China’s fund industry bucks global routs as assets reach new high on haven demand

Assets rose to US$2.3 trillion at end February; money-market funds contributed more than half of this year’s gain

Investors including JPMorgan Asset and BNY Mellon say the risk appetite will stay low as global recession looms

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A man wearing a mask walks by a bronze sculpture of a bull in the central business district in Beijing. Photo: EPA-EFE

Published: 4:17pm, 3 Apr 2020Updated: 9:29pm, 3 Apr 2020

China’s mutual-fund industry has expanded this year amid the global market routs, with assets reaching a new high in February amid demand for safer assets at home.

Assets rose 11 per cent this year to 16.4 trillion yuan (US$2.3 trillion) at the end February, according to statistics published by the Asset Management Association of China, even as many other markets slumped into bear-market territory amid the worsening coronavirus pandemic.

Money-market funds, which typically invest in safer assets such as short-term government bonds and commercial bills, contributed 60 per cent of the expansion this year, with its size rising 14 per cent to 8.1 trillion yuan, the data showed. Bond funds increased 7.2 per cent to 2.96 trillion yuan from the end of 2019, the association said.

Asset managers from JPMorgan Asset Management to BNY Mellon Investment Management said risk appetite will remain low in the foreseeable future as the pandemic is likely to send the global economy into a recession this year.

“As uncertainties arise from the global economic fallout of Covid-19, global growth may worsen before improving and market volatility and risk aversion will persist,” said Tai Hui, chief market strategist for Asia at JPMorgan Asset in Hong Kong. “Investors are likely to stay defensive until the outbreak is contained, or until there is credible policy to support the global economy.”

The size of stock funds rose 7.7 per cent to 1.4 trillion yuan in the same period just before global stock markets faced a torrent of selling in March.

While many global stock indexes fell into a bear-market territory in March, losses in Chinese equities were narrow. Reports suggesting China has succeeded in containing the outbreak at home may have buoyed investors. The Shanghai Composite Index fell 4.5 per cent in March as regional markets lost at least 20 per cent.