China’s mutual funds top record of US$4.1 trillion as investors shift out of deposits amid bond rally, stock rebound

Combined net assets increased 5.4 per cent month on month in April to more than 30 trillion yuan (US$4.1 trillion), industry association says

Shift reflects demand for risk assets as investors look to put an abundant pool of cash to work at a time when the property market is a poor option

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A stone lion appears on an advertising board near the headquarters of the China Securities Regulatory Commission in Beijing. Photo: Reuters

Published: 4:34pm, 24 May 2024

Total assets invested in China’s mutual funds have topped 30 trillion yuan (US$4.1 trillion) for the first time, reflecting increased demand for risk assets among investors looking to put an abundant pool of cash to work at a time when the property market is a poor option.

The industry had combined net assets worth 30.78 trillion yuan as of the end of April, an increase of 5.4 per cent, or 1.58 trillion yuan, from the previous month, according to the Asset Management Association of China. These assets were run by 148 mutual-fund managers, among which 51 were wholly owned by foreign investors or joint ventures, the data shows.

The data indicates some success for the China Securities Regulatory Commission (CSRC), which has been trying to cultivate institutional investors as one of its long-standing goals. While China’s capital market is already more than three decades old, trading is still dominated by individual investors, who tend to amplify volatility by chasing rallies or selling on declines. China has 220 million individual stock traders, the most in the world, according to the data by the clearing house.

The industry’s expansion has been driven by a stellar run in the bond market and a stabilisation in stocks, as investors shift to fund products from a big pool of cash built up over the past years amid the downturn in the property market and Covid-19 lockdowns.

And the growth is set to continue, according to analysts.

“Mutual funds still can do a lot in the aspects of meeting demand from pensions and attracting longer-term funds,” said Ping An Securities in a note on Friday. “There’s plenty of room for development.”