Yields on Bank Wealth Management Products Hit New Low for 2018

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Yields on the wealth ┬ámanagement products (WMP’s) of Chinese banks have fallen to a record low for 2018, following the launch of new asset management regulations earlier that seek to undermine the “implicit guarantees” undergirding the instruments.

The latest data from Rong360 indicates that average expected annualised yields for bank WMP’s in July were 4.75%, for a decline of 0.05 percentage points compared to June and the fifth consecutive month of decline, as well as a new low for 2018.

Rong360 data further indicates that July saw the issue of 761 yield-protected WMP’s with an average expected return of 4.14%; 2,218 principal-protected floating rate WMP’s with an average expected return of 4.23%, and 7634 floating rate WMP’s without principal protection, whose average expected return was 4.97%.

In April Beijing launched long-anticipated asset management regulations that removed the implicit guarantees on WMP’s, in a move expected to undermine the viability of those smaller banks who make extensive use of the products to tap retail funds.

Analysts said to the People’s Daily that the main reason for the decline in bank WMP yields is loosening monetary policy, with targeted cuts to required reserve ratios at the start of July and increased use of medium-term lending facilities by the Chinese central bank at the end of the month serving to bolster liquidity and push market rates to a record low for the year.

Rong360 analysts said that the shift from “rationally stable” to rationally ample” monetary policy by the Chinese central bank will make further declines in bank WMP yields highly likely.

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