The purchase of bank wealth management products (WMP’s) by listed companies in China has hit its highest level in nearly five years, despite ongoing declines in returns following the launch of new asset management regulations in April that remove their implicit guarantees.
A report from Securities Daily indicates that as of 18 November a total of 1211 listed companies had purchased bank WMP’s since the start of 2018, for a total subscription amount of 1.37 trillion yuan.
Both the number of listed companies that have invested in bank WMP’s as well as the total subscription amount have broached their highest levels in nearly five years.
The number of listed companies purchasing bank WMP’s saw a YoY rise of nearly 5%, while the subscription amount rose by 18.61% compared to the same period last year.
The record purchase of bank WMP’s arrives despite the latest data from Rong360 indicating that returns dropped to an 18 month low in the second week of November.
These declines have dimmed the enthusiasm of China’s listed concerns for bank WMP’s since the third quarter. In the third quarter listed companies purchased just 397.2 billion yuan in bank WMP’s, or less than half the reading of 899.4 billion yuan for the second quarter.
In recent years bank WMP’s have proven a highly popular means for listed companies in China to make use of their idle funds, given the liquidity and safety of the instruments, which were perceived to enjoy “implicit guarantees.”
The standing of WMP’s has been overturned, however, by the launch of new asset management regulations in April that remove implicit guarantees as part of efforts to staunch moral hazard.