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
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 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.”
Fund products investing in the money market and debts contributed the most to the asset increase in the industry last month. Money-market funds, which invest in short-term bonds or the cash equivalent, added 960 billion yuan and bond funds saw an addition of 460 billion yuan, while the balanced and stock funds increased by 150 billion, according to the Securities Times and Ping An Securities.
Guangzhou-based E Fund Management is the biggest among China’s mutual-fund firms, with 1.07 trillion yuan of assets under management as of the end of first quarter, according to data provider Wind Information. China Asset Management and GF Fund Management came second and third place, with assets of 920 billion yuan and 654 billion yuan, respectively.
A study by Axa Investment Managers showed an investment in a property in 1998 would have provided a 420 per cent return by 2023, whereas an investment in a Shanghai stock market index-tracking fund would have achieved less than 250 per cent. It attributed this disparity to an incomplete financial market – a lack of alternative investment options and policy regulations, as well as strict capital controls, which pushed households to channel their savings into the property market as a longer-term investment and trusted store of value. But that model may be broken given the dim outlook for the property sector, Axa said.
