China’s Money Market Fund Assets Expand to Record-breaking $880 Billion

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Money market fund assets expanded to a record-breaking size at the end of July following six consecutive months of increase.

The latest data from the Asset Management Association of China indicates that money market fund assets reached a historic high of 5.86 trillion yuan (USD$880 billion) at the end of July, for an increase of 751.687 billion yuan, or 14.72%, relative to the preceding month.

AMAC data indicates that money market fund assets have seen net increases for six consecutive months, for an increase of 36.72%, or 1.57 trillion yuan, compared to the end of 2016.

The strong growth impetus of money market funds also pushed the scale of China’s publicly offered funds to a new historic high of 10.68 trillion yuan by the end of July.

According to industry observers China’s stock market upset in 2015 served to heighten the risk aversion of domestic investors, and drive them towards money market funds in the hope of obtaining more secure and stable returns.

Over past two and a half years money market fund assets have increased by 3.89 trillion yuan, for a near tripling size compared to 1.96 trillion yuan at the end of 2014.

While China’s stock and bond markets have seen a tepid performance in 2017, an increase in the returns of money market funds since the second quarter has served to further attract investors.

Chinese investors are also making increasing use of money market funds as liquidity management tools, given their high levels of stability, security and liquidity.

In stark contrast to the strong performance of money market funds, China’s share funds and hybrid funds posted contractions in July as a result of the ambivalent performance of domestic stock markets.

Hybrid fund assets were 1.86 trillion yuan at the end of July, for a contraction of 145.902 billion yuan, or 7.28%, compared to June, while share fund assets were 71.8056 billion yuan, for a contraction of 10.624 billion yuan, or 1.16%.

AMAC data indicates that as of the end of July China was host to a total of 112 fund management companies, of which 45 were Sino-foreign joint-ventures and 67 domestically owned.

12 securities companies or their asset management subsidiaries are licensed to operate mutual funds, as well as 2 insurance asset management companies.

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