf other issue

ular, investoEligible stocice and trademes, the on in day traauthorities

could destabs want invg to bond mA market libto those sho

g of the scand RMB-dewas set rolliss-border sup when g

d from the LRMB funds strong growtsafe and staerm. At the etary tighten

- 4 -

percentagehe earningsggish tradinbe able to reo commence

are probabcheme but ang themselv

trading pic

xecutive of tas a succ

r, with regarded, he pointe

listed on bhe concept ag stocks jus

hort-term prs (such as ndividual invn the southbund USD 80mall-cap stoliarity with tes besides t

ors want to cks of the scing value in Connect traades or IPOare conce

bilize domesvestors to market therberalization ort-term inve

heme is anenominated ing in July 2settlements,lobal investLehman Shsourced fro

th, these deable way to isame time, ning, dim su

So

of annual s of securitig, there is coup the ini

e trading. Asly a numbeare sitting bves.

ks up

the Hong Kcess in turnd to why soed out the foboth exchanabout allowst came outrofits from insurers or

vestors in mbound tradin0,000). (4) Mcks. (5) Mathe Hong Khose ones r

have morecheme accou

both markeading is lim

Os are also oerned that stic financial

focus morre are morebased on lo

estors.

other problebonds) pick

2009 when while app

tors saw hoock. There om the maiebt instruminvest in RMwith mainla

um bonds pr

outh China –

trading volues compana concern ttial investme

s a result, asr of such coack to obse

Kong Stock n of overaluthbound tr

ollowing issuges has reding mainlant. As a resuarbitrage.

r fund housainland are g must hold

Mainland invinland inves

Kong markeraised by Li.

e loosening unt for arount, but unlike

mited to largoff the table.large-scale markets. Are on longe short-termong-term inv

em. Tradingked up in HoChina aboli

petite for thow fast thewas only anland, and ents provid

MB-denominaand China farovide issuin

Asia Busines

ume and wies.” If the that some sent costs invs the Conneompanies werve how thi

Exchange, l stable sy

rading remaues. (1) the vduced compd investors

ult, investors(2) Guidel

ses) have nfacing high an account

vestors cannstors are stit. There are

restrictionsnd 80% of agthe QFII, R

ge-cap stoc This is bec

capital infAlthough the g-term invem investors vestment ca

g in dim sumong Kong froshed restric

he bonds we Chinese ea few ways

with prospeed investorated Chinesacing more ng companie

ss Report

would not Connect

securities volved in ect is still who have ings go

said he ystematic ins more valuation paring to to trade

s cannot lines for not been

hurdles, t balance not trade ll lack of e also a

s on the ggregate QFII and cks, and ause the flows or Chinese

estments, in stock

annot be

m bonds om 2011. ctions on was also economy to trade

ective of s with a

se assets pressure es with a

Dec 2014

4 Real Est5 Exchang

4

tate Investment ge Traded Fund

cheap wagrew so fJanuary t374.4 billio

Fig 4: Iss

However, Chinese eexpected years havwere easeRMB tradhave seenrestrictionConnect wETF5’s IPcorporate submittedand renmcompany several timarket forSum bondcurrency.”

Regulatio

It is commtransactiomarket. Inprobably RMB-denomonitoringthe Chine

Trust

2

4

6

8

10

12

14

16

ay of raisingfast. Dim suto Septembon at the en

uance volum

market coeconomy hato come do

ve now passed, there ar

ding. Some n steady gro

ns on Hong Kwas launchePO performe

companies an applicat

minbi. Howesays, “Sim

mes so far,r RMB-denods and thus”

ons expects

monly knownons until nown this sense,marks a bigominated trag the impactese authorit

10

0

20

40

60

80

00

20

40

60

2007

(RMB bn)

- 5 -

g renminbi fum bonds toer 2014, w

nd of Septem

me of dim sum

Not

Sou

onditions haas shown cleown, thus msed since resre now moreof these, li

owth, while sKong RMB-ded, with REITed well, buts. In Septetion for an Iever, as th

milar dual-c, but it is uominated sto in the end

s to be furth

n that China w in order to, the launch g step forwade settlemet on domestties are loo

12 16

2008 2009

So

fund, which otalled RMBith outstand

mber 2014 (s

m bonds in Ho

te: The 2014 da

urce: HKMA

ave changeear signs of

market playestrictions one ways for ke dim sumsome have denominatedT4 first went the same ember of laPO denomihe aforemeurrency IPO

unclear howocks which isHong Kong

her relaxed

has kept a to protect thof the Shanard. At the ents and dimtic markets aosening/rem

35.8

107

2010 201

outh China –

is the reas 163.6 billio

ding issues see Fig. 4).

