Chinese investors flee into money market funds from stocks

The US$941bil China Investment Corp (CIC) wants permission to invest in local shares and bonds, and has laid the groundwork for an application to the central government, sources said.

SHANGHAI: Chinese investors flocked into money-market products at a rate outpacing equities and bonds last quarter, adding to what is already the biggest segment of the nation’s mutual fund industry.

Mutual funds investing in low-risk, short-term debt instruments grew 5.4% last quarter to 7.7 trillion yuan (US$1.1 trillion), compared with the 3.7% increase in bond funds and a drop of 1.3% in equity funds, data compiled by the Asset Management Association of China show.

After a shadow banking crackdown shrank the pool of investment products in China, money market funds are seen as a safer investment as trade war uncertainties weigh on stocks, while offering returns close to those of bonds.

While Chinese equities have rebounded from their lows and corporate notes jumped last month amid a government shift toward easing, analysts say money-market funds will continue to be attractive to retail investors.

“Money market funds offer high risk-adjusted returns and provide good liquidity to retail investors,” said Huang Li, a Shanghai-based fund analyst at Fitch Ratings.

“Annualised returns of around 4%, against the backdrop of poor performances in stocks and bonds this year, is very attractive. This relative value isn’t likely to change much for the rest of the year.”

China’s money-market funds have nearly doubled in size from 2016, making it the world’s second-largest market behind the United States. — Bloomberg





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