ong Kong

ata is for Januar

ed drasticala slowdownrs became

n cross-bordinvestors to

m bonds prenot taken od IPO were at to IPO in 2cannot be

ast year, Hnated in botentioned HoOs have be much apps of more ris

g airline wen

tight rein on he stability onghai-Hong K

same timem sum bondand demand

moving restr

7.9 112.2 1

11 2012 2

Asia Busines

son why theon were issu

adding up

ry through to Se

ly since thn, with growmore cautio

der RMB seto engage in eviously meff yet.. For eabolished be2011, and si

applied to Hong Kong th Hong Koong Kong een considetite there sk comparinnt to IPO in

cross-bordeof domestic Kong Stock , the introdu

ds suggest thd in foreign rictions and

116

163.6

2013 2014

ss Report

e market ued from to RMB

eptember.

hen. The wth target ous. Five ttlements offshore

entioned, example, efore the nce then IPOs of Airlines

ng dollar security

ered for is in the

ng to Dim just one

er capital financial Connect uction of hat while markets, expand

Dec 2014

Disclaim1. Le

acac

2. Cobedis

3. Comaby

4. Lim(a)

(b)

5. Thfin

4

mer & Confidegal and accoucounting or tacounting and

onfidentiality: Te kept strictly csclosure to anyopyright: The iay not be copiany means fo

mitation of liab) The informa

but in no waany liability analysis hethe results t

) Please noteagencies, amodificationanalysis hethe risks to

he informationancial instrum

trading aauthoritiesgoverningthey are emeet shor

On the othand foreigConnect mentionedinvestors investmenattractive trading pitightened.erraticallyare how HRenminbi competitivasked to d

[Remarks] December prevail.

dentiality unting advice: ax issues. You tax aspects ofThe informatioconfidential. Thy third party isnformation coed, duplicatedor any purposebility: ation containeay is the accuwhatsoever forein is hypothethereof. e that informatand/or changesn to the relevarein ineffectuawhich your co contained he

ments or to pro

nd develops have alsog the Conneexpected to rrt-term inves

her hand, Hgn investorsand other

d above, it swith investm

nt tools to binvestment

cks up, sup. This in turn, and thus tHong Kong

internatioveness as ademonstrate

This report is10, 2014. In th

The informatishould obtain

f this informaton contained hhis informations strictly prohibontained hereind, quoted, repre whatsoever

d herein was racy, reliabilityor any damagetical and is n

tion to be discs in the system

ant processes al. Further, thisompany is experein does noovide investme

- 6 -

p a greater indicated tct to match respond flexstment need

ong Kong ss and meer RMB deshould morement informbe more uset products. pply and den could caushe authoritieshould utiliz

onalization an internatioe its worthy a

s a translationhe event of an

ion contained n your own indion.

herein is givenn is intended fbited. n is, as a generoduced, transwithout prior c

obtained fromy or integrity oe arising out oot intended as

closed hereaftem and/or finanand/or schems information iposed. t constitute a

ent advice or s

So

r presence hat they wilmarket con

xibly and furds like those

hould be mot their need

enominated e actively promation, makeer friendly, aIn long-term

emand of shse short-termes have to sze China’s c

and howonal financias an offsho

n of the originny discrepancy

herein does ndependent pro

for general infor your compa

eral rule, the islated, or lent,consent.

m information sf such informa

of or relating tos an indication

er, appraisals,ncial environm

mes, which mais not intended

solicitation orservice.

outh China –

in internatll adjust the

nditions, wherther ease ree mentioned

ore proactivds by stead

investmenovide both me systems sand of coursm, if RMB-dhort-term Rm RMB intersteer cautiocapital markw to booial market. ore RMB cen

nal report in Jy, the original r

not incorporateofessional adv

nformational puany’s internal

ntellectual pro, in whole or in

sources deemeation guaranteo this informatn of the certain

the opinions ment may nece

y have the effd to be an exh

r offer by MH

Asia Busines

ional markee various regen the timingegulations inabove.

vely appeal mdily buildingnt instrumemainland andsuch as prese, it has todenominated

RMB fundingrest rates fluusly. Questi

ket liberalizaost Hong Hong Kong

nter.

Japanese pubreport in Japa

e advice on legice on the lega

urposes only ause only, and

operty of MHBn part, in any f

ed reliable by eed. MHBK distion. Moreoventy or complet

of credit ratingessitate substafect of renderinhaustive statem

BK to buy or

ss Report

ets. The gulations g is right

n order to

mainland g up the ents. As d foreign

e-existing o provide d stocks

g can be uctuating ons now

ation and Kong’s

g will be

blished on nese shall

gal, al,

and shall the

BK, and form or

MHBK sclaims r, the eness of

g antial ng the ment of

sell any